I’ve continued to consolidate my portfolio rather more rapidly than anticipated, selling my holdings in Just Eat and Hilton Food Group.
I sold out of Hilton Food Group on noticing how low down it was ranking on my spreadsheet. This is for a couple of reasons. While Hilton has a really good track record of high returns of capital and consistent growth, it has very thin margins and is reliant on large customers, in particular Tesco. This does create some risk. The valuation is also starting to look quite stretched given my cautious assumptions for future growth. This might be justified as Hilton is currently investing internationally in a number of ventures, but this also raises risk. Overall, while I am reluctant to sell a business that is doing well with the share price making new highs, I think the reward to risk ratio is better on some of my other holdings at the moment.
I’ve also reluctantly let go of Just Eat, not very long after opening a position, on news that the Executive Chairman needs to take a break for medical treatment. This follows shortly after the CEO stepping down for family reasons. While I think this is just an unfortunate coincidence, I am concerned that these events are happening at an important time when Just Eat is looking to expand very rapidly both organically and through acquisitions. Losing some of their key players now does appear to create some risk. The share price has been volatile around highs recently. I think I’d do better selling out for now and potentially revisiting later.
With the proceeds from these sales I’ve reinvested in a number of holdings across the portfolio, both increasing the size of a number of my smaller positions and adding to System 1 and On The Beach, which I think look very promising at the moment.