Disclaimer: Shareinvestors is not authorised by the Financial Conduct Authority to give investment advice. Terms such as ‘Buy’, ‘Sell’ and ‘Hold’ are not recommendations to buy, sell or hold securities, these statements and other statements made by the author have the meaning only to express the author’s personal views on the quality of a security. Independent financial advice from an authorised investment professional should always be sought before making investments. CAPITAL AT RISK. Full Disclaimer here.
Yesterday I tipped Sepura as a speculative buy here, that being despite a turbulent year where it managed to destroy 95% of shareholder value. Those brave investors though who agreed with my view yesterday and bought in could have already turned around a 10% gain. I am always nervous though about these more riskier trades, but I was very relieved this afternoon to see Henderson notifying Sepura that they had increased their stake from 15.89% to 18.37%. Does this helps to derisk the trade towards my target of 20p?
Who are Henderson and why are they buying?
Henderson are a major asset management company and are Sepura’s biggest shareholder. The two funds invested by Henderson with a stake in Sepura are the AlphaGen Volatis an activist style hedge fund with $1.5bn under management, it has a 6.53% stake. The second is the £150m Open Ended Henderson UK & Irish Smaller Companies Fund with a 11.83% stake. The Open Ended Fund has Sepura has one of its top 10 investments and 2.2% of the total fund.
Should I follow Henderson into Sepura?
All shareholders are not made equal despite what you might think. Henderson is the biggest of Sepura’s shareholders and backed the last placing. You can pretty much guarantee that the Henderson Fund Managers were the first people that acting CEO Richard Smith picked up the phone to call when the dreadful RNSs and profit warning was released. I suspect Henderson have had explained in detail the drivers behind what has happened and the future plans to make things right, this may include various hints as to what may be behind the corner. Henderson may even have had a part to play in the disappearance of CEO Gordon Watling. The hedge fund is an activist fund so this is not an unreasonable assertion.
Given the close access to management that Henderson combined with their deep knowledge of the company then further buying is definitely a positive. However, word of warning, the open ended fund has woefully underperformed its benchmark in the last two years, unsurprisingly the fund is ranked just 1 out of 5 on morningstar’s fund review. So can Henderson be trusted to know what they are doing? Unfortunately there is limited information on the hedge fund so I can’t comment on the performance there.
Whether you have confidence in Hendersons or not, the fact they are buying and not selling will have a major impact on the price, irrespective of your view on potential value in these shares. Today’s TR-1 derisks the trade somewhat but this is still a high risk trade, don’t bet the ranch….
REITERATED SPECULATIVE BUY – 20p
Disclaimer – I have a long position equal to <1% of my net assets in Sepura bought in at 13p. I have no further positions in any of the other stocks mentioned and to my knowledge nor do any close family, friends nor associates.
This post is purely my opinion and should not be taken as financial advice. I welcome any alternative comments and will consider adjusting posts based on information made available to me.