I think we can all agree that good investing is largely boring. You read results and annual reports, choose what you like and decide on the price you think is worth paying. Then, after buying, you sit back and wait for the dividends to flow, all the while monitoring new results and possible threats to the business.
The problem, of course, is that reality is decidedly different. Screaming headlines appear, hot new sectors emerge and commentary and social media, awash with reports of big wins and exciting opportunities, startle you.
As investors, a large part of our job is to ignore all this noise.
But I want to propose a new idea to add to the “good investing is boring” narrative. Investing is also easy.
Take the case of Combined Motor Holdings* (CMH).
The company sells cars and has a car rental business. Nothing thrilling about that, and certainly no 10-bagger will emerge in less than a year. But we all need to get from A to B, and for many of us that involves owning a car. So demand is there.
I remember that about 20 years ago the industry was all about getting to 1-million vehicles sold in a single calendar year. Yet this year there will be about 600,000 sales.
Such information as I have from the early 1990s shows the stock as a 1,000- bagger over the period and having a 20-year annualised return of about 12%
But more or less 600,000 vehicle sales a year is still a lot, and the September report by automotive business council Naamsa showed vehicle sales that month to have been at their highest since September 2015.
But why CMH?
For boring reasons. CEO Jebb McIntosh owns about a third of the company and has done so for as long as I can remember. He founded the business with Maldwyn Zimmerman in 1976 and it was listed during the 1987 listings boom. My share price data doesn’t go that far back, but such information as I have from the early 1990s shows the stock as a 1,000-bagger over the period and having a 20-year annualised return of about 12%.
And then we get dividends. Over the past decade the dividend yield has averaged about 10% — so in those 10 years shareholders got the current share price paid back to them in dividends.
Remember that it just sells and rents cars.
The latest results report contained two important statements. One is that Chinese and Indian brands made up almost 50% of the company’s sales. Yep, the decade-high vehicle sales figure for South Africa was driven by cheap imports as buyers rejected the expensive brands of the past. CMH also sells a lot of the more expensive brands, but it is well positioned for the new wave of cheap cars.
The other interesting point was that no dividend was forthcoming, as the company is proposing a share repurchase offer of 15% of the issued stock. Details are still to be announced. I will not be tendering my shares for repurchase, and I suspect many others won’t either. However, the CEO is nearly 80 years old and this looks like a potential partial exit for him, as he could tender for the repurchased shares not taken up by other investors.
So, at the end of the day here’s a boring stock that’s delivered annual total returns of more than 20% in the past decade alone.
*The writer holds shares in CMH
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