Value Ideas Blog
Hargreaves services plc

Today I would like to present you a company which pops up in nearly every value screener which we use and is already well known by some value investors (the result below is from the quant investing screener):

 

QuantInvesting

 

I’m talking about Hargreaves Services Plc. (OTCMKTS: HGRVF), which was founded in 1994 with the acquisition of a haulage business from RJB Mining plc which consisted out of 20 trucks and simply hauled coal around. But we will come to the history of Hargreaves later in the text. Recently the share price has tanked to just below 3 GBP which is far away from its old high of 2012.  So the question is what happened? First in 2011 and 2012 some company specific news hit the share price when Hargreaves discovered in the year of 2011 that its Maltby coal mine had geo-structural issues and had to be mothballed. Later Hargreaves discovered a fraud in their Belgian operations, and took a GBP 17.7m write-down. You can see this development quite nicely in the share price development of that time. Than in 2013  many value investors found the company, it was pitched 2 times in Omaha, and called for an entry which ends in a share price stabilisation in the year of 2013 to 2014.

 

Hargreaves

 

In the same time the coal price collapsed from its high in the year of 2011, when one tonne of coal was traded at around 130 Dollar to  now 58 Dollar. As coal mining companies are normally dependent on the coal price this is the explanation for the collapse of the stockrpice of Hargreaves.

 

Coal Price

 

But Hargreaves is not a simple coal mine. The key to Hargreaves business model lies in its history.  Especially the 1990’s  where from importans for Hargreaves, when it continued to grow organically and bought further haulage operations. At the start of the millennium, Hargreaves Waste Services was founded and haulage diversified to hauling waste. Gordon Banham, the current CEO joined the group in 2001 and began a strategy of diversifying into higher value services.

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This is a rather unusual post for us, because it’s event-driven. Carmat S.A. is a 2008 founded company that produces advanced biological materials. The founder of the company is the 80 year-old surgeon Alain Carpentier who invented the scientific Carpentier-Edwards ® heart valves in the year 1968, which are the most used in the world. The company describes itself with the words: Carmat S.A. is the designer and developer of the world’s most advanced total artificial heart project, providing an alternative for people suffering from end-stage heart failure. Due to the company this disease currently affects over 100 000 patients in developed countries.   The first implantation of the Carmat S.A. bioprosthetic artificial heart in a human was performed on December 18, 2013 at the Georges Pompidou European Hospital in Paris, by the medical-surgical team headed by Professor Alain Carpentier and consisting of Professors Christian Latrémouille (HEGP), Daniel Duveau (Nantes University Hospital), Bernard Cholley (HEGP) and Doctor Denis Méléard (HEGP). Today the newspaper reported that the first client died 75 days after the surgery. That led to a trading stop of the stock. read more