Hobson: The Market is Wrong About Sports Direct

THE WEEK: Sports Direct shares have bounced following good year-end results. But Morningstar columnist Rodney Hobson is unconvinced

Rodney Hobson 21 July, 2017 | 11:30AM

There are times as an investor when you doubt a) your sanity and b) your stock-picking skills, and I went through such a moment early last month after I bought shares in RPC (RPC), the plastic products company. It is smaller than most of my choices but I was attracted by its positive outlook and judged that a fall in the share price from £10.61 at the start of the year to around £8 was unjustified. The shares fell further after my purchase.

The update issued this week showed that I was right and the market was wrong. The trading performance in the first quarter of 2017 exceeded management expectations, with revenue in the quarter to June 30 well ahead of the same period the year before. Although some of that gain came from acquisitions and positive foreign exchange movements, there was also continued organic growth.

Group margins and profitability levels were ahead of expectations, with a favourable currency translation offsetting the impact of higher polymer prices that have still to be fully passed on to customers. Letica has performed well since being acquired in March, with cost savings coming through nicely.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Premier Foods PLC80.20 GBX0.38
Sports Direct International PLC306.00 GBX-3.29

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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