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Bruce J.
Posted: 03 April 2018 18:53:53(UTC)

Joined: 04/11/2016(UTC)
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Life is full of surprises.

I have my £20K ready for the new ISA season kicking off at the end of the week, and after much deliberation I had chosen 5 investments, one of which was Air Partner (AIR), a company which seemed to offer both a good yield and the opportunity for growth.

Then, this morning, Air-Partner did a bit of a nosedive, falling by close to 25% of it's price after revealing a long running accounting error.

It may be that the accounting error has no real impact on the future perfomance of the company, or it may be that the error has so distorted the reported profitability of the company, that it is not nearly as attractive as it had seemed.

Will the price drop prove to be a perfectly timed buying opportunity? Or will I bale out now and count myself lucky to walk away from the wreck?

I shall study the "fall out" over the next two days and then decide.
1 user thanked Bruce J. for this post.
Fell Walker on 03/04/2018(UTC)
Alan Selwood
Posted: 03 April 2018 20:56:56(UTC)

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Companies with "accounting errors" tend to have a chequered future after such events.

Investors may ask themselves questions like:

What were they trying to hide?
Were their staff not capable of spotting errors quickly in the short term and correcting them before it mattered?
Will there be another (bigger?) accounting error next week/month?

Whatever the reasons and the thinking, there is always some tarnish to reputation, and in a market place with thousands of choices, an investor has to believe strongly that he/she is in safe hands. If not, 'another bus will be along in a few minutes'!

In support of Air Partner, it has long been a favourite of John Lee, and most (though not all) of his selections have been highly profitable over a long period.

Investors may want to keep them on the watch list, and make sure that all is well before buying.

Meanwhile, this is what Air Partner said today, which perhaps hints that it may have been small misallocations within the various account headings over a long period, especially around 7 years ago, rather than anything more sinister:

"The Board of Air Partner has identified, during the course of its year-end review process, an issue predominantly relating to its accounting for receivables and deferred income.

Following preliminary investigations, the issue principally relates to the collection of receivables from customers and accounting for uncollected amounts since financial year 2010/11. Certain uncollected receivables were inappropriately offset against deferred income rather than being expensed to the income statement in the appropriate financial year. This is a non-cash item and has no bearing on the Company's cash balances.

Whilst the investigation continues, the Board presently understands that the cumulative amount between financial year ended 31 July 2011 and the financial year ended 31 January 2018 is approximately £3.3 million and a significant proportion of this relates back to 2011.

At no point was a customer, operator or supplier impacted or disadvantaged. Further, the Group continues to maintain a strong net cash position.

The Board of Air Partner will update the market as appropriate."
2 users thanked Alan Selwood for this post.
Andrew Smith 259 on 03/04/2018(UTC), Bruce J. on 03/04/2018(UTC)
Bruce J.
Posted: 03 April 2018 23:44:02(UTC)

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Thankyou Alan, for that very wise reply.

I suppose in the long run it often comes down to a simple maxim of "If you are not sure, don't risk it..."

All in all I count myself fortunate. If this had emerged a week later I would have already been invested and would have suffered the loss.

If anyone else has an interest in this company, there has also been a very informative discussion on the ADVFN share chat forum for Air Partner.

Time will tell....
Jim S
Posted: 04 April 2018 08:59:41(UTC)

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Reduced Jupiter Asian Income and Schroder Small Cap Discovery due to poor recent performance

Opened positions in Gresham House Strategic (30% disc), India Capital Growth (16% disc) and TRG (6% disc)
3 users thanked Jim S for this post.
c brown on 04/04/2018(UTC), Andrew Smith 259 on 07/04/2018(UTC), dlp6666 on 10/04/2018(UTC)
Jim S
Posted: 04 April 2018 12:32:01(UTC)

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Alan Selwood;60083 wrote:
Companies with "accounting errors" tend to have a chequered future after such events.

Investors may ask themselves questions like:

What were they trying to hide?
Were their staff not capable of spotting errors quickly in the short term and correcting them before it mattered?
Will there be another (bigger?) accounting error next week/month?

Whatever the reasons and the thinking, there is always some tarnish to reputation, and in a market place with thousands of choices, an investor has to believe strongly that he/she is in safe hands. If not, 'another bus will be along in a few minutes'!

In support of Air Partner, it has long been a favourite of John Lee, and most (though not all) of his selections have been highly profitable over a long period.

Investors may want to keep them on the watch list, and make sure that all is well before buying.

Meanwhile, this is what Air Partner said today, which perhaps hints that it may have been small misallocations within the various account headings over a long period, especially around 7 years ago, rather than anything more sinister:

"The Board of Air Partner has identified, during the course of its year-end review process, an issue predominantly relating to its accounting for receivables and deferred income.

Following preliminary investigations, the issue principally relates to the collection of receivables from customers and accounting for uncollected amounts since financial year 2010/11. Certain uncollected receivables were inappropriately offset against deferred income rather than being expensed to the income statement in the appropriate financial year. This is a non-cash item and has no bearing on the Company's cash balances.

Whilst the investigation continues, the Board presently understands that the cumulative amount between financial year ended 31 July 2011 and the financial year ended 31 January 2018 is approximately £3.3 million and a significant proportion of this relates back to 2011.

At no point was a customer, operator or supplier impacted or disadvantaged. Further, the Group continues to maintain a strong net cash position.

The Board of Air Partner will update the market as appropriate."


FWIW, I read an interesting interview with Ketan Patel (Edentree UK Equity Growth co manager) in April's Money Observer where he talks about profit warnings often coming in threes, when.... 1) management finds the issue, 2) management has done a stock take, 3) full scale of problem is known. His approach is always to sell on the first warning. I suspect other fund managers follow a similar approach, aiming to sell before downward momentum kicks in.
2 users thanked Jim S for this post.
Tim D on 04/04/2018(UTC), Bruce J. on 06/04/2018(UTC)
Mr Helpful
Posted: 04 April 2018 14:27:30(UTC)

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Warren Buffett: "There's never just one cockroach in the kitchen."
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Andrew Smith 259 on 07/04/2018(UTC)
Trev DIYer
Posted: 05 April 2018 16:50:52(UTC)

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I thought I might sell my worst performers over the last few months: RMMC & TRG, but then noticed others were buying in the dip. (Their thinking: oversold on mangement issue RMMC & unusual discount on TRG)

I try to buy & hold, but sometimes I can't resist tinkering.
King Lodos
Posted: 05 April 2018 16:58:23(UTC)

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It's nearly to impossible to know whether it's better to buy something that's been losing, or cut it loose.

Lindsell Train's exceptional performance across their funds is an example of generally doing neither – and is something I'm much happier to pay for.

It's momentum vs mean reversion, and in either case, you need to be adding some information to the system in order for your trade not to be a stab in the dark .. And if you're not adding information (whether it's about the stocks, or the behaviour in trading them) then it's very likely the people on the other side of your trade know something about your behaviour.
2 users thanked King Lodos for this post.
Trev DIYer on 05/04/2018(UTC), Andrew Smith 259 on 07/04/2018(UTC)
Jim S
Posted: 05 April 2018 17:06:26(UTC)

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Trev DIYer;60194 wrote:
I thought I might sell my worst performers over the last few months: RMMC & TRG, but then noticed others were buying in the dip. (Their thinking: oversold on mangement issue RMMC & unusual discount on TRG)

I try to buy & hold, but sometimes I can't resist tinkering.


Guilty as charged! Bought TRG for the first time as I thought the 6% discount was decent value, & I also looked into RMMC (other funds they manage do well so they must have some strength in depth) but decided on Gresham House Strategic instead.

In your shoes I would probably stick with both. In know what you mean by tinkering, I usually TRY to wait 2-3 years before selling a fund on poor performance, judging by a few months is a bit harsh. With individual shares I find it harder not to tinker at exactly the wrong times. Also with ITs, I tend to look at NAV growth & ignore SP growth, if NAV growth is decent I look at the discount plus if it might have a trend.
If NAV growth is OK, then a lower SP (= higher discount) just means you get better value.
1 user thanked Jim S for this post.
Trev DIYer on 05/04/2018(UTC)
Sara G
Posted: 05 April 2018 18:26:35(UTC)

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...I'm also guilty - bought RMMC recently as it seemed like a good entry point. I'd had an eye on it for a while though as a replacement for WPCT, so it was about wanting to own it and waiting for the right time. I wouldn't buy something just because of the discount.

Markets are all over the place at the moment so not really sure whether anything is cheap or expensive - a period of hand-sitting for me I think!
5 users thanked Sara G for this post.
Trev DIYer on 05/04/2018(UTC), King Lodos on 05/04/2018(UTC), gillyann on 06/04/2018(UTC), c brown on 06/04/2018(UTC), dlp6666 on 10/04/2018(UTC)
J Thomas
Posted: 05 April 2018 21:29:56(UTC)

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King Lodos & Tim D,
I appreciate and understand your concerns about Shell 'liquidating themselves' regarding their dividend payments. However I do feel this is yesterdays news, and the current climate for Shell is infinitely superior to that of twelve months ago.
Over the last six months both debt and running costs have been drastically reduced, the scrip dividend has been cancelled, OPEC has cut long term production, and the oil price is now firmly above the $60 to $65 price range and steadily going higher.
In the past ten days the shares have increased by over 8% (cutting the dividend yield to 5.99%) yet the market and brokers still believe the share price has a further 21.5% to climb over the next twelve months to about £30 per share by general consensus.
Time will tell, yet at the moment Shell feels like both a growth and dividend share to buy and hold.
8 users thanked J Thomas for this post.
Tyrion Lannister on 05/04/2018(UTC), King Lodos on 05/04/2018(UTC), Fell Walker on 06/04/2018(UTC), Captain Slugwash on 06/04/2018(UTC), Tim D on 06/04/2018(UTC), Sara G on 07/04/2018(UTC), Andrew Smith 259 on 07/04/2018(UTC), dlp6666 on 10/04/2018(UTC)
Tyrion Lannister
Posted: 05 April 2018 22:42:17(UTC)

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J Thomas;60217 wrote:
King Lodos & Tim D,
I appreciate and understand your concerns about Shell 'liquidating themselves' regarding their dividend payments. However I do feel this is yesterdays news, and the current climate for Shell is infinitely superior to that of twelve months ago.
Over the last six months both debt and running costs have been drastically reduced, the scrip dividend has been cancelled, OPEC has cut long term production, and the oil price is now firmly above the $60 to $65 price range and steadily going higher.
In the past ten days the shares have increased by over 8% (cutting the dividend yield to 5.99%) yet the market and brokers still believe the share price has a further 21.5% to climb over the next twelve months to about £30 per share by general consensus.
Time will tell, yet at the moment Shell feels like both a growth and dividend share to buy and hold.


Just topped up yesterday and am 4% to the good already! :)
King Lodos
Posted: 06 April 2018 01:03:36(UTC)

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J Thomas;60217 wrote:
King Lodos & Tim D,
I appreciate and understand your concerns about Shell 'liquidating themselves' regarding their dividend payments. However I do feel this is yesterdays news, and the current climate for Shell is infinitely superior to that of twelve months ago.
Over the last six months both debt and running costs have been drastically reduced, the scrip dividend has been cancelled, OPEC has cut long term production, and the oil price is now firmly above the $60 to $65 price range and steadily going higher.
In the past ten days the shares have increased by over 8% (cutting the dividend yield to 5.99%) yet the market and brokers still believe the share price has a further 21.5% to climb over the next twelve months to about £30 per share by general consensus.
Time will tell, yet at the moment Shell feels like both a growth and dividend share to buy and hold.


Well I can't really criticise, as I'm a longterm holder of Lukoil.

I certainly haven't gone over the accounts of Shell, and I notice earnings growth estimates are revised up.

But long-term, companies with high earnings instability don't tend to be good buy-and-hold investments, nor easy things to trade .. And when the share price is only 10% above where it was in 2000 (rising well below the rate of inflation), to me it would look like a business that basically destroys value – and higher risk than I think many bonds that yield more
1 user thanked King Lodos for this post.
J Thomas on 06/04/2018(UTC)
philip gosling
Posted: 06 April 2018 05:41:40(UTC)

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[quote=King Lodos;60196]It's nearly to impossible to know whether it's better to buy something that's been losing, or cut it loose.

Lindsell Train's exceptional performance across their funds is an example of generally doing neither – and is something I'm much happier to pay for.......



Trouble is Lindsell Train is at around 40% Premium - surely there must be 1 or 2 Quality Global Equity Funds almost as good which might be better investments at current prices?





2 users thanked philip gosling for this post.
gillyann on 06/04/2018(UTC), Guest on 06/04/2018(UTC)
kWIKSAVE
Posted: 06 April 2018 10:14:38(UTC)

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Today I have spring cleaned my paltry SIPP.

End result is an equal weighting between

Lindsell Train Global Equity

Lindsell Train Japanese

and, rather than Vodadone, Ashtead where the profits, free cash flow and dividend cover look very promising for the future.
kWIKSAVE
Posted: 06 April 2018 10:16:02(UTC)

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The LT funds are the non Investment Trusts.

Philip Gosling

I still like Rathbone Global Opportunities and Evenlode Global Income.
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King Lodos on 06/04/2018(UTC)
Jim S
Posted: 06 April 2018 13:27:36(UTC)

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For global, I like Lindsell Train Global Equity, Fundsmith, and SMT

I've been looking at possible alternatives recently, as Kwiksave suggested Rathbone Global Opportunities has had good performance.

You could also do worse than check out Baillie Gifford's 3 global funds:

Baillie Gifford Global Discovery (just over 50% US, 22% UK, mainly 250M-3B market cap)
Baillie Gifford Global Select Class B (Global best ideas from BG regional teams, nearly all 1Bn+ CAP plus, lots of megacaps)
Baillie Gifford Long Term Global Growth (lots of tech, a bit like SMT)

Its impressive that they are all quite different but all have good performance. I decided on Baillie Gifford Positive Change for my kids' Junior ISAs in the end, that's worth a look too although track record is short.




4 users thanked Jim S for this post.
philip gosling on 06/04/2018(UTC), kWIKSAVE on 06/04/2018(UTC), Guest on 06/04/2018(UTC), c brown on 10/04/2018(UTC)
King Lodos
Posted: 06 April 2018 15:40:08(UTC)

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kWIKSAVE;60235 wrote:
Today I have spring cleaned my paltry SIPP.

End result is an equal weighting between

Lindsell Train Global Equity

Lindsell Train Japanese

and, rather than Vodadone, Ashtead where the profits, free cash flow and dividend cover look very promising for the future.


I bought a little of all three today (Global, Japan and UK).

Lindsell Train UK is the first UK fund I've bought in a while – still cautiously watching Corbyn in the election odds, but I guess some of this antisemitism stuff is making him as PM less likely
3 users thanked King Lodos for this post.
kWIKSAVE on 06/04/2018(UTC), Andrew Smith 259 on 08/04/2018(UTC), dlp6666 on 10/04/2018(UTC)
kWIKSAVE
Posted: 06 April 2018 15:43:35(UTC)

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Let's hope so as the pound would take a little battering otherwise.

Staying clear of utilities and Royal Mail therefore just in case.
2 users thanked kWIKSAVE for this post.
King Lodos on 06/04/2018(UTC), Andrew Smith 259 on 08/04/2018(UTC)
Jim S
Posted: 06 April 2018 16:11:18(UTC)

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Opened position in PSDL in ISA today. Its drop since the new year, when its property portfolio was revalued upwards to 609 million euros, seems way overdone. Happy for 9.3 p/e & a semingly well run business in a key European capital.

1 user thanked Jim S for this post.
Sara G on 07/04/2018(UTC)
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