Caledonia Investments plc is a self-managed investment trust company. The Company aims to deliver long-term growth to both shareholder capital and income by investing in a balanced, risk managed range of asset classes, across diversified sectors and regions. The Company focuses on established businesses, where return on capital employed is a differentiator of longer term performance. The Company’s investments include listed and private companies, as well as funds, in a range of sectors and geographies. The Company invests in private equity and quoted market collective investment vehicles, structured through companies, limited partnerships and open-ended funds. It invests in a range of sectors, such as oil and gas, basic materials, industrials, consumer goods, healthcare, consumer services, telecommunications, financials and utilities. It invests in various regions, such as the United Kingdom, Continental Europe, North America and Asia Pacific.
On VectorVest CLDN.L is valued at 5075 while the share is trading at 2750. The earnings potential (RV) of the share is 1.86 on a scale between o and 2. This means that VectorVest believes the share will outperform the risk free rate by 86% over a window of three years into the future. This is excellent.
The safety and predictability of the earnings (RS) is also excellent at a level of 1.38, again on a scale between o and 2. The share pays a good dividend and has a 47 year history of increasing the yield each and every year. The dividend safety (DS) on VectorVest is excellent as a result and the dividend growth (DG) is 13%. All of the fundamental measures are excellent.
The technical position of the share is shown below. The share price is in candlestick format while the valuation is shown as the green line study above the price. Earnings per share (EPS) is plotted as the blue line study in the window below the price. The extent of the undervaluation of the share is clearly seen.
CLDN.L is currently on a hold recommendation on VectorVest. In the next chart shown below I have removed the valuation and EPS so as we can explore the price action is more detail.
In the last year the share price has increased from 2100 to 2850 with the latter being reached in February 2017. Since February the share has consolidated within the confines of a triangular formation known to technical analysts as a “pennant”.
A few days ago the share price fell and found support at the lower trend line defining the pennant. Technically a break out of the pennant would lead to a 750 move which should take the share to around 3500. The move is supported by the fundamental strength of the share as noted above.
The UK market is within a Confirmed Call upwards with the short term trend also positive. On Thursday on VectorVest we had a “three green light day”. This means that the price, momentum of price and the market breadth were higher day over day and week over week. Share markets movements that are going higher on rising price momentum and breadth tend to follow through.
Summary. CLDN.L is much undervalued with excellent numbers for earnings potential, earnings safety, dividend safety and dividend growth. A breakout of the pennant pattern which is confirmed by a BUY recommendation on VectorVest (while the general market is trending higher) should herald a high probability move upwards.
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May 12th 2017