Pretty poor performance this year from me. FTSE AS is up 18%, though the year is not quite over.
I am not *yet* a full-time investor and so investing is limited by my life / job. At the end of last year I got voluntary redundancy from my 2.5 day a week job and started another which was 4 days. I had hoped to use greater mortgage ability from that to do a few BTL investments – so I could quit and invest full time. That didn’t work as I couldn’t find enough that I wanted to buy at prices I wanted to pay, in many ways like stocks. There has been a lot of cash drag as money has come in/ gone out from a property sale / purchase, for most of the year I have had 40%+ cash/gold/ silver positions. I simply haven’t had the time I need. it hasn’t all been bad – I probably made a gain of c60-70% on a property deal but had to do a lot of work to get there. I could manage the portfolio as a fund buying and selling shares as I need cash but this is unwise due to the large spreads on many of my holdings.
Next year I plan to invest full time, or at least drastically cut my hours. I am seriously considering emigrating to Bulgaria – as my costs there are c30% lower. I could *just about* invest full time now from the UK but with limited income from property / shares in a relatively expensive country it would be a struggle, for little benefit. I don’t like to spend capital, just income. Its the difference between having assets worth 40-50 years minimal living expenses in the UK to one which is worth 60/70 outside the UK. Due to Brexit if I don’t leave the UK by the end of 2020 I am pretty much stuck here as I cant get visas as an investor. Immigration systems are not set up for guys like me – they are for people with jobs in the main. I lived in China for almost 3 years so am not a stranger to living abroad.
Investment wise this will affect me next year as I still need to keep a section – probably around 20-25% of the portfolio in cash / gold to buy a house and the cash percentage may jump up throughout the year as I liquidate property in the UK, depending on what ideas I have on the go and exactly what I do. I will also avoid holding too much GBP as my future costs will be in BGN/EUR. I actually don’t mind this as an investment position as with a current account deficit of 4.3% of GDP (2018) and with ongoing negotiations with the EU I am not a bull on GBP. These things tend not to matter until they do.
It has also gotten a little harder for me as every year property income / money from work worth about 8% of the portfolio flows in, plus dividends. The greater size, plus money raised by my property sale makes it harder to invest psychologically. I am not quite adjusted to the bigger numbers I need to put in to maintain weights. I haven’t gotten weights right this year – being too small in many areas. I have experienced this before following gains in the portfolio’s value and will adjust with time.
Onto individual ideas. Firstly, the failures – c 8.9% of the portfolio at current valuations.
DCI, WCW / DUPD. These are cheap and have fallen. They are the worst side of value investing. Nothing is fundamentally wrong – so I will wait for now. I am a little concerned by deteriorating operating trends in WCW. DCI is going to take a while but I think will deliver. Waiting on DUPD – something of a news vacuum.
JUST – fell lots with worries about house prices. Seems to have bounced back a bit. I have traded it a bit so managed to make it a net contributor. I think this can still come good.
4D pharma – very strange, falling, but execs buying heavily and getting news on drug partnership with Merck worth c $1.3bn. The company is worth £64m so there is an opportunity here. There are also some connected individuals buying – so I hold – but for risk management reasons won’t buy more.
WSE – Seems to be doing OK, it is cheap with a good yield, good margins. Just needs a bit of a change in sentiment to quality Eastern European Stocks and no operational deterioration.
PHN – Still very cheap, quality property at a third of book. Operating trends looking like they are going to improve and the chart is turning.
Things that have done well
CMCL – only a small position but up a bit, still learning about mining companies. Nervous about investing in Zimbabwe.
SHG – went well, exited, I simply don’t trust management. Again a very small position.
AJOT – slow and steady, good signs that this will perform. A much more material 6% weight at current values.
FP. – one of my biggest positions – c12.5% weight, always delivers, decent divided and still at a discount. BUT, It is trading at an all-time high. I have trimmed a bit but expect to hold the rest next year and might add. It has done 13.5% in RON this year plus a tender and c7% yield.
CMCX – this is up over 35%. Its a potential strategy for the future – cheap, value businesses with a potential growth catalyst that the market can rerate when it realises they are growth. Symptomatic of a market that really, really loves growth and is overpaying for it in my view.
LIT/MANO – Sold these but am keeping a close eye. Saw things I didn’t like in the accounts – namely a lack of NAV growth – but I will look again and reenter if need be.
These are now a 12.5% weight. Lots of the portfolio’s strong performance is due to these over the last two months. I want more of these and Eastern European stocks in general – this is where the opportunities lie now. There are so many really good cheap opportunities in these markets. Risk is being vastly overestimated. I hold HYDR, FEES, MOEX, GLTR and RSTI. I want to get the weight of these up to c 15-20% I am conscious of the risk so want more ideas rather than putting more cash into the existing ideas, though I may dabble. Posts to come on HYDR / FEES and RSTI.
This is my biggest position – 13.7% weight. If they lose their case in the appeals court – and I think it is near impossible for them to lose all of it they are worth £2.47 – so a 31% fall. If it’s halved we get a 10% upside. If it is maintained my figures are that it is worth £5.50 – a 53% upside. My average is 329 as I overpaid a touch for some after misreading an RNS.
To me, it’s overwhelmingly likely that the case will not be modified much, if at all, so the probability of that £5.50 is very, very high. The IACEW judged that this was negligent. I also read the judgement and to me it seems highly logical – though not a fun 500 pages. Others also view it as sound.
Of course, the only thing that really matters is what the court of Appeal thinks. I don’t think of judges as free thinkers and from looking over past judgements they seem to mostly tinker rather than rewrite.
There is also some risk management won’t return money after the judgement or value be reflected in the share price. I am prepared to wait on that one.
I have tried investing in more, small, growth companies, with mixed results.
This is with pretty negligible weights from a portfolio point of view – I am doing it as a learning experience. My experience of these is I may need to be faster getting out / reacting. You need to be sharper than in value land. In my usual fayre, a tendency to inaction is a strength – as things take time to play out. In growth-land even slight movement in operational results translates to big share price movements. It isn’t suited to me – particularly when I have very little time.
For an example of this look at Sosandar – slight dip in Sales growth resulted in it halving in price. Since then an equally marginally good set of quarterly results put it back up again. I lost about 30% on a tiny position.
I have got ENET +45% I hope this year will be an inflexion point from loss to profit and a big change in price will result. Again weight is minute.
SAV -58% simply hasn’t worked. They seem to have a good Asset but management pay themselves too much. I knew this at the time but need to be stricter.
EML also looks to be a quality asset but I am concerned with managements pay also – I am about flat here and will wait- again a tiny position.
WEY +123% management pay themselves sensibly – this might be a way to combine my value instincts with more growth investing – when I got in it was trading at less than NCAV.
HUR -26% Guy running it clearly has a point to prove. I don’t think fall in price was justified by the operational results. Won’t add here though – will wait and see. Tiny position.
Summary of all positions and approximate weights is below.
Looking at this the list is getting too long – so no more minor ‘learning’ positions (<1%). I will also be looking at a bit of a problem if ASTO does go well as I will again be 40%+ in cash / gold/ silver – which is too much.
Brief look back over the 2010s performance as it is the end of the decade:
To me the story is clear – I started working 3 days a week in August 2013, later cutting down to 2.5 in May 2017, leading to dramatically better performance. I absolutely have to have lots of free time for my investing to do well as I need a constant stream of good ideas as things work out. 2017/8 was affected by the drop off from the crypto bubble and me (somewhat foolishly) working on changing jobs.
Next year is the year I am likely to go full time. Lots to think about when I do this. I don’t want to be scared money and may restructure the portfolio into income-producing assets and more speculative plays. The Russian stocks and most of the Polish stuff already produces a decent income. I don’t want to do too much of this – the aim is to get rich, not sit around waiting for a dividend. Having said that lots of high yielding high-quality Eastern European stuff is undervalued. It is a big decision as I have not taken my career at all seriously, focussing on my investment. I suspect I will rapidly become near unemployable, as no-one wants to hire me for routine jobs – as I am overqualified / they think I will get bored. For mid-high end jobs they want people who have taken their career seriously for long periods, so don’t look on me favourably either. It’s likely I will have 5-10 years out and in the ‘real-world’ people just can’t afford to do that.
Also next year there will be much more Eastern European stuff. I have two more ideas I am working on, both you won’t have heard of anywhere else and I think they are real quality. I know lots of readers don’t like these investments but they really are dramatically better value than mainstream UK at present.
As ever, comments welcome – any of you guys ever moved to a cheaper location to invest / trade ? Or gone back to work after 5/10 years away ?