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By Rob Davies (TMFEssex@aol.com)
The merits and demerits of the Qualiport portfolio have spread far and wide. This is not surprising, because it contains blue chip shares that form core holdings in many private and institutional funds. Oddly enough, news reached the Motley Fool office this afternoon of a lunch in which the Qualiport stocks were the main topic of conversation. Through the benefits of our extensive network, we are able to give our readers a close-to-verbatim report on this lunch.
Bear in mind, of course, that it is the dog days of August, volumes are very low and corporate news flow is thin to say the least. With this background Roger Everybody, head of sales at ace investment bank Legover and Stuffem, thought he would invite Robin Blind and Maximilian Charges, of the prestigious fund manager Crufts Capital Management, to a lunch at Simpsons-in-the-Strand. Roger was fed up with all the salads he had eaten over the summer season, and he really needed some beef -- preferably British to satisfy his carnivorous instincts.
He also thought a couple of good bottles of Petrus would solve the little compliance problem they had with Crufts. He would invite Sue Quickly, head of the legal department, along, to give the impression that they were taking it seriously. If that didn't do the trick, he would have to ask Sir Ian Cider, Chairman of the Bank, to take Crufts' Head of Research to the opera to smooth things out. Neither of them liked opera, and neither did their wives, but they could use the Glyndebourne trip as good ammunition at the next battle in the society battleground.
After the customary Bloody Mary and discussion of the horses, Robin asked Roger for his latest thoughts on Rentokil Initial (LSE: RTO). It had been a key holding in his UK fund and he was getting huge amounts of grief from his trustees about the way it had depressed the returns. The pension salesmen were also on his back because Rentokil had dragged down the second quarter returns and Crufts was in danger of losing the pension fund management contract for the Dry Hole Drilling Company. It was a good contract, and he didn't want to lose the active management slot to an index-tracking fund because the fees were terrible and he wouldn't have much to do.
Roger had taken the precaution of talking to the analyst, Adam Upp, before the meeting, to get some numbers under his belt beforehand. He was therefore able to point out to Max, who was devouring the smoked salmon with relish, that the support service sector did have 35 members and Rentokil only made up 25%, even though it was the biggest single stock. Roger did also, gently, point out to Robin that putting his whole allocation for the sector into one stock was risky, as he had mentioned when he bought the shares for Crufts.
What Roger had really wanted, of course, was get lots of small orders and one rather big one where he got caned on the commission. Robin, on the other hand, couldn't be arsed to read all the research about all the other stocks in the sector and thought life would be simpler if he just held one share, the biggest.
However, Roger was able to point out that Rentokil was now on a prospective P/E of 18.7 against a sector P/E of 42. So he should keep the stock for recovery. He knew full well of course that there was no way Robin would give him the sell order after its performance, but by persuading him to hold it he could make sure no-else got the commission either.
The second bottle of Petrus arrived with the roast beef. While Roger was struggling to find the pound coin to tip the carver the conversation moved onto Unilever (LSE: ULVR). This was dodgy ground because the analyst, Dr David Devon, had been promoted and no longer followed the stock, and Roger had forgotten now why they had bought it for Crufts. He quickly steered the conversation onto EMAP (LSE: EMA) which he knew more about because he was an avid reader of FHM. He assured Max and Robin that the imminent ejection from the FTSE 100 was likely to be only temporary. Anyway, hadn't they seen last week's Investor's Chronicle, which recommended buying shares of companies recently dropped from the 100 index as a surefire way of making money? Max privately wondered why they were paying huge commissions to Legover and Stuffem if he could get the same advice for £2.95.
As the plates were cleared, and the waiter brought the menu for dessert, Sue smiled at Robin and addresed a tricky subject. She explained that the unfortunate rise in the price of Trotters Independent Trading (LSE: TIT) just before Robin bought some for his personal account could not possibly have been caused by front running by Legover & Stuffem staff. Phil Pockets, the trader, had given her the request slip for his deals a full 5 minutes before the larger order had come through. She explained that the discrepancy in time stamps on the order slips had been attributed by Ray Boot, the IT manager, to a malfunction of the XML parser when speaking to the fully integrated digital DOCSIM protocol. Robin's eyes glazed over at this technical gobbledygook, and knew he was being fobbed off. He wasn't too upset, though, because the shares had still doubled after the bid from MarKet.com.
As they tucked into the treacle pudding talk naturally progressed to Misys (LSE: MSY). Everyone freely admitted that they didn't have a clue what the company really did. What was worse was that whenever they asked Ray they just got more confused.
Finally, over a glass of port, there was some debate about the valuation of US tech shares. But as Dell (NASDAQ: DELL) had gone up after the most recent results they all convinced themselves that it was still a great investment. None of them had PCs at home, but they all knew the day was coming when they would have to buy one and, worse, plug it in themselves.
Roger paid the £250 bill and hoped to get a deal that afternoon to pay for it. But he fell asleep in the taxi and didn't hear his phone ring.
Anyway, so I am told. Happy Bank Holiday to all our Fools. Don't forget to check the Qualiport message board over the weekend.
Company Change Bid DELL(US)-1.10 47.80 EMA -0.01 9.86 IIG -0.02 2.85 MSY +0.06 5.57 PIZ 0.00 7.45 RTO -0.02 2.53 ULVR +0.09 6.13 Qualiport Stocks Last Rec'd Total # Company Buy Current Change 27/10/98 755 Indep Ins 2.58 2.85 10.5% 27/01/99 74 Dell (US) 44.63 47.80 7.1% 19/12/97 783 Rentokil 2.55 2.53 (0.8%) 22/04/99 347 Misys 5.76 5.57 (3.3%) 04/11/98 245 Pizza Exp 7.93 7.45 (6.0%) 17/04/98 169 EMAP 11.34 9.86 (13.1%) 17/07/98 266 Unilever 7.53 6.13 (18.6%) Last Rec'd Total # Company In At Value Change 27/10/98 755 Indep Ins 1972.64 2151.75 179.11 27/01/99 74 Dell (US) 2007.42 2143.76 136.34 19/12/97 783 Rentokil 2046.53 1980.99 (65.54) 22/04/99 347 Misys 2028.71 1932.79 (95.92) 04/11/98 245 Pizza Exp 1966.34 1825.25 (141.09) 17/04/98 169 EMAP 2341.32 1991.72 (349.60) 17/07/98 266 Unilever 2052.00 1630.58 (421.42) Cash: £3,433.46 Current Total : £17,090.30 Total Invested: £18,184.62 Profit/(Loss) : (£1,094.32) Value Per Share Day Month Year Qualiport -0.22% 0.70% -9.12% FTSE 100 -0.14% 2.30% 8.37% FTSE All Share -0.08% 2.23% 11.83%