Bought TSTL & TUNE

I bought two new holdings this week, as many of the shares in my portfolio and watchlist have been rebounding following the June dip. I rebought Tristel, not long after I sold it and just in advance of it’s trading update, and Focusrite, whose price was breaking out to new highs.

Markets are looking a bit more positive at the moment than they were in June and the balance of cash in my portfolio has been falling as decent opportunities to top up or add positions have appeared. I’m concerned about the possibility of a ‘whipsaw’ market, where prices start to oscillate up and down, as in those conditions my momentum based strategy breaks down. I think the key is not to compromise on risk management when prices are falling, but to judge when to buy back into positions carefully. The latter is difficult and it’s easy to feel euphoria when prices bounce after an anxious dip.

At the moment I think it’s a bit early to doubt that this was just a minor blip in the bull market, so I’d rather not keep too high a cash balance. I think that continuing to rotate out of the shares that have lost momentum and into those with stronger news flow and momentum is the right thing to do for now. Even in a whipsaw market, I think shares with strong news flow should continue to outperform. However, if I start getting the sense that this strategy is not working well I’ll hold on to more cash.

Next week is a bonanza of news updates from many of the shares in my portfolio and watchlist, so I expect more rotation is likely. I still have some cash on the sidelines ready to buy or add to any shares with particularly good updates.

I intend to be continue to be more clinical and aggressive in concentrating the portfolio in the best opportunities as they arise. My portfolio is currently at 13 shares and I don’t really want too many more holdings than this. Indeed I may even sell the weaker holdings to reinvest into any shares with particularly good updates next week (fingers crossed).

Anyway, on to the buys…



I bought some Tristel on Monday and added more on Tuesday following an excellent trading update. Tristel makes chlorine dioxide based disinfectant products, predominantly for hospitals. I’ve held it until very recently and have written on it here before. While the decision to sell was probably an error in hindsight, it’s important not to get hung up on this and let it cloud my judgment of whether to buy back again if the opportunity looks good.

My view on it hasn’t changed so I’ve just reproduced what I said previously below.


  • Business economics: Tristel has good economics. It currently has high margins (20%) and returns on capital (26%). These haven’t always been this high but have been growing in the last 3 years. Tristel also has consistently high free cash flow conversion.
  • Track record: the track record is somewhat patchy with some mild profit warnings, volatility in sales growth and consequently the share price over the last few years. However, overall I’d say the performance has been good and profits and revenues have grown at a high rate. Given it is a small cap niche manufacturer I think some volatility is to be expected.
  • Competitive advantage: Tristel appears to have a strong competitive advantage. It has IP over its products. There seems to be some evidence from studies that its products are superior in quality to alternatives available. Its main customers are hospitals who are slow to switch suppliers. This can make it take longer for Tristel to win new customers but also means it is less likely to lose them too.
  • Growth prospects: there appears to be plenty of scope for Tristel to grow into several large addressable markets globally. It is currently planning to expand into the US hospital market.


I was attracted to rebuy Tristel after the price momentum turned positive and broke out to new highs in advance of its trading update. This appears to have turned out well as the update was very good, with profit and turnover ahead of expectations. The share price is already well ahead of my average buying price.

Valuation is fairly high though I think reasonable given the growth prospects. Tristel has continued to make progress with its license applications to sell in the US market and this exciting opportunity seems to be on course to being realised.



Focusrite develops and manufactures hardware and software audio products. It is a relatively new addition to the watchlist.


I think Focusrite is a high quality business:

  • Business economics: the business economics look very good. Focusrite has decent margins and consistently high ROCE, currently at 29%. It does have to invest a significant amount of capital in new product development but is able to do so very profitably.
  • Track record: Focusrite is a relatively new listing but seems to have grown profits at a fastball rate since listing and fairly consistently. It doesn’t have a long track record but seems to be in a sweet spot at the moment.
  • Competitive advantage: Focusrite seems to have a good competitive niche and high quality products that currently seem to be some of the best in class, from my limited research. However, I suspect its market is subject to continual technological advancement which in turn leads to the continual threat of being out-innovated by competitors. Market leaders in these sorts of areas don’t always sustain their position for a very long time. This isn’t a share I would buy and hold forever, though I’m just about satisfied with its competitive advantage for now.
  • Growth prospects: the growth prospects look very good. Focusrite are taking advantage of the opportunity to grow internationally, in particular through online sales and seem to have a good pipeline of new products.


The valuation seems reasonable given the growth prospects. I have decided to buy as the price has showed continued strength since its last very positive trading update and recently broke out. It’s had a bit of a dip on Friday so I’m currently down on my purchase price but hopefully this is temporary.


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