Carpetright

I haven't bought or sold any shares recently. My finances are in a state of flux right now, and I'm waiting until they settle before investing any more. I will have a series of cash sums becoming available over the coming months - I'll probably be investing fairly steadily from mid-August onwards.

My post today is a reminder to myself over the next few months to take a good look at CarpetRight. I took a 15-minute look today, and I like what I see:

• Strongly cash-generative.
• Strong growth possible with minimal cash requirements. They maintain high payables and low receivables, so get by with negative working capital. Provided they are prudent, that makes growth very cheap.
• They give a lot of the cash they generate straight back to shareholders - last year's dividend was a meaty 52p (on a current share price of 621p that's a yield of 8.3%).
• I think it's unlikely that carpets will start being sold online. There are big advantages to the biggest player in the market.

Lord Harris and family own about 25% of the shares. He aborted a recent offer at £12.50 per share due to funding issues. Could be a double-edged sword - I don't think he would let the company go down the pan if it got into financial trouble, but on the other hand he might look for a takeover on the cheap.

My concern would be how they would cope in a recessionary market with very few house sales happening. Carpets are presumably sold in two circumstances - when a family is feeling flush and confident, and when a family moves house. I expect both of those will be squeezed over the next year or two, hence the low share price.

I may decide to keep a watching brief on this one. It looks like a quality company, but I'm concerned that it doesn't have enough cash on the books to survive a downturn.