What do you like about the stock?
Beacon is an anomaly in retail as there is limited competition in the retail lighting category from sophisticated operators.
BLX is a category killer, with high brand awareness and excellent sites. The business operates over 96 stores, while most specialists operate only a few stores each.
How long have you held the stock?
We have held the stock for about 18 months.
How is it better than its competitors?
The business has a vertically integrated model so it can better control its supply chain and pricing.
BLX continues to introduce innovative products and drive fashion elements in the category.
Where do you see the value?
Although there are concerns with its vulnerability to the housing cycle, we believe the business still provides us with a longer-term opportunity.
BLX has a significant number of internal growth drivers, including increasing its presence in the trade channel, leveraging general consumer trend towards premium products, further product expansion and a steady rollout of its big box stores.
What do you like about its management?
The business is family controlled, by the Robinson family, with long serving executives. We rate management highly. We also take comfort in the fact that the family have not sold any stock pre or post listing.
What is your target price on the stock?
We expect mid-teens annual return over the next five years, driven by double digit earnings growth.
At what point would you sell it?
In the absence of an excessive re-rating or unforeseen issues in its business model, we hope to hold this name over the next decade.
Its weight in the portfolio will oscillate, with the relative price movements of all stocks in the portfolio.
How much has it added (subtracted) to your overall portfolio over the last 12 months?
There has been a positive contribution to alpha in the portfolio, with the stock appreciating over 65% over the past 12 months.
Is it a liquid stock?
The stock has relatively limited liquidity, which is common for small cap stocks, particularly where stock holdings are typically concentrated.
Hyperion has a 5% shareholding, alongside the Robinson family with 55%.
Beacon Lighting Group (BLX)
Source: Yahoo!7 Finance, 28 January 2016
Jason Orthman is a portfolio manager for Hyperion.
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