In investing, as in life, there is no substitute for human contact. And one of the touchstones of my investing style is to get out and meet the experts on the ground, whether they be managers at the small companies I invest in or dealers in the books, stamps and coins that also form part of my portfolio.
I have been interested for some time in extending my coin collection to encompass old coins from the Isle of Man. I have both family and business connections in the tax haven, and make regular visits there. What better way of getting in-depth knowledge about collectable coins?
The acknowledged expert on Isle of Man coins is Alan Kelly of Mannin Collections. He is based in Peel, the old fishing port on the island’s west coast. Kelly’s business covers all Manx collectables, from old maps and prints to china, coins, bank notes and the like.
He is a keen coin collector and dealer and the author of a book covering the documentation of old Manx coinage. This dates back to the early 1700s when James Stanley, 10th Earl of Derby, ruled the island. Lord Derby’s family crest, of an eagle clutching a small child, adorns early Manx coins. The island later passed into the control of the Earl of Atholl before being sold to the Crown in 1765 for £70,000.
Collectable Manx coins run only between 1709 and 1839. After this the older coins were de-monetised. Previously, 14 Manx pennies had been equivalent to an English shilling. The change to the new coinage provoked serious rioting.
In practical terms, this means there are only 18 basic coins in the series, although there are often several variants of each. Some pennies and halfpennies, for example, were struck in silver, perhaps to be used as sixpences and shillings. There are “unofficial” issues and errors to add to the fun.
I have invested a modest amount in an initial set of the coins, complete apart from all but two in the basic series. I view this as a learning exercise, to become familiar with the issues before upgrading in quality with some new purchases and trying to ferret out some of the rare variants.
London dealers such as Spink and Baldwin also have stocks of coins, and my next step is to try to see what else is on offer. I am funding this adventure partly from stock market profits and partly from the sale of a rare ancient Greek coin. This was the only survivor of a cull I conducted of the Roman and Greek part of my collection about six months ago.
Activity elsewhere in my portfolio has centred on taking profits in one of my longer standing holdings. The stock in question is Paypoint. Here I have sold my entire holding, partly in order to take advantage of my capital gains tax exemption for 2005/06 and also to soak up some accumulated tax losses from previous years.
Why sell now? Simply because I believe most of the good news is in the price. I am happy to head for the exit, having more than tripled my money.
To take its place I have reinvested part of the proceeds in Vindon Healthcare. I visited this company some time ago. I decided to reserve judgment until the company’s first set of full year results, which appeared last month. Vindon’s main business is so-called “stability storage” of pharmaceuticals and related products, to test in a controlled way their efficacy in different climatic conditions.
The results, which effectively covered a 10-month period, were up to expectations. More important, however, the company has new contracts that guarantee much higher levels of income for the next five years. These provide a strong platform on which to build further growth.
My reading of the accounts suggests Vindon is selling on a multiple of historic free cash flow of about 12 times. This looks good value now that management is delivering on the objectives it outlined several months ago.
My task later this month, once the new tax year has started, is to look at my remaining equity holdings with a critical eye. This past year capital gains tax considerations have restricted my freedom of movement. From April 6 onwards I will be less constrained. I am particularly concerned about Erinaceous, where I have a big profit and where recent allegations of potentially fraudulent conduct at one of the group’s subsidiaries have unsettled the share price. Further inspection is definitely required.
