Seneca Investment Managers has drunk its fill of beverage wholesaler Conviviality, as it announced today it had sold all its shares making a 65 per cent return.
Recent re-ratings, which have lifted the company's share price, have reduced Conviviality's value in Seneca's eyes since its investment in January.
The fund manager has instead put the money from the exit into specialist assets where it believes “better value can be found”, including socially focused global infrastructure fund International Public Partnerships and RM Secured Direct Lending, which provides asset-backed loans to corporates.
“At the time of purchase, [Conviviality] was a good example of the value that can be found in certain UK mid-caps,” explained Seneca's Mark Wright.
“The shares were yielding close to six per cent and trading on an attractive price-to-earnings ratio of just 10-times 2018 earnings.”
But since alcohol duty was frozen in last week's Budget, and strong performance has led to re-rating, the yield has decreased and price has risen to 17-times earnings.
Analysts have been less dubious about Conviviality's desirability, as Investec reaffirmed its “buy” recommendation earlier this month referencing the business's “impressive first-half trading performance”.
But Seneca said its walk away from Conviviality was a result of the firm's “strong value discipline”. The retailer's shares were down 0.42 per cent in afternoon trading.
This isn't the first bold move by Seneca this year, as it caused a stir in August saying it would stop its Global Income & Growth Trust investing in US stocks and shares.