In my recent piece looking at the SIF portfolio’s biggest losers, I found that three out of the nine businesses I looked at were contracting or construction-type businesses.
That seems more than a coincidence to me, and many of you suggested that I should simply avoid this sector altogether, in order to avoid future losses.
I’ve decided not to impose an complete ban on such stocks, but I’m already facing the temptation to buy one again. This time my screen has picked out a small firm I rate as a quality operator in its sector -- building services group T Clarke (LON:CTO).
The other choice provided by my screening system is emerging markets asset manager Ashmore (LON:ASHM).
Shares in both firms have performed strongly this year. In the remainder of this piece I’ll explain what I’m going to do and why.
Mello London
I’ll be at Mello in Chiswick this week, where I hope to be able to meet up with many of you.
I see that T Clarke’s CEO Mark Lawrence and FD Trevor Mitchell will be manning a stand on Thursday and also giving a presentation on the day. I’ll be attending this session to find out more about this business.
Character Group, another SIF stock, will also be presenting (on Friday), so I’ll be attending that one too.
You can see a full list of of exhibitors and presenters here.
T Clarke: right stock, wrong time?
Building services contractor T Clarke has a 130-year history of installing wiring and related infrastructure in buildings. These days, its work focuses on commercial projects such as office blocks, hospitals, rail projects and schools.
I share Paul’s view that the combination of complex projects, low margins and cyclical risk is a potential concern. Having said that, my impression is that this is a fairly high quality business. One metric that’s caught my eye is that more than 80% of custom is repeat.
Recent trading commentary was upbeat and the group’s order book and margins are continuing to expand. However, I added brickmaker Michelmersh to the SIF folio last week and already have broader cyclical exposure through Bilby, Staffline and Lookers.
While none of these firms are directly comparable to T Clarke, I’m keen to find a way to…
