Bogle Death, Patisserie and Diploma AGM

The death of John Bogle has been announced at the age of 89. He wrote several very informative books on investment and was the founder of Vanguard which has grown into one of the largest mutual fund managers by promoting index fund management. He also promoted the idea that the investors should own the fund manager. He suffered from heart attacks from a young age, the first at age 31, and actually had a heart transplant in 1990. So in some respects he was a medical success story as well as an investment one. His books are well worth reading even if you are not a fan of index tracking (I am not).

More bad news from Patisserie (CAKE) with two more non-exec directors resigning and an “update” saying there were thousands of false entries in the accounts. KPMG have been called in to review what to do next and the company’s bankers have been asked to extend the “standstill of its bank facilities”. I suggest investors mentally write off the value of their holdings in this company.

I attended the Annual General Meeting of Diploma (DPLM) yesterday (on the 16th Jan). This is a business that owns a ragbag of technology companies from multiple acquisitions but grew into a financial profile I like to see under the former CEO Bruce Thompson. He led it for 20 years. Consistent growth in profits, good return on capital (about 24%), and good cash flow with rising dividends. Unfortunately, the new CEO they appointed did not work out for some reason and left in August after only a few months. The Chairman, John Nicholas, took over temporarily and they have just appointed a new CEO named Johnny Thomson who was present at the AGM. He used to work for Compass Group which is a much bigger business so I asked him why he joined Diploma. Was he disappointed about not getting the CEOs job at Compass perhaps (the CEO there died in a plane crash)? His answer was that he had spent a long time at Compass and it was time for a change. Was he disappointed? Perhaps, is a summary of what he said.

The company issued a trading statement on the day, which said reported revenues up by 9% in the first quarter, and was otherwise positive. Thank god for such boring companies in these turbulent financial times. I asked a question in the meeting on the possible impact of Brexit and US/China trade wars. The answer was in essence not much so long as US tariffs don’t rise much further (they do import much from China to their US operations).

A poorly attended AGM but useful nevertheless from a company that keeps a low profile.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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