20-05-2025
Takeover deals confirm our instincts were right on these three stocks
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest.
It has taken a long time but our patience looks to finally get its reward with pawnbroker and jewellery seller H&T, which is on the receiving end of a bid from America's FirstCash. After fending off three prior proposals from FirstCash, H&T's board is recommending this one, which comprises 650p a share in cash and the final 11p-per-share dividend for a total of 661p. That will take our total return on the stock, including dividends, to over 120pc.
We first took an interest in H&T five years ago during the pandemic and resulting lockdowns as we sought out business models suited to weathering an extremely difficult economic environment. We also eyed shares that came on lowly valuations, to provide an additional layer of downside protection.
The Aim-quoted company fitted the bill admirably, not least as the shares traded on barely seven times earnings, offered a forward dividend yield of more than 5pc and came on barely one times net asset value (Nav) at the time.
The subsequent returns therefore help to justify this column's value-driven methodology, helped by the 44pc premium to the undisturbed share price implied by FirstCash's offer – a figure which compares to the average 35pc premium across nearly 30 ongoing or closed takeover situations involving UK-listed companies in the year to date.
Even the 661p offer price values H&T on just 11.7 times forecast earnings for 2025 and implies a forward dividend yield of 2.8pc. Based on those numbers it is easy to see why FirstCash should swoop on H&T's strong competitive position and robust financials.
H&T was trading at a tiny premium to its book value per share of 442p before the bid, even though it was generating a post-tax return on tangible equity of 15pc.
Questor says: Hold – we shall tip our hat to H&T when the deal closes and move on
Ticker: HAT:AIM
Share price: 644p
Update: Care Reit
H&T is not the only portfolio pick to have received a bid this year. Assura is one and Care Reit is another.
In the latter case, the New-York listed CareTrust Reit brought a cash bid of 108p per share on March 11 – and the deal became effective on May 9. The shares ceased to trade last Monday, May 12, and investors should receive their cash by May 23 at the latest.
The bid vindicates our faith in Care Reit's business model but we ended up with a small capital loss, for which 16.99p per share in dividends just compensated – as we paid one times book value upon entry back when the company was known as Impact Healthcare Reit.
The combination of a surge in interest rates and that fairly full price tag is the reason we ultimately made only a modest total return on investment. As ever, the lesson is to be more careful when it comes to the valuation paid to access a share of a company's cashflows and assets.
Questor says: It could have been better, but the fault was ours. Neither buy, hold nor sell as the shares are delisted.
Update: Fresnillo
Hopes for an easing in trade tensions and a clearer economic outlook are leading to some profit taking in gold and silver but we remain content to stick with shares in Fresnillo, the world's largest silver miner, for two reasons.
First, the US government bond, or Treasury, market continues to see an increase in yields. This smacks of bond vigilantes worrying about the inflationary implications of president Trump's planned tax legislation.
The so-called 'Big Beautiful Bill' looks set to substantially increase the American federal deficit thanks to new tax cuts and the extension of existing tax breaks. Silver, as a real, physical asset could offer some protection against inflation and any eventual money printing or monetary system reset designed to help the US make its borrowing more manageable.
Second, to continue the M&A theme, Pan American Silver has recently launched a $2.1bn (£1.5bn) cash-and-stock bid for MAG Silver. The target's main asset, alongside two exploration projects, is a 44pc stake in the Juanicipio silver mine in Mexico, where the owner of the other 56pc is none other than Fresnillo, which also operates the site. The price tag values MAG at 3.5 times historic net asset, or book, value, while Fresnillo trades on just 2.3 times.
Fresnillo has seven other producing sites, so it is now a pure play on Juanicipio, but that mine generates just under a fifth of Fresnillo's output and revenues – and the offer price for MAG Silver does suggest that the FTSE 100 index member is cheap by comparison.
Ticker: FRES
Share price: £10.26
