The Forager International Shares Fund owns shares in UK real estate agency group Countrywide plc. For the last six months, we wish it didn’t. After first buying at the beginning of 2015, the stock promptly ran up 40%. It’s since given up all those gains, and then some. It’s quite cheap today.
Much of that downdraught relates to changes in the UK housing cycle, which is largely outside the company’s control (that’s not an excuse for us as investors, we could and should have avoided this). But there is a lot the company can do to take full advantage of a down cycle and build on its market leadership. I wish there were more signs of them doing so.
I like and respect the company’s CFO, a real nuts-and-bolts type who owns a meaningful amount of company stock. My impressions of the CEO, Alison Platt, who I’ve never met, are significantly less favourable. But she has the opportunity to get on with the job and make me eat my first conclusions. I sincerely hope she does.
A company announcement this week is a step in the wrong direction. Platt has just accepted an offer to join the board of supermarket giant Tesco plc, and will also join its remuneration committee.
Countrywide’s stock is down 40% in the past few months. Today is probably the best opportunity in at least three years for the group to snap up high quality independent realtors around the UK at attractive prices. Putting in longer hours is likely to have a higher than usual payoff at the moment. And the CEO decides now is the time to take on Tesco’s problems as well?
And then there’s a change to how the company reports its results. Previously, Countrywide reported results from its various division, the three biggest being Estate Agency (the housing sales business for the UK excluding London), the London and surrounds sales business, and Lettings. It’s good to see Lettings separately because it’s a far less cyclical business than housing sales. The company has the opportunity and desire to grow bigger in lettings.
So what change is happening with the next results? They’re folding Lettings into the two housing sales divisions for reporting purposes. Now hopefully they’ll continue giving clarification about the progress of lettings, but shareholders are likely to be left with less information than they currently get. Again, this isn’t a step in the right direction.
C’mon Countrywide, now is the time to get on with it.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.