Why top fundie regrets selling even some stock in this manufacturer

Successfully taking profits after a stock rises sharply isn’t usually associated with investor regret – but tell that to Westferry Investment Group MD Peter Johns, who cashed in when XRF Scientific jumped earlier this year.

“I regretted (selling those shares) to some extent when they put out a really good half-year report,” Mr Johns told Reach Markets’ Meet the Fund Manager session in February.

The Investment Manager noted strong financials for the specialist manufacturing company – which provides systems that analyse material samples for mining companies, plus materials such as cement, steel, glass and ceramics for companies, universities and school labs.

“The increase in NPAT doesn’t look huge but if you look at actual profit before tax, which is probably the best metric to use in valuing a company, you’ll see that it’s a really significant increase from $2.4 million last year to $3.7 million this year,” he said.

“The next thing you might do is to look at how strong the balance sheet is and, in my view, it’s a very strong balance sheet.”

XRF Scientific – which helps its clients by producing the chemicals, platinum labware and fusion machine needed to analyse samples – has identified further potential opportunities, including in platinum fabrication and the manufacturing of precision products for the likes of aerospace components, chemical production vessels and glass production bushings.

The vast majority of the company’s inventories are platinum ware or raw platinum, Mr Johns said, noting that they can be melted down and sold: “So it’s essentially as good as cash.”

According to the fundie, critics of the stock might say it’s too reliant on mining, an inherently cyclical industry – a point that Mr Johns acknowledges, “to some extent”.

“But this is also a company that has significant market share and the process of testing materials is not as cyclical as the actual production of the much larger amounts of the materials,” he said.

“(XRF Scientific) has done a very good job of moving into other less-cyclical industries as well.”

Click here to view more videos from Peter Johns’ The Insider: Meet the Fund Manager session.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets’ position. Any advice contained within this presentation is general advice and does not consider your personal circumstances, you should consider whether it is appropriate for you. 

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.