In starting off my first of four portfolio updates for 2017, I have to say things could scarcely have gone better. Performance year-to-date has been 17.44%, against 3.56% for my designated benchmark, the FTSE All-Share. This brings my overall performance since inception in August 2015 to 29.76%. Things are going well, however with each day I remain aware of the fact that the steady march upward can only continue for so long. I am also beginning to find that it is getting harder and harder to find what I would deem “value” opportunities. View my portfolio here.
I am not an active trader, and therefore the first quarter of 2017 has been relatively quiet for me. I’d far rather find and buy a quality company, and then let time work in my favour. I made a few purchases towards the middle of last year which were decided based on an investing philosophy and method I have been developing over the past 18 or so months. So far these investments have largely done well, which has helped to reinforce my feeling that this methodology may prove successful in the long-run. Read my end of year summary here if you would like more information. As before, I will now detail the good, and bad of the portfolio so far this year.
I’ll begin with my first takeover offer of the year for online gambling firm 32Red (TTR). Following my initial purchase, TTR raced into a healthy profit before getting itself stuck in a range for most of 2016. Following a takeover offer by Kindred Group, however, TTR has settled at a price giving me a shade under a 180% return. Subsequent to this takeover offer, TTR issued out of this world results which leave me somewhat disappointed that they will not be able to continue their journey.
Frankfurt-listed Dialog Semiconductor (DLG) made it into my 2016 review and have continued their impressive march upward, now just over 50% up on my initial purchase price. As mentioned in the previous review, DLG derive a substantial portion of their revenues from…
…Apple (AAPL). By some distance, Apple are the largest publicly listed company in the world, and are up just over 30% in my portfolio. There’s little I specifically need to say about AAPL, they are no doubt one of the most discussed companies in the world. I will however highlight that Berkshire Hathaway have been buying, and now own approximately 2.5% of the business. Nice to know I’m in good company! AAPL are operationally an exceptionally well run company with oodles of free cash. Speculation exists as to whether they will become the first trillion-dollar business. I wouldn’t bet against it.
Somero Enterprises (SOM). My most recent purchase, Somero have shot up in quick order, leaving me a position currently up over 22%. With funds from the TTR sale I cast a keen eye over prospective purchases, struggling to find many suitable ideas. SOM jumped out as one I looked at during the middle of last year, but for whatever reason decided against pulling the trigger. Up 72% in the past six months, I am kicking myself somewhat. I do however believe they are still good value, and will likely be looking to add more in the coming month.
Housebuilders Berkeley (BKG) and Persimmon (PSN) make the list for the fact they are now back in the black. Following the precipitous drop following the EU referendum I am pleased to see them having recovered their losses, and remain confident of their prospects going forward. In the mean time, there are healthy dividends on offer from them both.
Another from my previous write-up, Next (NXT) remain perplexing to me. I’m not sure anyone would argue they are not operationally a well run company, however their delay in embracing eCommerce and online retail is proving a hindrance to their current success. My position is now down -45%, however this position seems to have stabilised somewhat. NXT appear to have identified their deficiencies and are taking action to rectify them. I am buoyed by the fact that Next Directory sales have been steadily increasing, and will be watching with caution until their next update.
Dunelm (DNLM), like Next, appear to be falling victim to the negative feelings around retail businesses. Now down 30% in my portfolio, this is another one I am watching closely. DNLM are a quality business, however like for like store sales were negative in their most recent update in February. Much like Next, however, their online delivery service appears to be picking up speed, led in part by their acquisition of Worldstores, which they appear to be integrating successfully.
Gattaca (GATC) remain largely in the situation they were in three months ago. Down 48% in the portfolio, they remain on a particularly attractive valuation with a yield of over 7%. If their next update is favourable I will be looking to add to my position.
- Somero Enterprises (SOM)
- 32Red (TTR)
So far this year I am amazed at the relentlessly bullish direction of the markets. Before I started investing properly I always wondered how exactly people determine exactly when markets are overvalued. I’m sure there are many methods (I for one enjoy looking at CAPE ratios), however one way is to simply judge how many investment opportunities you can find at any given time. I wrote earlier about how it is becoming increasingly hard to find value, which may in itself be a signal that valuations are getting a bit high.
It is likely I will have significant funds to invest in the coming months, which leaves me in a bit of a dilemma. Do I invest, knowing I do not have full faith in some of my investments, or do I keep cash on the side, in preparation for a fall? What goes up must not necessarily come down. Nobody can predict the markets, to believe otherwise is a fallacy.
I do wish I had more time to devote to what is quickly becoming a real passion of mine, and am heartened to be able to draw upon the support and advice of a fantastic Twitter community. I hope to be able to contribute back to that community in 2017. Because investing is as much psychology as it is business and finance, it offers a level of intrigue not easily found elsewhere. I have often said I invest more for the intellectual challenge than the prospect of making money. So far, however, I have been well rewarded in both.
If you’d like to discuss anything contained in this article, contact me on Twitter @britishinvestor, or leave a message via the Contact page.