Monthly Archives: April 2019

Portfolio performance April 2019

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So it’s time for the monthly recap against the market for both SIPP and ISA portfolios as recorded by Sharepad:

  • SIPP – overall performance +1.3%
  • ISA – overall performance + 1.8%

Overall performance in same benchmark fund (Vanguard Lifestrategy 80%) is +2.87% so again behind the benchmark annoyingly. As said in last months update I do have ~ 5 shares ex-dividend with payments due in May, so I do expect this to recover.

Yearly performance so far is SIPP 4%, ISA 8.7% – based on sharepad again. When compared at benchmark of 9.58%, I have someway to go, but again dividends are not paid yet… I’m reasonably happy with 4% at this stage of the year, and ecstatic about 8.7%… let us hope the performance continues throughout 2019!

Over the month, highest performance from non-benchmark fund was as below:

  • SIPP – PCOMKT – Merian UK Smaller Companies +6.03%
  • SIPP – BT.A -> BT Group Plc + 2.64%
  • ISA – ATST – Alliance Trust Plc +4.13%
  • ISA – AV – Aviva Plc – +3.15%

Detractors:

  • SIPP – DLG – Direct Line Group -7.45%
  • ISA – LLOY – Lloyds Bank -0.525% (tiny loss and dividend due).

Overall only 2 holdings in ISA lost money in April – great. Mears Group Plc also had another month of losses, so averaging down that purchase has made sense. DLG is targeted to top-up in the SIPP next month.

The SIPP portfolio has only really had > 0.5% losses from SSE, MER and DLG for the month, overall the funds have gained as a whole. As the shares in question are all actually in my top-ups already for last month as per my last post, it’s not unexpected. The losses are actually covered in DLG’s cases, by the dividend that is due in May, so I am not intending to drop this position.

I have also sold out of an under-performing fund this month in the SIPP – and converting to cash for later use. This will leave a ~2% cash holding in SIPP that will be increasing until I find a good trade to use on.

Monthly Investments – Top ups

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Regular monthly post on what I’ve “topped” up with inbound cash to the relevant pots via my monthly reinvestment (at low costs).

ISA:

  • LLOY – Lloyds Bank
  • AV. – Aviva
  • MRCH – Merchants Trust

SIPP:

  • DLG – Direct line group
  • FUEQUI – Fundsmith Equity
  • SSON – Smitson Investment Trust
  • FCSS – Fidelity China Special Situation Plc
  • CGXXQ – LF Miton European Opportunities
  • M1UB29 – Lindsell Train Japanese Equity Sterling Hedged Inc
  • PCOMKT – Merian UK Smaller Companies Fund Acc
  • SSE – SSE Plc
  • MER – Mears Group
  • Cash

As mentioned – I try to keep all my investments to a target, Mears is new as previously blogged about, so is always on top-up duties. I need to wind down the overall fund top-ups to half the monthly top-ups and add some new companies to the SIPP pot, SSE re-added as the price has dropped significantly, so it was eligible due to the averaging down. Vanguard top-ups are now also required in SIPP as the percentage has dropped below the 25% target.

I’ve also added a monthly cash top-up to allow more dynamic market moves without needing sales over the year ahead. I have missed out on a couple of items I predicted, and without a small “trading” reserve in the SIPP I can’t take advantage of these situations.

ISA wise Next month I expect to remove LLOY (unless it drops to 60p or less) in favour of SKG (as Lloyds is becoming too high a percentage of the ISA). (MRCH will remain as it’s a growing element to add to the fund). I am considering stopping AV. top-ups for moment as although price is attractive, I may have better gains elsewhere.

SKG & FCIF – update

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After the announcement of a wind-up nearly at time of post of last post…

I ended up selling my position that morning, as money in bank is better than waiting for a drip feed of returns (which I see as the likely FCIF outcome) – and buying SKG as a replacement from my “targets list”. Smurfitt Kappa are a paper/card producer with huge market reach across the globe, and my current “valuation” metric has them trading below their true value (which should be 15% above current market by my calculations (as a lower-end estimate)). Given that and a 3% dividend, it met my up to >20% growth in a year metric. It also has the owners heavily invested in the business’s future stake (which I love to see in a company), and is trading at a healthy PE. The Venezuala situation did hit this years bottom line, but I don’t see it being repeated.

As this is going ex-dividend shortly, I expect to expand on this position in 2019 as the price drops – it looks like a long-term holding potential for me – I may not sell this position for 10 years if I’m right, given how cheap it seems right now.

I’m also intending on buying the same share in the SIPP over time, as I do see it being a core-industrials holding, and the current move to home-delivery is really helping SKG.

One small point, this does place me reasonably underweight reference Bond/Loans in the portfolio, so I do need to replace this percentage over the coming year. I may top up CGT, which has been a good exposure to this market which actually has made me money in last year (circa 8% in 13 months, as I purchased on a dip!).

FCIF – Funding circle investment fund

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This is more a note to myself on not investing what you don’t understand fully. Last year I made one of the embarrassing mistakes that end up defining your investment strategy in future years. Back in 2008, I had similar “big bets” on Oil plays like Aminex, which I also didn’t understand, but the money lost was tiny! From then on I didn’t really lost most years, however, last year, I did make a mistake.

Last year, when I was re balancing my ISA, I put £1000 over to FCIF, as at the time it had a decent Dividend. But this was early in my understanding of both valuations (NAV) and ETF’s – ie, the fact an ETF can trade both above and below the asset valuation.

At the time, I just had focused on the price, which had been a steady ~ 100-102p since inception, and hadn’t paid heed to the NAV graph (which wasn’t exactly rising). The fact the NAV was below the actual price the shares was trading should have been a “danger” sign, and should have prevented me buying at a 5-10% premium.

Last year I paid over the odds effectively for this investment, and it’s made my future buying more informed. For the value of the knowledge priceless, but it did cause a £200 drag to the overall ISA last year, which would have actually resulted in my other investments outperforming the benchmark (ie, Lifestrategy) in 2018.

Is FCIF a good investment now? Well, it’s relatively under the NAV now – and personally I do top-up the investment when I have nothing better to top-up in the ISA monthly (as having assets in the market in a liquid stuck like FCIF is a good play to allow a faster trade compared to an OIEC settlement), but I know for sure right now that won’t be the case this month (I have 3 better candidates for this months monthly “regular” investments). However personally I would rate this as a ~7.5% divi rise in a year, and maybe 2% on shareprice over 2019 (but it does have a future potential 10% rise on the discount). As you can get a ROCE of up to 15-20% elsewhere right now, I’d personally avoid buying outright given I don’t expect the recovery this financial year. Am I going to sell this? Well no, as having a investment like this in the portfolio does help to remind me of the failure. And I may want to top up when I see the NAV monthly gain numbers start to recover a little.

Investing as a Ltd Company

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I write this hoping for advice from readers! I have a full time consulting company, which is where I get my funds to invest.

Over the last few years, that company has now passed the banking threshold to safely store funds in a single institution. It is still making money, as I am still full time consulting for a couple of clients as my day-job. The money that remains is now no longer deemed “rainy day” money, as there is sufficient for me to survive a year or so without actual work. However, given it is still gaining money as a company, and it is not tax efficient to withdraw that money, should I not invest it as the company so it is not losing money to inflation? My thoughts are I should and I expect a whole series of blogs to indicate that.

The outline plan will be to first get the LEI number I require from the stock exchange – then sign-up for a trading account as a Ltd (many companies offer this I have found). My question to others who have done this is what limits should I place on this trading? My understanding is my gains from this should be limited to 20% of the companies overall turnover to avoid any issues from HMRC – which actually should be reasonably easy to handle in the early years. The actual assets held, I was thinking of keeping it in a moderately reasonably ETF that pays dividends (something like Merchants), and stays about same “value” – allowing withdrawal of the dividends back to the business as income, and this will easily stay under 20%, but will end up earning me a 4-5% ROI instead of the 0.5%-1% in the bank. It’s probably a better bet in the long term.

There have been a few previous posts on this from a few people – but I’m yet to find others actually doing this (such as this article from Foxy) – my accountant advised that I should still limit my turnover and it is “simpler” to do on same Ltd. I’m personally unwilling to setup a 2nd Limited company but interested how many others have actually done this. So please comments please on advice on this, given even forum searches, I’ve yet to find many people actually doing this.

Portfolio Performance – March 2019

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Overall “monthly” figures (from my sharepad tracker), taken on Sunday 31/3/19 as markets closed

  • SIPP : +2.2%
  • ISA : +1.7%

Given during the month the Vanguard Lifestrategy 60% we have as benchmark is +2.29%, so I am behind this “rolling” month by a small amount on both portfolios (I’d also add these figures include dividends!)

Lets see how we do next month – Given this is first time I’ve been tracking my portfolio this way, I should add my largest benefits/detractors :

  • SIPP – Largest growth : BP +4.78% – + a dividend payment making this higher.
  • SIPP – Largest detractor : WPCT -5.15% – overall portfolio is -0.4% on this now
  • ISA – Largest growth: BGJSB +4.09%
  • ISA – Largest detractor : LLOY -1.13% **

Given majority of shares in both portfolios have actually had gains, and we’re due Dividends on quite a few having already gone or are going to be going ex-divi over April, I expect growth over next 2 months to actually exceed the benchmark.

With the top up strategy discussed yesterday, I expect reinvestment to continue in the detractors going forward.

** Aviva was actually largest detractor, but we expect this from a new position in portfolio, and I haven’t lost as much as a long-term holder of a share – majority of losses are in stamp-duty and the trade fee – as is normal when entering a position.

Lets hope for a better result next month!

New reinvestment strategy 2019

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I have just had the realisation, maybe a revelation, after a few beers, that maybe I’ve been going about this slightly wrong. I mean a few beers and a spreadsheet combined with last years month by month share price figures. Conventional wisdom is not to catch a falling knife, but I’ve been doing quite well overall in recent years (I wasn’t minus equity in 2018-19 when most funds including my world tracker was). So I was thinking the following:

Why not robo-target my monthly regular investment pot to invest in the companies or OIEC, or ETF with the highest fall over previous month? I’m also tracking fall over the financial year (which for me runs on an ISA year basis) – so I’ll probably likely also have a next-preference to the overall yearly fallers after the monthly, all things being equal. The math said I would have overall ended up with a higher percentage of winners last year by adopting this strategy.

Is this a stupid plan, I’d be glad of your comments, but I think I’m going to try it for a 3-6 month period now given I expect we’re in an extreme volatility period. Now as my investments are publicly listed on this blog month by month, this would allow others to also follow this so hence I am pre-notifying this will be the plan for a few months at least. I will exclude “new investments” under 1% from this rule to allow me to top up to a reasonable 4% min holding, otherwise I wouldn’t be able to sell without horrible trading losses.

I also couldn’t have implemented this due to sheer lack of portfolio size in 2017-19… I would have ended up with a far to high percentage in single stocks if I had followed this strategy (on positive, I’d have gained > 20% from those investments, but I also do need to keep an eye on the percentages from a risk perspective). If a single, non fund investment exceeds 10%, that should be a marker to stop doing this – unless it’s one of the major holdings I have previously identified (LifeStategy 60% ACC or Fundsmith).

So those are the new “robo” rules I’m setting my portfolio. Comments please!

Given I usually put a lot of planning into new shares in portfolio, this should help maximise returns over the year – if it works as well as the numbers showed last year (if I hadn’t had beers as I wrote this I would have done a nice diagram!), it’ll be a permanent feature. Analysing the numbers in excel, I missed out on ~ 4% of extra performance, which is reasonably substantial in both portfolios from not doing this in 2018..

I don’t need to be told the obvious downside, this could be chasing losses and may horribly fail – and it will multiply this failure if this IS the case, but my monthly reinvestment’s are split value wise – there should be a further post as I work out percentage top ups from the available funds, as I have an immediate feeling it needs to be proportionally weighted, which could result in some fun math in the future. But that’s after I try this for 6 months.