As mentioned yesterday this was an investment added as a monthly short-mid term “feeder” investment for my SIPP last month, and will likely remain whilst the price remains attractive and below my max buy price, which would be circa 350p at present (Today this trades at 250p.

So why Mears, and not one of the other companies in sector (social housing repair/maintenance)? The shareprice has fallen heavily since the results & they have now hit the magical Yield figure to make me interested. The recent graph doesn’t look good though:

The yield is a pleasant 4.8% with 2.3X cover, and the PE hasn’t been this low since ~1999. Also the annual report makes for reasonable reading and does explain the dip a little. Large shareholders (Primestone) have added funding only in November at £3.31 price, making my purchase at 260p seem very cheap – which has reassured I was not the only person seeing value here. Mears were on my target list prior to their results at this higher price level due to the previous years results being “acceptable”, . This dip probably did make me add them to the portfolio a few months ahead of planning. (I also had XP Power on the list to add this month, but they were near 20% up from when I had marked to purchase, so did not seem appropriate to add at this time from the 2 potential targets).

What I can’t dispute however, is the likely fact that caused this is the operating cash flow is at an all time low (lowest since 2014) – so I consider this given this a little bit of a punt over 12 months, however, this is a company that looks to have better figures than in 2012, but is currently trading at the same book valuation (despite the fact there is clearly a better forward order book (from the annual report). With the long procurement times in this sector, they fit my target list as a long-term likely gaining share with decent dividend prospects.

My prediction is for a recovery over the coming years, but I could be wrong, hence why I am funding this with 10% of net new “income” to the SIPP over the likely the next year, which will represent under a 4% net holding by end of year.