Portfolio changes 31/05/23

I made some pretty sizeable moves in my portfolio today, with the largest being the decision to sell my entire Somero Enterprises (SOM) position - amounting to 1,408 shares sold at a price of £3.26 per share.

This decision wasn't taken lightly, and I still see Somero as a high quality company that's trading very cheaply. If I had a larger, more diversified portfolio, I'd likely be happy holding the shares. However, with my level of concentration I need all my positions to be very high conviction, and in the end I realised that my conviction just wasn't quite strong enough with Somero.

There are a number of reasons for this. Firstly, it has become clear that they've pretty well saturated all their available customers in the US, and so future US sales growth will be entirely dependent on how much work the existing customers get, which is in turn a function of the overall level of construction demand. Internationally, there's still plenty of room for growth, but it's looking pretty unlikely that international sales will exceed those in the US for the foreseeable future. On this basis, the upside for the company is largely capped, unless they start moving into other business lines, but this is not without risk. It's fair to say that the stock will still give you a good return, as it trades at a single digit earnings multiple and pays out all the earnings they can't invest in a very healthy dividend.

The second factor for me is that I don't feel I have a sufficient understanding of the industry at present, and would have to put in a significant amount of work to get to that point. When I considered the other opportunities available, I decided that it wasn't worth it to me.

Again, I'm not seeking to dissuade anyone else from investing in the company, it just doesn't fit in my portfolio.

I used to the proceeds of the sale and some additional funds to add to 5 existing holdings. These were:

  • 4,256 shares of tinyBuild (TBLD) for £0.47 per share - bringing my total holding to 20,303 shares.
  • 248 shares of Aviva (AV) for £4.03 per share - bringing my total holding to 1,381 shares.
  • 892 shares of Ecora Resources (ECOR) for £1.12 per share - bringing my total holding to 4,953 shares.
  • 1,185 shares of Taylor Maritime Investments (TMIP) for £0.84 per share - bringing my total holding to 6,964 shares.
  • 109 shares of Warner Bros. Discovery (WBD) for $11.36 per share - bringing my total holding to 673 shares.

The Somero position was sold at a loss, but this was of a similar magnitude to the falls seen in the positions to which I added, so I'm pretty happy with the reallocation on the whole.

You'll note that I didn't add to Fuller's (FSTA). This was largely due to the position already being relatively large, resulting from recent additions and price appreciation of ~10% on my average cost basis. Probably too early to say, but this one does appear to be proving its resilience to a recession.

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Jamie Larson