RWS bought

I’ve been very busy for the past couple of weeks with my day job, which has become pretty hectic. This hasn’t left me much time to write blog posts – I’ve restricted myself to simply updating on my trades until things quieten down. I have a few ideas for some more interesting strategy-related posts but probably won’t have time to start getting them down until mid to late November. Stay tuned. In the meantime, I have one trade to update on from last week: RWS Holdings.

Stock markets have remained volatile over the last couple of weeks, leading my portfolio to alternate between making some of its biggest daily losses and its biggest daily gains. It’s still anyone’s guess whether this will turn into a prolonged bear market, though I’m still optimistic that it will be short-lived.

I find decision-making in this sort of more volatile environment is a bit more tricky, as it’s less clear how much to rely on momentum, normally a cornerstone of my strategy. Is it better to buy shares that have held up fairly well through the volatility or those that look to have been unfairly punished by indiscriminate selling? There seem to be plenty of exceptions either way. It’s probably more important to rely on conviction in quality and valuation. Recently I’ve resumed scoring the valuations of the shares on my watchlist to help me get this balance right, using the Graham rule of thumb, as described at the end of this post.

I’m sticking to my approach of making one trade every couple of weeks. I had a bit of spare cash last week, which I’ve used to buy RWS without needing to sell anything.

RWS

I’ve previously held RWS and written about it here. I still have the same overall view of the quality of the business. Here are a couple of additional thoughts on more recent developments:

Since I last held RWS, the main news has been the integration of its recent large acquisition, Moravia. Moravia uses technology to provide ‘localisation services’, assisting large global brands in tailoring their marketing to demand in different countries. After an initial slow period following the acquisition, RWS recent trading update suggests Moravia is back on track to continue delivering good growth. Business momentum looks strong and the shares potentially undervalued.

Last time I held RWS, an issue at the top of my mind was the possible impact of the European Unitary Patent. This poses a risk to RWS’s core business if it means that demand for patent translation falls in the future. There is not much new to update on here. The risk is still there but the magnitude has decreased as RWS has diversified its revenues away from patent translation (now 35% of revenues). The Unitary Patent may be implemented at some point in 2019. While it is likely to take some time to get up and running and whether businesses decide to use it or not remains to be seen, there may still be significant impact on RWS’s patent translation revenues. I’m not especially concerned by this risk and think RWS looks like a good buy regardless.

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