Category: Portfolio

  • The market is cheap (but specify your inputs)

    Lots of people think the market is dangerously expensive. They take a look at the S&P 500 graph, which looks like this:


    And they'll point out that we're now about 50% higher than we were in 2007, just before the last crash. Has there been a stupendous improvement in the real economy since then? No, they'll argue, and so the index level must have been frothed up. You'll probably hear something about printing money at this point.

    But the graph in itself doesn't tell us a great deal, since it's raw data without any comparator. Much better to look at how the companies making up the index are doing, and how they are valued in aggregate relative to a proper measure, like earnings. At this point the Shiller PE graph often gets trotted out. It is basically a 'normalised' price-to-earnings graph, which shows the current multiple you're paying for the average last-10-years earnings for the companies making up the index. (more…)

  • January 15: Portfolio Performance


    The portfolio on this website has been more or less defunct for the whole of this year. Since I got a job, I thought it best if I didn't trade with it until I better thought about how to run an online portfolio and be employed by an offline one - there are obvious conflicts of interest, after all. Still, yesterday I realized it was coming up to what would have been the third 'New-Year' review... and I thought it'd be interesting to run it anyway. Call me sentimental - carry on the portfolio in absence of any changes, just as I left it.

    You can see the results above. Since starting this blog three and a half years ago, the portfolio returned 140%, or an annualised rate of 28.4%. The FTSE AllShare, over that timeframe, has been broadly flat. We're also more or less flat on a year ago today, which ruins the annualised growth rate a bit, and makes the graph a lot less sexy!

    Reading back through my articles, you'd be forgiven for thinking that the vast majority of this rather credible performance is due to luck. I wouldn't disagree - though I would note that it was luck tempered with the fortune of stumbling onto an investment strategy that consistently outperforms the market anyway. If you only pick stocks from a quantitatively cheap end of the market, as I did over the last few years, you're likely to outperform even if your qualitative analysis adds little value. I suspect that's very much the case with me, reading back.

    The future

    I've figuratively liquidated the portfolio and put the cash into my hypothetical bank account, save for one company - Quarto - which I should say I continue to hold in my offline portfolio, too. I hope I'll be able to add to this rather undiversified collection of assets (cash & one stock!) with some additions over the next few months, though I'm not in a rush. The additions are likely to be of a larger-cap - and more global - nature than before.

    Thanks for reading what is now the fourth year of my experiment. I genuinely hope that I look back in two years with the same perplexitude (you were buying WHAT?!) as I have just done compiling these figures!


  • Portfolio

    Some shuffling

    The markets have been pretty volatile recently, and the year-to-date has been one of my longest periods of underperformance vs. the market for a couple of years. I use the term 'underperformance' loosely - it's more or less in line with the All-Share percentage wise, which isn't particularly worrying nor worthy of note. It is interesting, though, if you're a story person. We all are to some degree; whenever the market twists and turns people start talking about the 'fear' biting into the bull run, or conjure up images of that great unwieldy behemoth - market sentiment - swinging round at last. In that vein, one thing I can say I am very interested in is how my portfolio performs in different scenarios. An element of counter-cyclicality and relatively smaller losses when the market is tanking appeals to me as an investor, because I'm trained to believe that protecting downside risk is paramount, and that probabilities in the minds of market participants tend to be skewed to unduly penalise 'boring' shares.

    Does my portfolio fit that nice, broad aim? Unsurprisingly, I don't think it's really possible to say. I'd like to think I have 3 years of data - I have been running the portfolio for nearly 3 years, now, but that's not really true. I would have 3 years of data if my strategy had stayed the same, and if I had not evolved as an investor; but there are companies I like the look of now that I never would have considered 3 years ago, and vice versa. Sure, there are broad similarities - so one can draw broad conclusions - but markets are noisy.

    Really, I'm just saying what I always say, here - people aren't conditioned to understand the nature of results in an extremely high volatility environment like the market. The same was true when I played poker, another extremely high variance game. Solid, winning players could be down money over tens of thousands of hands - even though they made the correct decision in every scenario. Terrible players sometimes enjoyed the opposite effect. Naturally, the good player is left questioning himself, and the bad player thinks he's the next Phil Ivey. (more…)

  • Portfolio Performance

    30 Months In

    Firstly, a very happy New Year to one and all and a belated Merry Christmas. I decided to take an impromptu little break for the blog after a couple of years of more or less non-stop, and I'm back rejuvenated and once again ready to do battle with the waxings and wanings of the UK stock market. Or something like that. A rather fortunate quirk of timing - I started at the beginning of July a few years ago - means that my 6-monthly performance reviews fall with the New Year and slap bang in the middle of summer. These are neat and intellectually appealing times to take a look at how you're doing and how you can do better, so it's a nice shove in the right direction.

    Without further ado, then, the latest figures for the EV portfolio:


  • Portfolio

    Buys, sells and questions


    The place I must start, obviously, is with H&T Group. I posted quite bullishly on them last Friday, and today they're down 19% on their half yearly figures. One of the perils of being a stockpicker, I guess, is that you're bound to be shown up like that sometimes! I'm actually quite surprised at the scale of the fall given the results. Profits are down, as expected, mostly on the decline in the fortunes of gold. The dividend cut must've been expected by anyone anyone giving the business any serious thought - if one of their major profit streams is drying up and profits are heading back to a more normal level, expecting the dividend to stay as it was before is naive. I think the fall is overdone, and I might go as far as to say that I prefer the stock now. There are a few things that bother me with the update, though.

    For instance - management says they think 'consolidation or rationalisation' may be likely in the 'medium-term'. They're fairly ambiguous terms, in my view, but the first means - to me - mergers or takeovers; fewer operators, basically - and the second means store closures. That they're still opening any stores and haven't rule out any further seems a little strange. Perhaps that's being overly nit-picky; stores take a while to set up, so there's a lag between deciding to open no more and no more actually opening. But the overall tone of the statement is also rather negative when they produced what, to me, looked like pretty credible operating figures in their quieter half of the year. Finance costs are down considerably with a refinancing (the group is financially strong), something that'll continue to help in the full year, and the group has cut operating costs on a larger store base.

    There's more to be said, but there's also more I need to do on my end, so I'm holding off on buying/selling for now. I'll pen a more complete write-up later in the week, hopefully, or next week if not - but it's at the top of my list given the price! (more…)

  • Portfolio Performance

    Two years strong

    July the 4th marked the two year point for the portfolio, landing (a little sadly) while I was away. This meant the portfolio update - and the birthday celebrations, with a dollar-shaped cake and novelty £50 pound note serviettes - were delayed for a while, notably until after I'd actually caught up with what was going on and rambled on about Communisis for a little bit. We're here now, though, and after the extremely tedious task of updating all the spreadsheets which keep my backend calculations in working order, I've put together the usual charts and figures Satisfying reading they make for, too! Through a combination of blind/beginner's/sheer luck and some modicum of improving stock picking analysis, its done rather well for itself over the last couple of years: