One of our less obvious picks among stocks related to the pandemic has been Volution: the company makes fans and ventilation systems, including those installed at the Nightingale Hospital in London docklands. No doubt partly as a result, the shares have enjoyed a very strong run since our tip in October last year; they have gained 113pc.

For no reason this column can identify, they had actually begun to climb the previous month and since then their performance has diverged drastically from that of the market as a whole.

The fund manager who put us on to the stock, Stuart Widdowson of the Odyssean Investment Trust, said the shares had become markedly more expensive on almost every measure since last autumn. The price-to-earnings ratio, for example, was then at roughly its long-term average of 13 but has now soared to more than 21, a level it has never previously reached in its seven-year life as a quoted company.

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If we look at the “price-to-book” ratio, which compares its market valuation with the value of its assets minus liabilities, it’s a similar story: that figure has soared from about 2.3, its long-term average, to 4.5 in just eight months.

Mr Widdowson said: “We invested in Volution in August 2018, seeing multiple drivers of value growth such as a growing market supported by environmental regulation, scope for margin improvement, an attractive cash generation record and a strong management team delivering successful mergers and acquisitions.

“Since our purchase the stock has outperformed our expectations, delivering simultaneously on all the drivers of value growth we had identified. This has led to a supernormal return and the result is that the shares now enjoy a full p/e rating.”

Questor would be inclined to go further and say that these are shares that have got well ahead of themselves. Measures such as the p/e ratio, the price-to-book ratio and so on don’t always “revert to the mean” but you need to make a convincing case for arguing that they deserve to be permanently higher than they were.

The scale and speed of the change in Volution’s valuation make us worry that we are looking more at a transitory change in sentiment here not fully supported by the fundamentals of the business. Odyssean has been cutting its stake; we will sell.

Questor says: sell

Ticker: FAN

Share price at close: 419.5p

Update: Hill & Smith

The rise in the share price of Hill & Smith, which makes “street furniture” such as crash barriers, has been a less dramatic 17.1pc since we tipped the stock in March last year following a conversation with Mr Widdowson.

However, the shares had enjoyed a good run beforehand, which prompted us to advise readers to “buy on weakness”. Their further rise since then has persuaded the fund manager to sell his stake and to reallocate the proceeds to other opportunities.

Do we need to follow suit? Mr Widdowson said Hill & Smith remained a well-run business still able to offer steady compounding of future returns. Readers happy to own this type of company can certainly hold on.

Questor says: hold

Ticker: HILS

Share price at close: £15.34

Update: Carnival

Another fund manager who has often contributed to this column has had to part company with a long-standing holding: Job Curtis of the City of London investment trust has sold his remaining stake in Carnival, the cruise line laid low by the virus.

He said: “Unfortunately, the investment case was undermined by the pandemic, even though Carnival’s shares have doubled from their lows. I am concerned about the rising level of debt, which grew on a net basis from $11bn at the end of November 2019 to $18.9bn a year later. It is estimated that Carnival is currently burning through cash at a rate of some $500m a month.

“Clearly there will be an improvement from July when sailing begins again although there could be some initial restrictions, such as on the number of passengers. I have come to the view that the resumption of Carnival’s dividend is some way off and it may need to raise money again by selling new shares.

“I have reinvested the proceeds across City’s portfolio in stocks with more certain dividend prospects.”

Questor says: sell

Ticker: CCL

Share price at close: £15.52

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