Knott nips in as fibre firm falls

SECRET Dealings exposes trading that usually escapes attention. Any trade of more than 3% of a company's value must be declared - but huge amounts of buying and selling went unreported until now because dealings were below the threshold.

A RECENT spate of share buying by directors at fibres company Chapelthorpe may have caught the eye, but one of the City's shrewdest fund managers has also been busy building a secret stake in the company in the past couple of months.

Chapelthorpe has three disparate divisions: fibres, specialist coatings and umbrella frames. The fibres division supplies the textiles industry and the coatings business sells to the wall coverings industry.

In July, Chapelthorpe warned that demand was subdued and predicted that the second half would underperform the first.

Full-year profits are still forecast to come in 2% higher at £5.83m, but the shares fell off a small cliff and waiting at the bottom to scoop them up was Simon Knott, the AAA-rated manager of the top performing Discretionary Unit fund.

Knott appeared in this column in May when we revealed that he had a secret stake in domestic goods company Mayborn. Since then, the stock has risen by 106%. He excels at rooting out undervalued smaller companies with solid, and sometimes slightly dull, businesses and hidden virtues.

His Discretionary fund bought 300,000 shares over the summer and has since built them up to a secret stake equivalent to 0.98% of the £29m company.

Others to see hidden virtues in Chapelthorpe include George Luckraft, an AA-rated manager who runs the Framlington Monthly Income fund, which holds 2.45%. The well-run Electra Active Management also controls 3.03%.

The share price has already recovered from 10p after its warning to 14 1/2p last week.

Source: CITYWIRE.CO.UK