Two new stocks for those determined to avoid being stung by inheritance tax
Today we will carry out a small‑scale refresh of our Inheritance Tax Portfolio: following a cull of four holdings in October we will add two new ones. We’ll also update on some recently added stocks as well as on one that dates back longer.
New holdings: Premier Miton, SDI
These are both stocks we have already tipped for the general readership, as opposed to those who specifically want shares likely to be exempt from inheritance tax.
We named Premier Miton, the fund management company, as our stock tip of the year on Jan 11 and recommended SDI, which makes scientific equipment, two days ago.
We believe (although one can never be 100pc sure) that both qualify for “business relief”, the tax break that gives rise to inheritance tax exemption, so we add both to our IHT Portfolio now.
Questor says: buy
Tickers: PMI, SDI
Share prices at close: 117p, 165.5p
Updates: Inspecs, Impax Asset Management, Breedon
These three stocks were added to this portfolio on July 15. One has performed well, one has stood still and one has been a disaster. We cover the latter, Inspecs, the eyewear maker, first.
Shares in the company have tumbled by 60pc since mid‑July but the fund manager who put us on to the stock is standing by it.
“We still have it, although I must admit that it would be hard to sell our stake if we wanted to,” says Chris Boxall of Fundamental Asset Management. “It made the mistake of trying to do too much too quickly, and on top of that it lost a respected chairman in Lord MacLaurin.”
The company said in October that it had been affected by weak consumer sentiment in Europe and by delays to a new factory in Gloucestershire.
It said it would delay the expansion of an existing factory in Vietnam and investment in a new one in Portugal until at least the third quarter of this year. “It has reined back expansion to conserve cash,” Boxall adds.
Inspecs’ market value of £95.6m compares with forecasts of about £200m in sales and 10p a share in adjusted earnings for 2023, a multiple of just 9.4 times. A positive trading update yesterday helped to reduce our paper losses. “It’s massively oversold; we are sticking with it,” Boxall says.
The stock that has done nothing is Breedon, the aggregates company. “We still own it – it has not done anything wrong, it has just drifted with the market,” Boxall says.
“It has a good ‘moat’ and is well managed. A mooted shift to America freaked the market but is now off the agenda. If the share price stays like this, someone will snap it up, perhaps private equity with the support of the founders.”
We’ve had more luck with Impax Asset Management, whose shares have gained 36pc since our tip. Boxall says: “It recently updated the market on the amount of money it manages, which rose in the first half of its financial year by 6.4pc to £37bn, including about £800m of new money in what was a bad quarter for the sector.”
The stock market has been recovering and Boxall says asset managers are a “geared play” on the markets – they go up and down in harmony but movements in both directions are amplified.
“Impax is committed to ESG [environmental, social and governance] investing. It did it seriously from the outset; now everyone else is playing catch-up,” he says. “The shares look expensive relative to the sector but it’s a fantastic business and we are still holders.”
We’ll hang on to all three stocks.
Questor says: hold
Tickers: SPEC, IPX, BREE
Share prices at close: 94p, 750p, 64.7p
This supplier of software to hospitals and other healthcare providers has also been having a difficult time of it: the shares, which are typically volatile anyway, have lost 25pc since last week following a downbeat trading statement.
It said it expected sales growth to be affected by a depressed contribution from professional services this year, while higher interest rates were hitting earnings per share.
We continue to think the company has a strong position in a lucrative niche and advise readers to hold on through the current weakness.
Questor says: hold
Share price at close: £14.40
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