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The model portfolio has a new position.
It’s a company I wrote up here in April and didn’t buy. Since then the shares have run up by more than half, then fallen back almost to where I wrote it up.
The last leg came on 11 November, the day after its results. The shares dropped 18% on about ten times their usual volume.
Here’s the setup:
Toll-booth model. The hardware is sold once, and a fee comes in on every ticket after that
Record recurring revenue, now over 40% of sales
Gross margin at a multi-year high
Net cash, no interest-bearing debt and a buyback running
The company was buying back its own shares at prices well above today’s
The headline numbers were bad. Revenue, profit and EBITDA all fell.
The revenue drop came entirely from one lumpy line, and the line I’d want to own the business for came in ahead of anything it has done before.
The company is…