I can't see the higher price of oil affecting our operations as, from my impression of Lycopodium, we're more a suits and laptops, designing, planning, management services type business than a full-blown contractor. We're not operating a fleet of yellow painted, diesel guzzling, heavy vehicles; so it won't affect our costs.
Where it could affect Lycopodium is if the higher costs curtail firms' decisions to build and expand gold and base metals mining operations. Also, if the Middle East problems cause the oft-predicted recession -- which will obviously reduce the demand for metals and reduce the amount of work we are getting as miners tighten their belts. I don't see how we would ever learn the details of their contracts and fuel cost provisions.
In my situation, LYL is about 4.5% of my portfolio. I hold it along with South32 (base metals exposure) and BHP (copper exposure and dividends). I've been reducing my WDS holding with the oil price spike and topping up some out-of-favour holdings in my portfolio which have fallen heavily.
There is only 39.7m LYL shares on the market. LYL is only trading at 13x earnings. In my situation, even though I am sitting on a decent gain in percentage terms, given the small 4.5% exposure, I couldn't exactly sell and retire so an exotic island! If it falls back 15% I generally buy another small parcel. If the price got crazy and my position size became too big I would look to trim. However I see Lycopodium as a great company, well managed, and financially conservative. Not the type of stock I wish to remove myself from even if there's downside risk
I suppose the question is how big your LYL exposure is, what your confidence level is in management, and what your tax situation is. If it's > 15% and you're sitting on a huge gain, with a good tax situation this financial year, it would be wise to consider reducing the position.
I'm not sure this has helped much, but all the best anyway!
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