Brief summaries of my 15 share ideas for 2025: Ideas 1-3

Water Intelligence WATR Volvere VLE JD Wetherspoon JDW

Having provided my list of 15 share ideas for 2025 I will now give a brief summary for each one. I intend to outline my reasons for investment in an easily digestible manner. The aim is to provide just enough information that you will have a base from which to investigate further.

Water Intelligence PLC

This company is a US plumbing operation. They find and fix leaks using their proprietary tech which they say is less invasive and therefore more cost effective for their customers than traditional methods. These customers are usually insurance companies or municipalities. This is a strategic advantage as it’s difficult for sole traders to build relationships with this type of client.

The core US business is still growing but to me the real opportunity is global. The fragmented nature of the global market makes it vulnerable to a large player such as Water Intelligence. One that can leverage economies of scale and access to public capital to buy and build from local operators at cheap business valuations.

Another advantage is that they are less subject to the whims of the economic cycle than most companies. If you get a leak, you don’t worry about where interest rates are going to be in six months, you get it fixed.

If they achieve their FY25 forecasts then I think that will equate to approximately £6m look through cash flows. The current share price of 417p (72m market cap) represents a forward p/e of 12x. That’s a decent price for the US operation alone so you’re getting the potential global expansion in the price for free.

Executive Chairman Patrick DeSouza is aligned with shareholders via his 28% shareholding. He presents very well as you can see from this interview…

Volvere PLC

Sometimes the beauty of an investment thesis can be in it’s simplicity and they don’t come much more simple than Volvere. It is a sum of the parts story… with only two parts!

Volvere held 24m cash and available for sale investments at their last reporting date of 30/06/24.

The only other asset is an 80% holding in food manufacturer Shire. These same reports showed that Volvere’s share of cash flows from Shire is around 2.4m on an annualised basis. Shire revenue has grown organically from 30.6m in FY21 to 43m in FY23. H124 showed a further 16% growth. With this in mind I don’t think it’s unreasonable to value Shire at 12x cash flows which would be worth 28.8m to Volvere.

Add these two assets together and we get 52.8m which is approximately 50% higher than Volvere’s market cap at today’s price.

Management has a great record of realising value and returning that value to shareholders. I expect we will see a sale of Shire before the year is out. Failing this there could be a tender offer or a major purchase with the cash. If it’s the latter then risks will increase but also potential rewards if management are able to pull off another successful turnaround.

JD Wetherspoon

I’ll save my ink on this introduction as I’m sure you’re all familiar with this name. Personally I’ve become more familiar than ever with the inside of a Wetherspoons in recent times which forms the bulk of my investment thesis.

JDW recently announced a 60m increase in costs from the well publicised NI and living wage changes. If these had been in effect during the entirety of the current trading period they would more or less wipe out all the profits I had been anticipating. Understandably the market is focusing on these costs and worrying about this impact on profitability.

My take on the situation is quite different. I believe these cost increases have pushed the rest of the sector to near breaking point. I anticipate this has created a perfect storm in which a low cost operator like Wetherspoons can prosper. The price discrepancy between Wetherspoons and just about everyone else has become so large that I consider it on a night out in a way I never used to. I’m sure this will be the same for many others.

Remember that these price changes don’t come into effect until April. I expect to see JDW aggressively pick up market share as the year progresses past this pivotal point.

Pre-covid net profits peaked at 73m. I can envisage a scenario whereby their advantageous market position sees these numbers hit once more. Should they trade on a 15-20x multiple of that figure then today’s shares would double at the top end of the range.

If I’m wrong and JDW suffer along with the rest of the industry then at least the shares will be supported by a large freehold estate.