Haynes Publications – sold, after a tripling (almost)

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I sold my Haynes (LSE:HYNS) shares last week at 291.8p.  I bought into Haynes in February 2015 for 115.9p.  Including annual dividends of 7.5p per share, the return over four and half years was 181%.

Wherever I looked in 2015 people wrote that Haynes’ business is rubbish because it is focused on paper manuals for car maintenance and repair. In the era of the internet and do-it-for-me mentality these books were not needed, and so the company faced the prospect of decline and death.

As you know, I’m bloody minded and do not simply accept other people’s conclusions without confirmatory evidence.  When I looked at the company in 2015 I came to a completely different conclusion than others.

The secret lay in not just examining the automotive manuals business, but also putting analytical weight on the other two businesses Haynes had developed.

Here’s what I wrote in 2015:

Haynes publishing – the hi-tech business of tomorrow

How would you like to buy a stake in a hi-tech B2B e-commerce company that already has 40,000 online business subscribers, making it the market leader in Europe?

It has a strong brand and a history of high profits relative to its current share price.

Oh, and I nearly forgot, it publishes paper books – over 2,000 different titles in 15 languages.  It is the market leader for these types of books in the UK, USA, Australia, most of northern Europe.

And, in case you were thinking that books are a little old-fashioned, not very hi-tech, well they have been working on that too.  Now most of the car and motorcycle manuals have online versions with neat videos and other additional features helping the DIYer and professional alike.

The 40,000 online subscribers I mentioned are just the professional lot who pay an annual subscription to gain access to a comprehensive database.

These are mostly garage mechanics who need technical information on maintenance and repairs, tracing and fixing electronic faults, links to component codes, ordering the right parts and job cost estimates.

Can 40,000 hard-nosed mechanics be wrong?  Haynes must be doing something right to get their orders.

On top of the 40,000 professionals there are many more keen amateurs subscribing to an online Haynes manual (LSE:HYNS).

In the face of all the gloom and doom in the stock market about the firm, it must be noted that in the last 8 years it has never made a loss, with the lowest earnings per share of 14.2p and the highest at 31.6p.  Throw in the dividend yield of 6.5% and you certainly have my interest kindled.

And you can buy into a company of this quality for a share price of 115.9p, or a total market capitalisation of £17.5m.

This is a share for my modified-PER portfolio:  It looks good on the ratio of share price to average eps over eight years, on Piotroski factors, and on the key qualitative elements.

By the way, I’ve been following this company for a decade without buying.  There was always the nagging doubt that DIY maintenance and repairs was going out of fashion.  On top of that the share price was two or three times what it is now.

Following a sharply lowered share price we now also have eight straight years of profits; if this business is headed for the dustbin, how come it keeps on reporting profits?

Perhaps it has found ways of profitably growing beyond its paper manual origins that the market has not yet cottoned on to?

Haynes has three very interesting businesses:

Business One: Printed manuals

John Haynes, while still at school in 1956, wrote and published his first book, on building an Austin 7 Special. After writing two more manuals while doing his National Service the company was founded in 1960. A stream of manuals followed.

Over 150 million have been sold, with over half a million in the UK last year alone. There are around 300 Haynes UK car manuals in print with 130 plus UK motorcycle manual titles

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