Tuesday, 23 July 2013

Temple Bar IT - Half Year Results

TMPL has been managed by Alastair Mundy since 2000. He takes a contrarian view on the timing of buy and sell decisions, buying the shares of companies when sentiment towards them is thought to be near its worst and selling them as fundamental profit improvement and/or re-evaluation of their long-term prospects takes place.

The belief is that repeated investor behaviour in driving down the prices of ‘out of favour’ companies to below their fair value will offer investment opportunities. This will allow Temple Bar to purchase shares at significant discounts to their fair value and to sell them as they become more fully valued, principally as a result of predictable patterns in human psychology.

The approach to stock selection and portfolio construction is driven by four core beliefs:

1.   Markets overreact to news on the upside and the downside. The Manager aims to be sceptical of the crowd and aware of investor psychology, which often causes overvaluation of those stocks that are deemed to have good prospects and an undervaluation of those which are out of favour.

2.   There are few companies which sustain below normal profits over the longer term. Weaker companies tend to leave an industry, thus improving the balance of supply and demand, are bid for or management is changed. Similarly, there are few companies which can sustain supernormal profits over the longer term. Such profits tend to be competed or regulated away.

3.   Fundamental valuation is the key determinant of stock prices over the long term. In other words 'cheap' stocks will outperform 'expensive' stocks.

4.   Diversification is an important control. Particular companies or sectors can be out of favour for a considerable time.

This approach has provided a very good return for shareholders - total return over the past year is 34% and annualised returns over the past 10 years is 13.2% p.a.

They have today put out half year results to 30th June (link via Investegate). The total return on the net assets was 16.7%, compared with a total return for the FTSE All-Share Index of 8.5%. The proposed increase in the interim dividend is 3.1% to 15.1p. This will be the 30th year of consecutive dividend increase.

One slightly surprising new acquisition is the purchase of gold via an ETF - I will be interested to see if this pays off as its not a move I would consider for my own portfolio.

All in all, pretty happy with progress so far and happy to continue holding.

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