Expecting Value – A UK value investing fund

Better late than never!

Ok, ok, so technically I said it’d all be ready and up and running by the 1st. But I figure it’s only one (working) day off, so I’ll cut myself a little slack and hereby unveil my opening portfolio, a ragtag collection of equities I’ve stuck together based on my conviction that they’re worth less than they should be, and that Mr. Market will fix it in the next few years. It’s been a hectic month of putting together ideas and concepts and a whirlwind learning experience for me, but I now feel I’m ready to dive in head first and experience the bracing chill of the market’s swings.

Now seems an apt time to reiterate my goals, hopes and targets for this portfolio. Loosely speaking, my goal is experience and learning. I want to become a better investor, and what way could be better than running a portfolio? With no place to hide and the world to see, running a blog and a fund seems like the perfect way to make me externally justify my investment decisions. We’re all prone to cognitive bias, but leaving your opinions to the scrutiny of others makes them easier to spot. Simply reading my own writing makes me notice things that I may not have had I just been talking to myself and compiling a list.

My timeframe is certainly in the years. I’d be disappointed to be down after, say, a  year and a half, but realistically I have to account for the truths of my chosen style of investing – if I’m asserting that I think the market is irrational and undervalues shares for certain reasons, how can I then not accept that they may not correct themselves any time soon? Performance wise, I’ll be comparing myself to the FTSE All-Share, as I have no limitations on my own stock universe and the all-share captures the broadest selection. It’s not perfect, as it has a very different market cap structure to me, but perhaps that’s the point. Realistically, I’ll be aiming for a few percentage points in out-performance to compensate me for the opportunity cost of stock-picking. If I simply earn the market return, the rational think to do would be stick my money in a tracker and enjoy afternoons lounging in the sun instead of trying to wrangle meaning from accounting policies and balance sheets.

So that’s how I’ll view it – an experiment and a learning tool for me, and hopefully you can watch my pitfalls to avoid making the same mistakes.

Barratt Developments (BDEV) – 10%
Howden Joinery (HWDN)– 9%
N Brown Group (BWNG)– 8%
Lookers (LOOK) – 8%
Cranswick (CWK) – 7%
Morson (MRN) – 7%
Dart Group (DTG) – 7%
RSM Tenon (TNO) – 6%
Character Group (CCT) – 6%
Plastics Capital (PLA) – 6%
Stadium Group (SDM) – 6%
Zetar (ZTR) – 6%

TOTAL EQUITY – 86%
CASH BALANCE – 14%

I should mention the dearth of links in the second half of the list was partly expected and hopefully will be addressed shortly –  I’ll aim to put out a few company profiles on the smaller caps which mostly occupy the it. The weighting of the individual equities in my portfolio was a blend of a few factors in my mind. Perhaps the most important one was my perceived volality in the stock. Not historically, in the sense of betas, but going forward. Hence, my opinion of Barratt, as laid out in my piece, is that it presents a minimal downside as the tangible book gives the share price a floor. The tradeoff is that the upside is perhaps more muted than in the case of say, RSM Tenon. Implicit in this is that the larger caps have larger weightings, as they’re more likely (to my mind) to drift upwards than shoot around like the small caps do. It’s a very concentrated portfolio to begin with, partly because I don’t mind being concentrated for a number of reasons and partly because I feel like I lose passion and clarity when trying to keep track of too many. This may well change in the future.

Anyway, I’ll be tracking myself and keeping up to date, and I’ve also set up a mirror fund at Stockopedia. I won’t use this fund’s performance in my own data (it differs in a few commission charges, size of capital etc.), but it should broadly match mine.

Any thoughts, as always, email me at lewis@expectingvalue.com or leave a comment below. I suspect some of my inclusions may be worthy of discusison to some of you! Look out for (hopefully!) a more varied style of blogging in the coming months – now I’ve got everything up and running, I can vary my content a little more with some more thematic articles and discussions on topics, instead of churning out the specific equity analysis.

2 Replies to “Expecting Value – A UK value investing fund”

  1. John (UK Value Investor)

    Hi EV, welcome to the market and I hope you have fun and make lots of money to boot. Sadly the Stockopedia fund tool doesn’t include dividends which is why I’ve closed mine for now as dividends are important for my returns (3 or 4% a year is not to be sniffed at). However, the developers over there assure me there’s something in the pipeline that’s better, so there you go.

    • Lewis

      Hi John,

      Thanks for the introduction – I am a reader of your blog too and am looking forward to this Astra Zeneca analysis!

      Evidently I hadn’t read the smallprint at Stockopedia very thoroughly as I hadn’t realised this. Dividends will likely make up a decent amount of my portfolio’s total return too – not sure off the top of my head, but divi yield is probably around 2.8% for the entire portfolio, and that’s with my largest holding not currently paying one. Luckily I’m a bit of a control freak, so have spreadsheets with my holdings/total returns/divis anyway. Just means I can monitor and do some work on the data more easily. Google Finance does seem like a better bet at the minute, but the chart isn’t working for me.. hopefully in a week or so I’ll have all the stuff I need up and running for a proper tab with my portfolio.

Leave a Reply

Your email address will not be published. Required fields are marked *