investing etc. 0024

Tariff edition: Charging the US to use the English language, the most exquisite painter of granite, histories of Pokémon and GPS, Dotdigital, Cake Box, Howdens, Garmin, Pets At Home, Porvair, Quartix

Last month was the sunniest March since records began in 1910*. It’s economic and political winds that have battered us.

March threats, April tariffs

As so often happens when the economic weather changes, investors find themselves asking different questions.

When I met Quartix founder Andy Walters and the company’s finance director last week, I asked about the company’s supply chain.

Quartix operates a vehicle tracking service. It uses a device that is installed under a van’s bonnet or plugged into the dashboard. This is coupled to a data service that reports the location of the vehicle to the fleet owner.

I was concerned about provenance because it was the eve of “Liberation Day”, when the US government would unveil the tariffs it had long been threatening.

The printed circuit boards in a Quartix device are made in China but assembled into a box in the UK. This makes them English. Quartix told me they are exported to Europe and the USA duty free.

I shrugged when I asked what the future might bring, anticipating Quartix was in the dark like everybody else. Quartix shrugged back.

Andy offered some reassurance, though. A Quartix device is cheap to make. It costs less than £40, which is nothing compared to the value of the service. Typically a customer pays monthly for seven years or so.

An increase in tariffs on the devices is unlikely to undermine the investment case.

The best response to change, I find, is curiosity. Nothing in investing is certain, especially our worst fears.

My number one source on sanity in testing times, Oliver Burkeman calls this desire for certainty the mother of all “toxic preconditions”. It paralyses us, preventing us from fulfilling our goals.

The most entertaining response to change, though, is humour, which is why I enjoyed Simon Crosby’s proposal in a letter published by the Financial Times:

The government hasn’t introduced a tariff on the English Language as he suggests, so it won’t be funding the NHS or defence that way. Instead it is emptying its smallest spending bucket, overseas aid.

Sadly, this is a popular choice. Happily, as Hannah Ritchie of Our World In Data says, tiny amounts of aid make a big difference. Those of us who take a different view and can afford a tiny amount of aid know what to do.

Never one not to pass up an opportunity to mention my favourite charity, The Livingstone Tanzania Trust is now Mikuyu Tanzania.

* And the sun’s still shining! The unseasonal sunshine is caused by an “omega block”, just in case you are curious.

Research

• Anatomy of a bubble
  I examine the crazy price action of Dotdigital during the pandemic, and wonder whether it has cast an unjustified pall on the business and its prospects.

• An elephant that trots
  The Competition and Markets Authority is investigating Large Vet Groups, but Pets At Home is different from other LVGs...

• The great cake bubble of 2021
  Cake store franchise Cake Box has just bought Asian sweet maker Ambala. I spy synergy, and an excuse to revisit one of my favourite Indian restaurants.

Score

• I think my final new stock is good value
  The market for business software is a bewildering and competitive environment, but Dotdigital has a profitable place in it. The arms race to acquire and develop new features is costing it though.

• My biggest company and another new stock
  I like everything about Garmin except for the share price, and the fact that all its volume manufacturing is done in Taiwan, a geopolitical hotspot claimed by China and depended on by the USA.

• Upgrade thrusts this stock into my top 10
  Under chief executive Ben Stocks, Porvair has bought and built its way to being a filtration powerhouse. Chief executive Hooman Caman Javvi should take its exquisitely described business model and run with it.

• How I rank this simple AIM stock
  When I scored Quartix last year, the experience was like reliving a fever dream. Last week I interviewed the company’s founder, who returned to revive the vehicle tracking business. I relived it all again!

• Why this stock’s still in my top five
  Fitted kitchen supplier Howdens grew its dominant market share in a down year for the market, which is what we have come to expect. It looks like it might have to achieve the same feat in 2025.

Trade

• Building a cash pile to go shopping in the sales
  Holding on to a long-term perspective is tricky during a market meltdown. My system, and Taylor Swift, guided me to liquidate the portfolio’s holdings in Garmin and Celebrus

etc.

No plan B

• Fans of Games Workshop’s mission to, “make the best fantasy miniatures in the World... forever”, will enjoy this interview with the Pokémon’s president Tsunekazu Ishihara.

• Pokémon is reportedly the highest grossing media empire in the World. A new trading card game generated $100 million in its first 25 days.

• The company hasn’t listed on the stockmarket because it fears investors would ask what would happen if Pokémon stopped being popular. Its answer is: “We’ll go bust when Pokémon is no longer popular”.

Run for your life

• Garmin was founded to popularise the new Global Positioning System (GPS) and “change the world”

• This Witness History podcast retells the invention of GPS. The pressure on the team working on it was so great they formed a running club. Frankly, Brad Parkinson (the “grandfather of GPS”) said: “I think it kept both our sense of humour and our sanity”. #

• I wonder if they realised that forty years later we’d be running around with GPS on our wrists.

Thanks for reading

We visited an exhibition of paintings by Mexican artist José María Velasco at the National Gallery. If you haven’t heard of Velasco, don’t worry, I hadn’t. Newspaper reviews are mixed, and my family’s were too.

Velasco painted stirring romantic vistas during the early years of Mexico’s industrialisation, but I found his portrayal of detail most compelling. If you like granite it’s a must see!

Detail from “The Valley of Mexico from the Hill of Santa Isabel”, 1877. A companion who shall go nameless said the exhibition was “a bit green and brown”.

investing etc. 25 should be with you on Saturday 10 May.