Year End Portfolio Review of 2022

As I have published in previous years, here is a review of my own stock market portfolio performance in the calendar year 2022. I’ll repeat what I said last year to warn readers that I write this is for the education of those new to investing because I have no doubt that some experienced investors will have done a lot better than me, while some may have done worse.

It’s worth bearing in mind that my portfolio is very diversified across FTSE-100, FTSE-250 and smaller company (e.g. AIM) shares listed in the UK. I also hold a number of UK investment trusts which gives me exposure to overseas markets, and some Venture Capital Trusts (VCTs). Although I have some emphasis on AIM shares, they are not the very speculative ones.

I have a relatively large proportion in smaller company and AIM shares with a strong emphasis on growth technology stocks. This explains my relative poor performance this year.

One feels wary of publishing such data because when you have a good year you appear to be a clever dick with an inflated ego, while in a bad year you look a fool – this year it is certainly the latter. Here’s a summary of my portfolio performance which turned out to be a very poor year. Total return including dividends was a negative 19.3% which matches exactly my positive return in the previous year. In other words I managed to completely wipe out the previous years’ gains!

This is my worst yearly performance wise since 2008. The chart below showing capital returns on our portfolios since 1997 versus the FTSE All-share highlights the impact:

The negative return last year compares with the FTSE All-Share down 3.2%, the FTSE Small Cap down 30.6%, the FTSE AIM-100 down 30.5%, the S&P 500 down 14.2% and the NASDAQ down 27.7%.

The FTSE All-Share is dominated by FTSE-100 companies – the dinosaurs of the financial world in many cases – of which I hold relatively few.

I sold a significant proportion of the portfolio during the year as prices declined and moved into more defensive stocks such as big miners and oil companies. This resulted in total dividends rising by 29% over the prior year so at least income is keeping up with inflation!

I also purchased more holdings in property trusts and REITs which proved to be a mistake as they fell substantially although that contributed to the increase in dividends received. The enthusiasm for warehouses and self-storage companies disappeared during the year. SEGRO, Urban Logistics, Safestore and TR Property Trust were big fallers, but I continued to hold them.

VCTs tend not to move with the market in most years but not this year. They also fell substantially because their AIM holdings fell and unlisted holdings were revalued down to match, but dividends held up.

Smaller technology stocks were a very mixed bunch –DotDigital fell substantially as did GB Group after a possible bid was rejected. Bids for EMIS and Ideagen helped to offset the otherwise broad-based losses in the portfolios mainly in my small cap holdings.

Large technology funds such as Polar Capital Technology and Scottish Mortgage were big fallers. My investment trust and fund holdings were all affected by the depressed US markets.

Note I am not giving up on small cap or technology stocks – just buying a few at opportune moments until market prejudice changes.

What does the future hold? This is what I said a year ago: “Inflation is rising as Governments pump money into the economy in response to the epidemic while interest rates are still at record low levels. It’s certainly no time to be holding bonds or other fixed interest stocks. It’s a return to the good old days when you could buy a house that was rapidly inflating in price when the mortgage cost was much lower than the inflation gain”.

And so it turned out except in the last few weeks we have had an abrupt U-Turn in Government and Bank of England policy to try and tackle rampant inflation. This has dampened the housing market and house prices are forecast to fall substantially this year (not a concern to me as we paid off our mortgage after I retired from a proper job over 25 years ago).

Interest rates may still rise further until we near the next general election when economic stimulus and more QE may look attractive, but I have no urge to move into bonds in a big way. Not until the Government stops trying to manipulate financial markets.

Postscript: Interesting to note that the CFP SDL Buffettology Fund managed by Keith Ashworth-Lord achieved a return of -23.4% for the year. This is an “unconstrained” fund with a focus on growth stocks and with a good historic record. Similarly reports on the web of the performance of private investors indicate a very mixed outcome. Perhaps my performance was not so bad in comparison after all.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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