Portfolio Review 2018

I just realised I never posted my H1 2018 portfolio review even though I had written it, so I’ll combine it with an H2 report.

2018 has been a year to forget for me, not just because of poor performance of the stock markets, but personally has had a lot of downs. There have been good moments though and I have to keep that in mind. One of those, I guess, was the markets in the first half of the year.

Headline performance

H1 2018 overview

My holdings returned 0.9% from Jan-June 2018 versus 3.5% for the FTSE All share tracker and 4.3% for the S&P tracker. Not great but not bad either. I don’t expect to beat the market when it is particularly buoyant. That flattens out my long term returns.

H2 2018 overview

My portfolio then lost 11.7% in H2 2018 versus -10.4% for the FTSE-All share and -10.3% for the S&P tracker. My under performance looks better when compared to the FTSE 250 losses of 13.9% but are still disappointing as they were driven by a couple of poor performing stocks.

I’m still out-performing the indices in the long term CAGR so that’s something.

Individual share performance

So it’s time to dive into my portfolio to see where the gains and losses came from. Here is a breakdown of the contribution in percentage points to my portfolio return. Check out my portfolio page to get tickers and info on my buy prices.

H1 2018

H2 2018

Gainers – H1

I’ll focus on the positives first. The biggest contributors were Ubiquiti, IG Group and Codan. I since amended my portfolio for two of these in the second half of 2018. Ubiquiti was 7.7% at the end of H1 2018 and was approaching what I deemed to be a fairer value (but with some way still to go). So I trimmed the holding by selling half for a 267% return, or 43% annualised. Codan I sold out of completely as it reached the top end range of my valuation, for a 318% return, or 44% annualised. IG ended the half 64% above my purchase price and was approaching what I thought was a fair enough price, but it’s a long term holding so I have maintained the position (at my expense as it was a big loser in H2).

Gainers – H2

Staffline again performed well and was the top gainer, up 28%. Apple gained 10% and I sold it during the half as I thought it had reach fair value and just couldn’t see where the future growth would come from. I also sold Oracle after growth had been poor and I thought, given that, it was fair value.

Losers – H1

During the first half I became disillusioned with Gattaca and sold my holding, realising a 43% loss. I didn’t really understand the industry they were in and had second thoughts with regard to the debt load. I thought Staffline was a much better play in this industry because of accounting methods hiding its true earning power. I’m glad I sold Gattaca as it’s down a further 47% since I sold.

Another loser was Cenkos, which has furthered its losses in H2. I doubled down on this position as I think it’s a stable option with very low chance of losing money in the long term. It is now 4.7% of my portfolio.

I’ll discuss Goldplat in H2.

Losers – H2

United Carpets was the biggest loser for me. After the stock dropped I doubled down on the position. It has since put out a profit warning and the shares have been battered. After topping up my holdings it’s still down 41% on my average purchase price. I continue to hold as I think the recent poor performance is genuinely due to the abnormal weather the UK had in 2018 (as management stated) which probably won’t be a new long-term norm.

That leaves me with biggest stinker in my portfolio, Goldplat. It further extended losses from H1 to H2. In hindsight, I think this reached its fair value in 2017 when it topped 8p, and due to gains made up 8.4% of my portfolio. It has now sunk to 3.75p, well below my purchase price. I’m content to keep holding but will probably sell when/if it hits 8p again. It isn’t worth my original valuation of 14p in my opinion but is worth more than its current share price.

Portfolio changes

I am just going to cover all the changes I’ve made in 2018, as I can’t remember which occurred in H1 or H2.

• Sold Oracle for a 46% gain, or 14% annualised. Its earnings had not performed as I had expected and I consider myself lucky to have got out with a decent gain.
• Sold Apple for a 224% gain, or 28% annualised. It was obviously cheap when I bought it, but now I can’t see where the growth will come from, and being tech there is the risk of it falling out of favour. I thought my cash was best placed elsewhere.
• Halved Ubiquiti position, as its position size relative to its valuation was too large
• Bought more United Carpets. I think the headwinds it is facing are not going to last forever, and it has a very impressive dividend history, along with half the market cap as cash.
• Bought SCS Group (SCS.L). A furniture retailer in the UK. Again, the UK headwinds it faces I don’t think will last forever.
• Bought Best of the Best (BOTB.L) Has some impressive online growth which I think makes it undervalued.
• Sold Pental after a profit warning as the thesis for this one relied on steady consistent growth. Made a modest 41% on the sale, or 10% annualised. I’m glad I sold as it’s down 45%.
• Sold Softbank as it was meant to be a play on Alibaba but I had underestimated how difficult their stake would be to sell. It’s highly illiquid. Plus it was getting into businesses I didn’t like. Made a 30% profit on it.
• Bought Facebook after the personal data controversy. I think it’s a decent long term bet.
• Bought Volvere after I discovered it, a well run business that turns around other struggling businesses. It’s selling for not much more than book value.
• Sold Codan and Gattaca as previously explained.

My UK exposure is now quite high, especially to troubled sectors. If the UK economy ends up going into a tailspin after Brexit then I think a few of my positions will fare poorly. But I believe in the long term health of the UK, and that my exposure is to companies that are not as threatened by online innovation. Buying carpets for example I think will be about physically going to a shop and inspecting the choices. Plus, United Carpet’s main competitor is already in financial trouble and will fold before them, reducing competition. Coupled with its financial prudence, this made me increase my position until this was the largest holding in my portfolio. Its losses since have reduced the size however.

This was the position sizing of my portfolio at the end of 2018

Japanese bucket		25.8%
Cash		14.5%
Weiss Korea Opportunity	WKOF:LN	6.5%
Volvere	VLE:LN	5.5%
United Carpets	UCG:LN	5.4%
Northern Bear	NTBR:LN	5.0%
Cenkos Securities	CNKS:LN	4.7%
Ubiquiti Networks	UBNT:US	4.5%
Goldplat	GDP:LN	4.2%
IG Group	IGG:LN	4.1%
Staffline	STAF:LN	3.9%
Facebook	FB:US	2.4%
Just Eat	JE/:LN	2.4%
Cambria Automobiles	CAMB:LN	2.3%
SCS Group	SCS:LN	2.2%
Best of the Best	BOTB:LN	1.9%
Revolution Bars	RBG:LN	1.8%
DOM security/Groupe SFPI	SFPI:FP	1.5%
Renn	RUG:LN	0.9%
Awilco Drilling	AWDR:NO	0.3%

I still have around 15% cash to utilise. I will probably use this to top-up existing positions if markets continue to decline. I’d be keen to top-up on IGG, CNKS and STAF.