Close Balfour Beatty (BBY) at market (805p)

Balfour Beatty has been an excellent performer for FTSE Investor, with both positions delivering strong gains of more than 90% and 70% respectively. The investment case played out well. Operational execution improved materially, infrastructure demand remained supportive and the market steadily re-rated the business as margins, cash generation and shareholder returns strengthened. The balance sheet is now in a very healthy position with substantial net cash, free cash flow has surged and the company has become far more disciplined operationally than the market once gave it credit for. In many ways, this has been a classic example of buying a high-quality cyclical business while sentiment was still catching up to the improving fundamentals. Yesterday’s shares going ex dividend also means the upcoming payment is now locked in for existing holders, adding another layer of value crystallisation to an already successful investment.

Today, however, much of that recovery story is reflected in the share price. The shares have had a powerful run, trading not far from their highs, while valuation multiples and expectations have both moved materially higher. Forecast earnings growth remains solid, but infrastructure and construction businesses rarely enjoy perfect conditions indefinitely, and the market is now pricing Balfour Beatty as a far more dependable operator than it was several years ago. Taking profits here is about discipline after a substantial move rather than a negative view on the business itself. After delivering such strong returns across both entries, this feels like a sensible point to crystallise gains and recycle capital into opportunities with a more attractive risk-reward balance.

Profit Tranche 1 = 92.1%

Profit Tranche 2 = 71.4%