Portfolio Review

It’s been a while since I posted here, mostly because I have remained passive since becoming busy with other things like writing a series of novels (I enjoy it, but it’s a lot of work).

But with the crazy world right now, I thought it was worth gathering my thoughts because I have been more active this year than before due to necessity.

Here is my performance chart since starting the blog.

You can see how performance has gone since I stopped watching my portfolio closely in 2016/2017. My focus has now become more ‘buy and hold forever’ for this reason. But currently, not enough of my portfolio meets that criteria.

Brief 2019 overview

Overall, 2019 was a mediocre/bad year for me. The markets surged in the first half of the year whereas my portfolio was slightly down. This was due to a couple of shares mainly, Cenkos Securities (CNKS:LN) which has had a slow period for the last couple of years (which is fine–I still like the company), and Staffline (STAF:LN) which is probably the first share I’ve owned where I’ve been infuriated by incompetent management.

STAF is a long story which you can probably catch up with in the news better than I can explain it, but needless to say, management took a highly cash generative company, loaded it with too much debt, suffered a downturn in business (which their splurges left it unable to deal with) and were forced into a catastrophic equity raise. I lost 80% of my initial investment in STAF before I sold. I could have made money on the equity raising as they offered shares at a discount to market value, but I was too incensed with management to give them even a penny more from me. As it turns out, selling was the right move as they’re down another 65%, but I can hardly be glad about it. 5% of my portfolio lost…

2020 review

But let’s move onto this year before I lose yet more hair. It started pretty mundane, but news of the virus began. At first I dismissed it. I’m still of the view that had things been left to run their course (as Japan seemed to) then it wouldn’t have made much difference in terms of deaths but our economy wouldn’t be so devastated.

At some point in the year, however, I saw the writing on the wall. When governments began shutting down entire countries, I saw how bad this was going to be for every company. I began to panic, and while I usually resist acting on emotion, I realised that this was an entirely justified panic.

I sold anything in my portfolio that was exposed, and was very lucky that the market in general seemed completely oblivious to how bad things were going to be (this is not due to any special ability on my part, but due to markets being dumb, as they often are). Given the epicentre was in Asia, I sold my Japanese shares after a small downturn but managed to break even. In the UK, I sold a few things that would be hit worst by a shut down.

A few weeks later, I was sitting on 45% of my portfolio in cash, and the markets were down 40%. I still can’t quite believe how fast the markets fell (and have bounced back) and how well I timed my sales! But, by luck, it left me in an ideal position.

I had a list of ‘buy and hold forever’ shares (i.e. virtual monopolies) that were now at reasonable levels. So I put half the cash into a FTSE 250 tracker (MIDD:LN), Facebook (FB), Alphabet (GOOGL), Berkshire Hathaway (BRK.B) and Volvere (VLE:LN) (not a monopoly, but I trust the management).

I was expecting further falls in the market over the next year when company results began to come out showing the true impact, so I kept 20% in cash. Maybe I was wrong and missed a bigger opportunity, but I still think markets are overly optimistic in some areas.

Winners / Losers H1 2020

My portfolio made 16% in H1 2020, and here are the contributors:

I won’t say much on all the companies other than it wasn’t my recent purchases that drove a lot of performance, it was some existing holdings. Some appear twice as I’ve bought in two tranches. I’ve always strived to buy companies that are solid and can survive hard times. With some exceptions (looking at you STAF), I’ve mostly achieved this.

Cenkos Securities is a good example. It has had some tough years, but I’m happy to hold, because it has plenty of cash and is flexible enough not to lose much money when work dries up.

I sold some Best of the Best and Ubiquiti after the surges because they were above 10% of my portfolio. I also sold Cambria and some United Carpets as these look set to suffer from the shut down of the UK economy.

This is my current portfolio.

I’ll be looking to buy more Berkshire and Facebook (after seeing what comes from this boycot). The rest will probably go in the FTSE 250 tracker as soon as the economic outlook seems clearer, because I’m looking to scale down the amount of maintenance my portfolio needs.

So, who knows what the rest of the year will bring. I feel my portfolio is well placed to survive, but for the sake of our countries, I hope the economic depression we’re facing isn’t as bad as I fear it will be…