What made this firm an ideal share? And where are today's equivalents?
The best share in the world for me, back in July 2009, was Carr's Milling Industries (LSE: CRM).
To cut a long story short, the shares were 425p at the time. They're now 801.5p, having been as high as 875p along the way, whilst paying a few handsome dividends into the bargain.
So what? We can all point to winners and losers we've selected from the past and point out reasons as to why it all went right or wrong. It means little other than perhaps helping us to learn a few lessons; everything is easy in hindsight.
What was so special?
But what was special about Carr's at the price back then was a combination of factors that made it close to the ideal investment for me.
Of course, the basic value parameters made a lot of sense; price-to-earnings, yield, balance sheet value, history and prospects etc. And if these aren't in place, you have to have some genuine insight into prospects -- or a lot of good fortune.
Add to that the fact that the company operates in what has to be the most essential of all industries, namely agriculture and food production, with some engineering in the mix, and any investment made even more sense.
Now consider that the company was experiencing what were always likely to be temporary difficulties (fluctuations in the price of flour and fertilizers). As I said at the time: "Short-term price fluctuations based on temporary bad news can present opportunities". Longer term, the company's prospects look good.
And to say Carr's track record had been a good one would be an understatement. Over the previous ten years, the company outperformed the FTSE 100 by 375%, growing the dividend every year for a decade.
Could anyone run it?
In short, Carr's had a great history, and there was no real reason to presume this wouldn't continue. Of course, you have to bear in mind Peter Lynch's sage advice: "Go for a business that any idiot can run -- because sooner or later, any idiot probably is going to run it."
In other words, a company's philosophy and previously wise course can change for the worse, as GEC/Marconi investors could testify. But there was nothing foreseeable in this regard, and Carr's is a straightforward, easily understandable business.
Furthermore, the market was nicely against it. The macro environment was ideal, purely because it was so terrible. By the time I wrote about Carr's, the shares had already recovered a smidgeon from their absolute low point of 405p along with the rest of the market. But things were still nicely depressed as the FTSE 100 index stood at 4,360. So Carr's has managed a 90% increase (plus dividends), versus around 35% for the wider market.
The fact that Carr's wasn't perceived to have exciting prospects and was little discussed by private investors was another big plus. Similarly, its Cumbrian base was a big tick for me. That isn't to say purely UK operations are a good thing; quite the contrary in fact. But a UK full listing and easy to understand operations and accounts, together with the company's trustworthy nature were (and are) big plus points.
In a perfect world, perhaps Carr's would have more significant overseas operations and the directors would have bigger stakes in the business. But you can't have it all.
And finally, Carr's was still small enough to gallop with a market cap at the time of £37m.
The ideal company
To sum up, if investing in the ideal company, I'd be able to put a tick in all these boxes:
- Fundamentally good value
- Essential industry
- Good dividend paying
- "Special situation"/ temporary difficulties
- Excellent track record
- Understandable
- Good prospects
- Contrarian good timing due to macro environment
- Little discussion
- UK base, overseas mix
- Directors' stake
- Small enough to gallop
I'm sure we could all point to individual shares that have fared a lot better than Carr's over the last two and a half years. But could you find one that had it all -- or close to it?
Anyway, that's not the point. The real point of this exercise is in trying to find similar shares right now. And for that, I need your help. So please tell me if think you know of any candidates in the space below.
And for more hints and tips on picking big stock market winners, download a free copy of '10 Steps To Making A Million'. It's yours, if you join up for The Motley Fool Collective today.
