Tag: Portfolio performance

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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As I have published in previous years, here is a review of my own stock market portfolio performance in the calendar year 2020. 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.

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. Consistency is not applauded on social media. But here’s a summary of my portfolio performance which turned out to be a lot better than expected earlier in the year.  Total return including dividends was up 10.7% which I consider a very good result bearing in mind that the FTSE All-Share was down 12.5% which I use as my benchmark (the latter figure does not include dividends though). It was helped by having significant US holdings and technology company holdings via investment trusts and funds. Dividends received were down by about 17% as many companies reduced their dividends or cut them altogether.

It was partly a good year because I had no bad failures but when you have a large number of holdings, as I do, then there are always one or two disappointments. The worst loss was on trading in the shares of 4Imprint (FOUR). This is an AIM listed seller of promotional products, mainly in the USA. In March I was reducing my stock market holdings, particularly in those companies that were being badly affected by the pandemic or seemed likely to be. The share price of FOUR was 3480p at the start of the year and I sold a large proportion of my holding at about 1390p (i.e. near its bottom). The share price has since recovered to 2565p so that’s a good example of the volatility of small cap stocks when everyone wants to get out, or how it is foolish to exit prematurely when the news appears bad. I chose not to buy back into the shares of FOUR but instead chose other companies, particularly investment trusts that had moved to high discounts. That partly compensated but not altogether.

My holdings in investment trusts focused on technology or US markets did particularly well such as Polar Capital Technology (PCT) – share price up 43% during the year, Scottish Mortgage (SMT) – share price up 107%, or Fundsmith Equity Fund – share price up 19%.

I avoided big FTSE-100 companies such as banks, insurance companies, pharmaceuticals and retailers which was all to the good, although I did make money on miners BHP Group (BHP) and Rio Tinto (RIO). Only minor aberration was a punt on AstraZeneca (AZN) which I rapidly exited.

My portfolio also includes some Venture Capital Trusts (VCTs) which would have generated a less good overall return because they tend to be vehicles for turning capital into tax free dividends. As usual they mainly showed small capital losses although two VCTs focused on AIM stocks (Amati and Unicorn) did relatively well for the second year running so the overall result was a small capital profit. My own AIM portfolio holdings were a very mixed bunch with technology companies showing a good profit but others showing losses as small caps generally fell out of favour. I analyse in detail the profits and losses on all my individual holdings during the year so as to try to learn from my mistakes. But last year was dominated by a rush to safe havens and into stocks that might benefit from the epidemic so it undermined my previous choices and required some rapid portfolio re-allocations during the year.

What will happen in the coming year for stock markets? I have no idea and simply prefer to buy good companies and hold them for as long as it makes sense to do so. But certainly the discounts, or premiums, on investment trusts in popular sectors seem to suggest some optimism for the future when surely western economies are going to be severely damaged. Meanwhile Governments are borrowing in a very big way to keep their economies afloat (or printing money to do so) while taxes are surely to rise to cover the cost of the pandemic. The stock market has become detached apparently from the real-world economy which cannot bode well for the future. But that’s not necessarily a basis for making decisions about stock market investment where investors have longer time horizons and still expect the epidemic to be under control this year.

But some things may permanently change as we have become used to doing more on-line shopping, working from home, travelling less and getting our education on-line. Those are the trends that one should follow I suggest. Plus of course the movement to improve the environment and halt global warming which is requiring substantial changes to the UK and other economies. But one has to be very careful about enthusiasm for “hot” market sectors – they often turn out to be flashes in the pan.

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

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Following folks on Twitter suggests that there was an enormously wide variation in the overall portfolio performance of private investors in the last year. But without people saying what they invest in and how big and diversified their portfolio is, I am not sure the information provided helps much. I also worry about how they calculate their performance figures and whether it includes dividends reinvested because I never find it a simple thing to do as none of the software products I use give me a correct figure so I still have to do the calculations manually.

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. Consistency is not applauded on social media. But here’s a summary of my portfolio performance.  Total return for the year (including dividends) was almost exactly 30% return on my capital invested at the start of the year. As my target is simply to consistently beat the FTSE-AllShare which was up in capital terms by 14.3% last year and dividends would have added another 4%, I am happy with that outcome.

My portfolio is very varied with a slight emphasis on UK small and mid-cap shares but it does include a very few FTSE-100 shares and several large investment trusts and funds including some overseas focused ones. One of the reasons for outperformance was probably betting on a successful resolution of the Brexit impasse before the General Election, which has clearly had a very positive impact on markets, particularly in UK small cap stocks.

It was partly a good year because I had few bad failures – Patisserie was the worst, but when you have a large number of holdings, as I do, then there are always one or two disappointments. Others I managed to get out of without much damage but Patisserie had trading suspended at the initial announcement of possible fraud and never returned.

Well at least I beat Warren Buffett’s Berkshire Hathaway last year. He only managed an 11% gain last year while the US market gained 31.5% last year, including dividends. No doubt some clever sod will suggest that I could have saved a lot of effort and just invested in an S&P 500 tracker but that would have been a risky strategy because the US markets can be very volatile. Incidentally Berkshire now has cash of $128 billion. Buffett is clearly finding it difficult to invest the money. Perhaps he is slowing down at aged 89 and if he has another bad year like the last one folks might be encouraging him and his partner to retire. But few investors achieve outperformance every year – one needs to consider performance over 5 or more years.

My portfolio also includes some Venture Capital Trusts (VCTs) which would have generated a less good overall return because they tend to be vehicles for turning capital into tax free dividends. As usual they mainly showed small capital losses although two VCTs focused on AIM stocks did relatively well for a change.

What of the future and where should we be investing? I am still keen on technology stocks and here’s a useful quotation from Alan Turing who is soon to appear on new £50 notes: “This is only a foretaste of what is to come and only the shadow of what is going to be”. He wrote that in 1949 about the future use of computers, but it still applies as many new and innovative businesses based on software and the internet are still being founded. However, I think the valuations of early-stage unprofitable companies are getting overblown (e.g. in fintech and biotech) so I suggest one needs to be careful.

One slight negative in my portfolio performance last year was that total dividends received fell slightly. That’s probably because I sold a few high yield shares – with a buoyant economy it hardly seemed the best place to be. I hold no builders, no banks or other financial institutions and no oil companies at present and generally do not as I am prejudiced against them.

The slight cloud on the horizon is that Boris Johnson has to conclude a free trade deal with the EU in the coming year, or face a difficult decision. That might cause some business uncertainty in the meantime. But I doubt if it will affect those companies with quality businesses. As I have been saying for the last 6 months, it is business perspective investing that enables you to generate good returns, and that is very much the basis of my good performance last year. Plus avoiding too many investment disasters as I said in a previous blog post.

If you were hoping for details of my holdings, or share tips for the future, you will by now be disappointed. What made money for me last year, may not do so this year, and giving tips for the coming year is a very risky proposition. Such tips tend to encourage churning of portfolios and increase the readership of publications giving them but it is not necessarily a productive exercise. I prefer a strategy of buying good companies and holding them for as long as it makes sense to do so.

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

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