True, I hadn't seen the profit warning coming, although hedge fund boys have been short-selling Mitie's shares like crazy. However, three times last year (see Bearbull, 16 January, 22 May and 27 November 2015) I made it clear that the group's days as a growth stock were in the past; that its diversification into 'healthcare' (more like home help, really) and care and custody (running miserable prisons and Godforsaken detention centres) was a hiding to nothing; and that its accounting profits and cash flow generation struggled to produce a per-share valuation of more than 200p (when the share price was 290p).
Sure, Mitie's bosses put a positive spin on almost anything. Thus, a year ago, chief executive Ruby McGregor-Smith contrived to say that losses in its healthcare division provided a chance to take "positive action to reshape the business to meet market opportunities". Now she reports that further deterioration provides scope for "reviewing the long-term plan and related options" for healthcare, which may be code for saying that Mitie's bosses are desperate to flog a division that was assembled by £120m-worth of acquisitions just a few years ago. These gals 'n' guys may even be able to interpret any further decline in the group's order book as a commendable achievement since it is a key target to keep orders in line with changes in revenues and these will inevitably shrink this year (as they did last year).
However, there comes a time, which Mitie has passed, when more PR means less credibility. True, Mitie - enervated though it appears - is not about to fade away. Its £8.5bn order book is about four years' worth of revenues and its cash flow generation - £86m a year on average since 2012 - has been enough to fund a dividend, which last year cost £42m for a 12.1p payout. Yet operating profits are set to fall for the fourth year out of the past five and this time may drop far enough to threaten that payout.
I am not hanging around to find out. The fall in the share price has taken it through the stop-loss level with which it has flirted for most of 2016. I sold the Bearbull income fund's 9,200 Mitie shares for a touch over 193p each the day after the profit warning. That meant a 5 per cent capital loss on a holding I bought back in 2010. Obviously, that's disappointing, especially as the price had touched 345p since I last reset the stop-loss level. I have no one to blame but myself and I'm hardly the first person to say I should pay more attention to my own advice. Even so, perhaps I should actually do that and - if so - that means taking a critical look at GlaxoSmithKline (GSK) and Carillion (CLLN), both holdings in the Bearbull portfolio about which I'm sceptical.
Meanwhile, let's take the positives - the blessing from this mighty mess is that it frees up the capital to buy shares in US planes maker Boeing (US:BA). For the reasons why, see last week's Bearbull. However, for many - including myself - the big step is to buy shares in an overseas company. After not far short of 40 years in the investment game - honest - this is the first time I've bought shares in an overseas company.
Starting with Boeing is sort of a cop-out because its shares are listed in London (where the stock code is BOE). At least that means there is no concern that a UK broker can buy the stock. In Boeing's case, it might be an exaggeration to say that trading in London is brisk, but it's sufficient to ensure that prices are aligned with New York's. I paid $131.51 per share for the Bearbull holding, which was virtually the screen price - delayed by 15 minutes - for the stock in New York. True, my broker supplied the US dollars so my exchange rate may not have been the sharpest, but hey ho.
Before dealing, I had submitted - via my broker - a W-8BEN form to the US tax man, which means that I will receive my dividends free of withholding tax. A completed form is valid for three years and covers all investments in listed US shares and, come to that, Canadian ones.
There remains the question of tax on the capital gains, should I realise any. There is little doubt that I would receive any sales proceeds free of capital gains tax (CGT) and, assuming the stock was held within an Isa wrapper, there would be no UK CGT. As to whether US CGT would be due - assuming Bearbull is a 'non-resident alien' for US tax purposes (don't you love that description) - the answer seems to be 'no'. I would only be taxed on 'fixed, determinable, annual and periodical' income, and capital gains fall outside that boundary. However, that assessment isn't gospel - where the US Internal Revenue Code is concerned, nothing is.
