Ever wondered how they print the date on the side of the eggs you buy at the supermarket? Shrewd Investor Peter Webb knows because he has just taken a stake in Domino Printing Sciences, which makes the technology that does it.
Mr Webb makes a lot of money by spotting troubled companies with the power to bounce back, as Domino will have to if it is to become a good investment. In this case his decision to buy Domino was underpinned by the experience of owning its rival Linx Printing Technologies for several years beforehand.
Mr Webb started watching Domino in June when it warned at the time of its interim results that difficult trading conditions could affect the full-year figures.
A month later Domino started to buy back shares for cancellation in an attempt to improve the lot of the suffering investors who had seen it slump from 229p at the start of the year to 88p by September. This shareholder- friendly activity impressed Mr Webb.
He and his team at Unicorn Asset Management knew about the high-tech printing sector thanks to the stake in Linx. They have held this since at least 1999 in Eaglet, his smaller companies investment trust, which also owns the Domino stake. Domino is five times the size of its rival with much greater turnover. It has a market capitalisation of GBP157m and last year brought in GBP150m.
Domino's problems this year have largely stemmed from the US, where it gets nearly a third of its profits. In the last set of results pre-tax profits were up on the first half of 2000, but the US business were showing signs of weakness.
In a statement at the time chairman Peter Byrom said: "In the USA order intake rates are well below last year and were particularly depressed from the middle of quarter two. Continued weakness in this market will impact results in the second half of the year."
The cataclysmic terrorist attacks on the US were the final straw and on 13 September Domino was forced to issue its second profits warning in four months. The company's stockbroker, UBS Warburg, knocked its forecast down from GBP14.5m for the year to GBP11.5m, way below the GBP18.2m recorded last year.
But such things do not worry Mr Webb. Where others feel fear and loathing at a plummeting share price, he sees a buying opportunity. Mr Webb was not about when we called, but Sean Perry, a member of Mr Webb's team at Unicorn, told us he made his first investment on 19 September when the share price was 102.5p. Mr Webb and his team had been watching the stock for nearly four months and this was the moment to strike, only days after the profit warning.
Over the next two months it continued to buy, paying an average price of 103p within a range of 99p to 138p. As a result of these trades, Eaglet holds a little more than 2.8 million shares or 2.5 per cent of Domino.
Unicorn also bought for the Premier Smaller Companies unit trust it runs for Premier Asset Management. This fund owns 333,000 shares.
Eaglet and Premier have already done well out of the investment. "Domino suffered more than Linx but it has also recovered better," Mr Perry told us. Indeed it has gained a third to reach 138p at the time of writing.
But Mr Webb and his team do not think the story is over yet and expect a further buying opportunity.
"We are happy holders but we would buy again at the right price," said Mr Perry. This chance may come with its full-year results. Although the company has warned investors of disappointment there is a good chance the publication of the figures will still knock the price down. If this happens Mr Webb will pounce again.
According to Mr Perry the main factor behind the company's success is its high-tech coding and marking - this is where the eggs come in. Its most successful product in the past year has been its A-Series printers, which includes the A-Series Egg Coder. This uses a non-contact ink-jet system to print information on the shell. The technique can be used to print several lines of text or even logos and quality marks without damaging it or inadvertently filling it with ink and ruining your breakfast.
In the first half of this year the A-Series range outpaced the overall sales growth of the business and grew its share of the market.
Domino's other key products are machines for printing bar codes or sell-by dates on products accurately, in large numbers and at high speed using laser technology or a technique called binary printing, which is similar to an ink- jet but works over a wider area. The really committed stock analyst can read the firm's discussion paper Why are seven lasers better than one at www.domino-printing.com for more information on this.
At 138p, Domino is valued at 13 times last year's earnings and 20 times the consensus forecast for this year. Last year its rating went as high as 21 times and the Unicorn team expects it to make a full recovery. It looks like an interesting play, but it is an investment that may not bear fruit for at least two years, although the share buy-back programme could help this along.
No doubt Mr Webb is confident of a cracking result.
