Bargain hunting

In essence, I have tried to maximise returns on a risk-adjusted basis, which is one of the reasons why my 2009 portfolio returned 53 per cent - more than double the rise in the FTSE All-Share that year. It is also why we did even better last year, with the 2010 portfolio's 50 per cent total return well ahead of the 18.6 per cent rise in the benchmark index.

Generating these bumper returns is no mean feat as the task of closely monitoring the operational performance of the companies - there are no fewer than 10 shares in my 2011 portfolio - requires considerable time and effort. However, if trading volumes in shares of these companies is any guide, these portfolios now have quite a following and so warrant regular updates.

A Noble Investment

Shares in Aim-traded Noble Investments have marked time around my recommended 150p a share buy-in price even though the rare coin trading company announced a bumper set of half-year results a few weeks ago. Pre-tax profits rocketed ahead 40 per cent to £1.5m in the six months to end-February, driven by a good showing in both retail and auctions as appetite for alternative assets is as strong as ever.

For example, a recent auction held by Noble's auction house, Baldwin, in Hong Kong, brought in over £4.2m of sales - more than double the pre-auction estimate - as coins and earlier sycee gold and silver ingots used as currency in China until the 20th century proved very popular. In fact, over 200 bidders attended the event and Baldwin is now working on consignments for another Hong Kong auction in the summer.

Post results, analyst Eric Burns of broker WH Ireland sharply upgraded his estimates for this year and next, and now expects Noble to report full-year pre-tax profits of £2.6m and EPS of 13p - a 13 per cent upgrade - rising to £2.8m and 14p, respectively, in the 12 months to August 2012. On this basis, the shares trade on a modest forward PE ratio of 10.5 and look well underpinned by a near 3 per cent prospective dividend yield. And this rating is even more conservative if you consider that Noble retains an ungeared balance sheet - net cash stood at £2.4m at the end of February. Mr Burn has a fair value estimate of 192p a share which is very reasonable and I continue to rate the shares a strong buy.

Time to heed shrewd share buying by Polo directors

Investors are starting to warm to the merits of commodity investment company Polo Resources. They are not alone, either, as Neil Herbert, executive co-chairman, bought another 5.1m shares at 5.22p after the company released results at the end of March and Regent Mercantile, a company wholly owned by the trustee of a trust under which executive co-chairman Stephen Dattels is a beneficiary, acquired 12m shares at 5.35p at the same time. And, late last month, Regent Mercantile topped up its holding again by purchasing a further 6.36m shares at 5.82p and non-executive director Ian Stalker has also been getting into the act, purchasing 1.77m shares at 5.56p. It is easy to see why.

Firstly, the shares are trading 10 per cent below end-March 2011 net asset value (NAV) of 6.6p a share, and on an even deeper discount to pro-forma NAV of 7.22p a share, assuming that the takeover of Australian coal miner Caledon Resources - a company in which Polo owns a 29.9 per cent stake - completes. That looks even more likely given that the bidder, GRAM, has now received the necessary Chinese regulatory approvals to proceed with its 112p a share bid for Caledon, which would result in £95.8m of cash being returned to Polo. Add to this the company's cash pile of £18.3m and receivables of £17m at the end of March, and all bar £10m of Polo's £141m market value will be backed by cash and receivables when the Caledon deal completes.

This will leave a holding of 15.2m shares in GCM Resources, a Bangladesh coal mining company worth £32m, in the price for nothing as well as a C$8m (£5m) investment in Ironstone, a private Canadian company which owns the Clear Hills Iron Ore/Vanadium Project in Alberta. Needless to say, it is well worth following the directors' lead.

Tune into Pilat Media

Results from the London-based Aim-traded supplier of business management software to the media industry are well worth tuning into after the company reported revenues up over 13 per cent to £21.9m last year and underlying operating profits surging from £1.2m to £3.2m. There were some significant contract wins, too, including a £3.7m seven-year deal with Australian regional television station Prime and a £4.8m deal with US telecoms giant AT&T. And with the order book accounting for half of 2011 revenue forecasts, brokers seem comfortable expecting underlying EPS to rise from 3.1p to 4p in the current financial year.

The shares are hardly expensively rated on a forward PE ratio of 12, but this rating looks even more appealing given that net cash more than trebled to £5m at the year-end and means that 8.5p of the 48p share price is now backed by cash. Add to this the stakebuilding by SintecMedia, a private company that is also in the same business as Pilat Media and which now has a 20.9 per cent shareholding, and I continue to rate the shares a value buy.

Bargain Share Portfolio Performance Table

PV Crystalox set to shine

The outlook statement from PV Crystalox Solar was much as I had expected when the solar-wafer manufacturer announced results a few weeks ago. Having ramped up wafer shipments 48 per cent last year to 378 megawatts (MW), the plan is to increase production from 225MW-240MW in the first half of 2011 to 273MW-288MW in the second part of this year. To facilitate this, capacity has been ramped up from 430MW at the end of 2010 to 535MW at the end of March, and the company plans a further increase to 670MW by the end of this year.

At the same time, average wafer production costs are forecast to fall by between 10 and15 per cent in 2011, having been cut by 20 per cent in 2010, ahead of the company's 10 to 15 per cent target. In turn this should offset ongoing pricing pressures in the industry and underpins analysts' expectations that 2010 marked the nadir of the profit cycle for PV Crystalox and that earnings will bounce back from 5.7¢ to around 8¢ a share in 2011.

To meet these estimates, demand from Asia will be critical as the region now accounts for three-quarters of the company's revenues, while sales in Europe and North America make up the balance. China and Japan generated around 30 per cent of PV's revenues last year and Taiwan, which increased volumes fourfold last year, now accounts for 11 per cent. That share is expected to double or could even treble this year, highlighting the country's importance to PV's growth strategy.

Trading on a modest eight times 2011 earnings estimates and underpinned by a 4.8 per cent yield (the final dividend of 2¢ (1.75p) goes ex-dividend on 11 May), the shares rate a value recovery buy.

■ I updated First Property and Terrace Hill Group in our bumper issue last month () and an analysis of the latest results from Randall & Quilter will appear in this week's issue. Please note in the performance table above, I have used the offer prices available in the market at start of trading on Friday 11 February 2011 when my 2011 Bargain Share Portfolio was published and the latest bid prices to calculate the portfolio's performance.

2010 Portfolio update: Acal's electronic returns

I am starting to lose count of the number of times in the past year that analysts have upgraded their earnings estimates for European electronic components distributor Acal.

It was more of the same last last month when Acal revealed that fourth-quarter like-for-like sales had risen 17 per cent year on year in the three months to end March 2011, driven by a robust electronics order book (accounting for 78 per cent of total revenues). This prompted analyst Hector Forsythe of Oriel Securities to nudge up his full-year sales estimates from £260m to £263.6m, which in turn produced a 12 per cent upgrade in adjusted pre-tax profit estimates to £6.4m. On this basis, earnings per share are now set to come in 12 per cent higher at 15.9p.

However, it is in the current financial year when net earnings could really ramp up on the back of the high operational gearing of the business and the improvement in margins. Mr Forsythe believes that a modest 7 per cent rise in sales, to £282m, for the 12 months to March 2012 will generate underlying pre-tax profits of £9.9m and EPS of 22.8p. In other words, a 7 per cent increase in sales translates into a 43 per cent per cent rise in post-tax earnings.

Given the strong momentum being seen in the cyclical recovery in Acal's markets, these estimates could prove very conservative with further earnings upgrades a clear possibility later this year. So, even though the shares have surged by 141 per cent to 337p since I advised buying at 140p less than 15 months ago (Bargain Shares for 2010, 11 Feb 2010), rated on a forward PE ratio of 15, they still rate a buy.