Upgraded broker forecasts are now out following on from Carr’s Milling (CRM) trading statement on January 11th. As I forecast last September in this post the numbers have moved up considerably.

Back then Carr’s were forecast by Investec to generate Earnings Per Share of 70p in 2011, now they are predicting 78p. WH Ireland are even more bullish and reckon 82.5p for 2011, increasing to 86.7p in 2012.

With Carr’s share price at 680p to buy I think they are even better value now than when I first posted on them back in September when they were 600p to buy. Given management’s confidence so early in the financial year I wouldn’t be surprised to see further upgrades as the year progresses.

…on 2010 trading. Management say that “the financial year ended 31 December 2010 concluded with a good performance.” and “As a result the Board is confident that adjusted earnings per share for 2010 will be materially above market expectations.”

This is terrific news, Running Capital bought in around the 360p back in December despite the shares being up over 200% in the past 12 months. Even after a big move you haven’t always missed the story. Earning Per Share has more than doubled in 2010 and with that sort of earnings momentum I’d be very surprised if they didn’t post further substantial growth in 2011.

Management are typically cautious with their outlook at the start of the financial year, their trading statement back in December 2009 was very downbeat and now we all know what a stonking year 2010 was now so I place little emphasis on management outlook and in fact am pleased that they keep things understated.

So Judges (JDG) should have done at least 44p EPS in 2010 and current forecasts for 2011 are just 44p. Clearly upgrades will be forthcoming for 2011 and I’d expect them to earn at a minimum over 50p in the coming year. Given the strong balance sheet, attractive sector fundamentals and earnings momentum I have now got a long term price target of 750p, a healthy 60% upside from the current price.

Today I’ve been taking a look at the risk I’ve been running in the portfolio, versus the general market situation and a variety of factors has tipped me towards reducing and selling some positions to build a cash buffer and taking out a short on the FTSE 100.

The general market has been on an amazing run since last July, up 20%, and with this move has come some complacency and increasing bullishness which to me raises the odds of a sharp downwards move at some point in the next couple of months. Undoubtedly the general economic situation is improving and good growth around the world looks set for 2011 however the market has a tendancy to get ahead of itself and I think we are approaching that point.

So with that view I’ve decided to reduce overall exposure, raise some cash and open a small short on the FTSE 100. Trades below:

Dart Group (DTG), £50 per pt sold @ 93p to take a 4% profit. Retain £100 per pt. Still unsure how winter trading will have gone and longer term increasing oil prices will crimp profits.
Kryso Resources (KYS), £200 per pt sold @ 17.5p for breakeven. Retain £300 per pt. Getting bored out of this one, plus gold has been weakening recently.
Quintain (QED) sold £100 per pt @ 43p to take a 17% profit and sold £100 per pt @ 42.75p for a 15% profit. Reducing position size after recent rally from mid 30’s. Still long over 60,000 shares.
CSR (CSR) sold £17.5 per pt @ 412p to take a small 2%. This was a trade so was closed as taking risk off the table and have higher conviction on positions elsewhere.
Cookson (CKSN) sold £10 per pt @ 635p for a loss of -5.5%. Another trade, not working so closed.
Debenhams (DEB) sold £50 per pt @ 67.8 for a loss of -2.15%. Only opened yesterday but with taking some risk off it didn’t beat the cut given smaller upside.
Aminex (AEX) sold 100,000 shares @ 8.77p for a small 2% profit. AEX has failed to join in on the small cap O&G sector rally and if the market does head south I can see that sector being hit hard. As a speculative position I am happy to exit and watch from the sidelines. Not sure there is any significant news expected in the near term that could propell the share price south anyway.

FTSE 100, sold £7 per pt @ 5940 on March contract (hence a fair way lower than current FTSE level). This gives me a good couple of months to see where the index will head. Stop loss at 6100 as I don’t want to let a large loss build up in the even the market continues heading higher.

Thats it. The portfolio is now about 18% in cash and with a small hedge too.

Performance for the year has really turned around in the last week and from being 2% down the portfolio is, at the close today, up over 4% for the year.

The interesting move in the portfolio today was Soco (SIA), zooming up over 7% with most of the move coming suddenly after 3pm. Clearly there is a takeover rumour out there, which makes sense given the current state of play. I’ve taken increased my position by buying 1733 shares at 366.8p. If they are taken out I’d expect the price to be somewhere north of 525p which would make very nice return from this point.

On the downside today International Ferro (IFL) released a woeful activity update with a series of problems with their smelting operations in South Africa. Unsurprisingly the shares turned negative on this news and with the costs and timescale unquantified to resolve these issues I decided to close my position for an average loss around 11%. £250 per pt was sold at 25.5p and the other £100 per pt at around 24p. Poor trade, should have listened to what the price action was telling me.

Other trades in the past few days are:

Reopened a position in CSR (CSR) after they announced a settlement of legal action that has been hanging over the share price, £10 per pt bought at 392p and £7.50 per pt bought @ 421p. Looking for a move over 500p.

I opened a trade in French Connection (FCCN), buying £50 per pt @ 68p, as the price pulled back from recent highs. It bounced back quicker than I expected and when it hit 80p early on Monday morning I took quick profits. Banking £580, a 17% gain, in just a few days. I retain 12,250 shares as a longer term position.

I added a small amount to Chime Communications (CHW), buying £9.78 per pt @ 239p. Its broken out of its recent trading range and I’m looking at 300p as an initial price target. I expect to move that upwards as the year goes on & earning expectations increase. I am very bullish on this lowly rated PR company.

I reopened the Cookson trade (CKSN), buying £10 per pt @ 670p which turned out to be bad timing as its dropped over 20p since my purchase. Watching it carefully and may cut losses on further weakness.

Finally I’ve opened an initial position in Debenhams (DEB), buying £50 per pt @ 69p. I liked the look of their recent trading statement and think they will do better than expected over the next 12 months and with a dividend being paid and debt reduced they are a good bet going forward. I will be happy to add if the share price slides further.

Key positions in Renovo (RNVO), Quintain (QED) and XP Power (XPP) have all done very well over the last week, adding at least 10% each and have driven the portfolio performance. If a bid turns up for Soco (SIA) in the very near term the year will be off to a cracking start.

It was a pleasure, but no surprise, to read Carrs Milling’s trading statement this morning (CRM).

“The strong trading performance for the first quarter of the current year, indicated in the annual results announcement on 8 November 2010, has continued and is ahead of management expectations.”

The rest of the statement is similarly upbeat, the underlying trend of rising food prices feed back nicely to Carrs and along with the general economic recovery, sound management and recent acquisitions I think Carrs is set to grow its earnings very healthily over the next year and beyond.

I added to my position on Friday in anticipation of this statement, buying 1250 shares @ 645p taking the total holding to 3250 shares. I’m looking for the share price to break the 1000p level this year & expect FY 2011 earnings per share (ending Aug 31st) to top 75p.

I’m a big fan of shares like Carrs, a solid, well run company that pays a good dividend, has good management and in share price terms there is no hype in the price with a low rating which I expect to improve as the story becomes more widely known.

Other trades over the past couple of days have been a top up in Quintain Estates (QED), £53 per pt @ 39p. I closed out Unitech Corp Parks for a small loss, £250 per pt @ 30p after parent company Unitech announced it would considering buying UCP shares @ 31p, capping the upside in my view. I closed out Cookson (CKSN), selling £10 per pt @ 665p to book a nice 25% profit. I added to the Chime Communication (CHW) position, buying £10 per pt @ 233p and added to Judges Scientific (JDG), buying 269 shares @ 365p.

Overall its been a flat start to the year which is disappointing but given that December was RunningCapital’s best ever month its not a surprise that some positions have pulled back a bit and are taking a breather. Quintain & Renovo have been dragging the performance down but I’m happy to continue to hold them.

I decided to reduce some positions in the portfolio yesterday, taking cash levels up to about 10% of the portfolio. That gives me some cash for further investment in case of market falls whilst still exposed to the upside I see.

I started off by reducing International Ferro Metals (IFL), selling £200 per pt @ 29.375p average for a small profit. I retain £250 per pt long position. It’s currently stuck in a tight trading range and with no clear catalyst for it to break out so it was an obvious candidate to cut back on.

Next I sold £20 per pt of Soco International (SIA) @ 375p, this has bounced back nicely since its big drilling disappointment a couple of months ago however results of the next drill are due within two weeks and given recent failures I am not confident so I took some profits whilst they were available. Now long 2500 shares & £15 per pt spreadbet.

Heritage Oil (HOIL) is up strongly since my last purchase so I decided to sell 25%, 500 shares went @ 456p. Spectacular bad timing given it soared another 6% a couple of hours after my sale! 1500 shares are still held.

Next I reduced Dart Group (DTG) selling £75 per pt @ 94.75p for a small profit, still long £150 per pt. I reduced in part due to wariness on how winter trading is going and also that given the 100% rise over the last year the upside is not as great from here. I still think that 150p is attainable on a 12 month view so intend to hold the rest of the position unless something fundamental changes.

Last up I sold the Kalahari Minerals (KAH) spreadbet that I opened the previous day, £30 per pt sold @ 260p for a small 3% profit. This was cut due to Extract Resources in Oz falling back 5%+ on the day. I retain 3200 shares for the long term and would reopen the spreadbet as a short-term trade if I identify a good entry point.

The selling left me much more comfortable with the portfolio exposure, with greater flexibility going forward.

I am currently busying researching several new shares that I hope could be winners in 2011 and have already added a few onto my watchlist that I would be interested in buying on weakness.

I started off 2011 by increasing a big winning position from last year, buying £30 per pt of Kalahari Minerals (KAH), adding to the 3200 shares I already hold. This is a uranium play that has plenty of news flow coming over the next 12 months. I’m looking for 300p as an initial target.

I’ve also added to my Carrs Milling (CRM) position, buying 500 shares @ 645p. This sleepy small cap will update on trading next Tuesday, when it holds its AGM. Given management’s tone in the last trading update I’m expecting it to be positive and have a 900p price target.

Two other buys, I’ve increasing my Renovo (RNVO) position with another guaranteed stop loss spreadbet, £75 per pt @ 70.5p. I’ve been waiting for a pullback but none has been forthcoming and with decent buying at this level I decided to add. Guaranteed stop loss as when the results of its phase III drug trial come round the downside needs to be protected in case of failure. I expect the share price to be much higher by the time that announcement rolls around.

Last purchase today was a buy of Unitech Corporate Parks (UCP), this has made me a lot of money over the last couple of years but I’ve been out of it for a few months. I noticed some large volume going through the order book and with a share buyback due to restart soon I see some good upside. £250 per pt bought @ 30.5p.

A good start to the year today, the first few days in January are normally positive for the markets. The lack of fear and disregard for the downside that I sense in the market is starting to make me cautious however, I feel a pull back coming soon and may unload/lighten a few positions by the end of the week.

2010 turned out to be a very satisfactory year, with a fantastic second half to the year. However, like last year I am still kicking myself over some missed opportunities.

RunningCapital finished the year with a return of around 58%. Like last year comfortably beating the major indices. It also means thanks to the magic of compounding that the total return for the site in just two years is a fantastic 211%! Initial capital of £100k has been turned into over £300k, a return that I am very pleased with. It has to be said though its been done with favourable market conditions, the FTSE 250 has more than doubled since its low point in the dark days of November 2008, the FTSE 100 is lagging a bit but is still up more than 70% since its low in March 09.

The winners of 2010…

Polo Resources (POL), Dart Group (DTG), XP Power (XPP) and First Derivatives (FDP) were all very profitable investments that I held through the most of the year. In fact Dart Group & XP Power I still hold and expect more of next year.

The second half of 2010 was so good due to big and quick gains in French Connection (FCCN), Kalahari Minerals (KAH), Renold (RNO) and Renovo (RNVO). These really zoomed up in the last few months. I’m out of Renold for the moment and have reduced my position in French Connection & Kalahari but think these will continue to be winners into the early part of 2011. Renovo could be a big winner in 2011 if it’s key phase III trial is a success.

Now the losers…

Quintain (QED) was the biggest disappointment in 2010, down on the year despite a nice bounce in December. However hope isn’t lost and I’ve recently been increasing my position, I think 2011 could see Quintain’s share price rise considerably given the large discount to NAV and recent appearance of Laxey on the shareholder register.

Soco (SIA) was a massive letdown, even though it finished the year higher than it started. I carried it as a large position throughout 2010 but its extensive drilling campaign was, in the main, a failure and the share price is well off its highs. The downside was well protected though and that is what assessing risk/reward is all about, I’m looking to see if there is some corporate takeover action here in the new year.

West China Cement (WCC) was one position I got very wrong, going too long too early on its anticipated HK listing and selling out at just the wrong times. It went on to more than double from where I sold, ouch.

Other losing decisions were not getting involved enough in the small cap gold & oil sectors which had a bumper year, I didn’t expect such large moves in so many shares. I’m sceptical about getting involved going forward giving the large amount of hot air that appears to be in those sectors right now. We shall see.

Lets hope for larger winners & smaller losses on 2011, right now I’m feeling that it will be a trickier year than the previous two given the headwinds of rising taxes and increasing living costs in the year ahead.

Thanks to all those who have emailed me asking what was going on with the site, I’ve been incredibly busy in the last couple of months and updating RunningCapital has taken a back seat for a little while. However things have calmed down a little now, all trades over the last 2 months have been entered and I’m planning to update the site on a regular basis over 2011.

I hope you’ve all had a profitable 2010 and the coming year proves to be even more fruitful.

Carr’s Milling (CRM), an agriculture, food and engineering group, came out with a great trading statement this morning:

“The final quarter of the financial year saw a strong trading performance by the Group which expects results for the full year to be ahead of market expectations…”

This company is really off most investor’s radars. There has been zero comment that I can see on the usual PI message boards and its rare to see more than 50k shares traded in a day. I doubled up my position, adding 500 shares at 599p as, I explain below, I see significant upside for the shares.

Details:

£51.5m market cap @ 587.5p
Net debt: 18.5m
EV: £70m

Carr’s is forecast by Investec to generate pre tax profits of £8.63m and EPS of 63.6p for 2010 & 70.13p EPS for 2011. I expect those forecasts to be upgraded and think its possible that Carr’s could do 75p EPS for the current financial year (ending 28/08/2011). This puts Carr’s on a forward PE of under 8. With a dividend yield of a shade under 4% and a positive management outlook I believe that Carr’s is undervalued at the current price.

The big driver of profit growth going forward should be the agricultural division, management are confident with 3 acquisitions in the past six months that will boost earnings in the current financial year. I also believe that longer-term earnings growth in this sector will be robust. Carr’s has two other divisions: Engineering is forecast to make a greater contribution in 2011, with an increasing forward order book. The only slight question mark is over Carr’s food division, which often suffers from poor margins however management seem to be on top of the issue.

I have a price target of 900p to be hit over the next 12 months, 50% upside from here. Given the positive trading, forecast earnings & dividend yield the downside from here looks pretty limited. Results are due out on November 8th.