Another year, another all time high for UK markets. Both the FTSE 100 and the FTSE All-Share ended at their highest point ever, with returns of 12% and 13% for the year, respectively. Before looking at how the portfolio has performed alongside this, let’s get the numbers out of the way.
Year-to-date, my portfolio has returned 42.72%, dividends included. Since I began it in August 2015, it has returned 65.28%. I have said all along that so long as I am capable of beating the All-Share index (my benchmark) I will pick and choose my investments. I’m delighted therefore to say that I have beaten this benchmark again in 2017.
Before I talk about what’s happened in the portfolio, I wanted to say a massive thank you to everyone who has read my posts, commented, shared or otherwise engaged with me this year. Your support has been invaluable in pushing me to keep the site running alongside an otherwise time-consuming full time job. The engagement you have provided has made me a better investor, and I hope in some small measure that I have helped you too.
I am determined to up my game in 2018. More analysis of companies, more reading of investment books, and more thoughts on markets & investment generally. I read 17 books this year (see a brief synopsis of each here), some of which were investment related, whilst others bore no relation at all. I already have plenty to sink my teeth into in 2018!
2017 in Review
I didn’t engage in all that much activity this year. If you follow my writing at all you’re probably aware that I lean towards buying and holding, rather than trading in and out of positions. So what did I buy and sell in 2017?
Somero (LSE: SOM) – March
Avon Rubber (LSE: AVON) – June
Taptica (LSE: TAP) – July
Gattaca (LSE: GATC) – April
Dunelm (LSE: DNLM) – July
I’m not kidding. I don’t do much at all! Alongside these transactions, I topped up on Somero, Next (LSE: NXT) and Creightons (LSE: CRL). 32Red was taken over in April, and my Emerging Market Europe ETF was shut down in November. Happily, only three of my holdings had a negative return this year. Howden Joinery (LSE: HWDN), Next and Dialog Semiconductor (FWB: DLG) (read about DLG here).
So, who’s blown the doors off, and who’s been a laggard?
Creightons PLC has caused me more stress than any other this year, I think. I should say, it was one of my best performing shares last year, and still returned over 100% this year as well. However, take a look at the share price movement in 2017:
It has actually been significantly higher earlier in the year, before falling back a fair amount. I was at one point onto a five-bagger. Will it get back to this point? I think so. It’s a stellar company with fantastic management.
AB Dynamics moved into two-bagger territory towards the end of the year, with a remarkable run up since the start of November. The company now sits on a P/E of 48, which surely isn’t sustainable. Nevertheless, I will continue to hold, regardless of pull back. If I start meddling and trying to time the market, I know I’ll fail.
Wizz Air likewise became a two-bagger in 2017. When I weighed up this investment last year, I looked at it alongside Ryanair and Easyjet. All told, I thought all three companies appeared attractively valued, however it seemed to me that Wizz Air was better positioned. It sat on a more appealing valuation, it was growing market share and it had one of the youngest fleets in the business. I’m heartened to see that on the final trading day of 2017 that they had finalised an order for new Airbus planes that will take them into the mid 2020’s.
I have to start with Dialog Semiconductor. They’ve been hit by a few warnings this year based on their relationship with Apple. I wrote about this recently (Dialog Semiconductor: A Reminder to Pay Attention) but in summary, Apple account for around 70% of revenues for DLG, and unfortunately rumours abound that Apple will bring their semiconductor manufacturing in house. Correspondingly, DLG’s share price has taken a few hits this year and currently has me at a loss. I have decided to await further clarification in Q1 of 2018.
I sold Gattaca and Dunelm this year, finally losing patience (and money) with both. In truth, had I formulated my current investing strategy before looking at these two, I wouldn’t have bought either. I confess I held both of these too long, in some feint hope the shares would recover. So lesson learnt. If you’re not convinced by a company, don’t hold just because you want to make your money back. Get out, put the money elsewhere.
Next continue to cause some concern. A minor earnings upgrade caused me to top-up my holding, and I remain convinced of the quality of this business (just read an annual report to see what I mean), however the fact remains that they continue to struggle against faster growing, online competitors. Will 2018 be the year they get their act together and start to catch up?
What will the new year hold? I’m not sure. US equities are sitting on pretty lofty valuations, but worldwide equity returns have been very respectable. In the UK, I think markets could at worst be considered ‘fairly valued’, and therefore remain happy to both hold my existing shares and make additional purchases wherever I find value. With only around 8% of my portfolio in cash, I remain keen to build up my reserves in case of a correction as well.
Whilst I try to follow macro events, I don’t really allow them to affect my investment decisions. That being said, it appears we may finally be seeing a program of interest rate rises globally. This must surely put pressure on equities.
What am I looking at in 2018? I’m keen to find a replacement to the emerging market Eastern European ETF I held until November. If you follow my CAPE posts, you’ll see that Eastern Europe still presents real opportunity from a value perspective.
I’m also intrigued by the possibility of India. I need to do far more research, but the attempts made to sort out their tax system last year should result in increased tax receipts to be spent on infrastructure developments. If you had to bet on one country for the next 50 years, India must be a contender. Perhaps a small-cap ETF is the way to go. More research needed.
I’m also keen to continue diversifying away from the UK, for no other reason than diversification is rarely a bad idea. I will be looking to screen for equities abroad, trying to find quality growth where I can.
I’m pretty happy with my investment methodology, as it stands. It’s something that has been honed over a few years now. That being said, I continue to develop and grow it based on new influences and education. The nice thing is that I can be extremely discerning in what I add, and what I discard. It seems to be working.
I was honoured to have been invited to contribute a Q&A interview to DIY Investor Magazine this year (you can read it here). When I had the idea to start this site, I had no idea where it would go, or whether anyone would even read it. It has been an education for me, and an inspiration to follow my interests and passions. I am excited to see what 2018 has in store.
Our little Twitter UK investing community isn’t so little anymore! It’s been fantastic to meet new contributors this year and I know they will make me a better investor in 2018. If you’re not yet involved, join us!
I wish you all a happy and prosperous 2018.
Leave a comment below, or find me on Twitter @BritishInvestor.