Q4 2016: Up 7.6% For The Year

01 January 2017
By Maynard Paton

Happy 2017! I trust you have enjoyed a successful year’s investing and that you continue to find my Blog useful.

I’m currently celebrating my second anniversary as a full-time investor — and I must admit to mixed feelings about how things have turned out so far.

True, I enjoyed a successful 2015 with my portfolio gaining 18%. But 2016 saw my investments collectively languish against a market buoyed by rebounding miners and post-Brexit USD-earners.

I have to confess, watching my portfolio slide 10% during the first six months of 2016 was not a happy experience. Still, a recovery eventually emerged and at least I can enjoy a positive — if hardly spectacular — full-year performance.

On reflection, I should have been somewhat bolder with my 2016 share-buying. I certainly should have put a lot more into my new purchases and bought more than I did during the immediate Brexit aftermath.

As a full-time investor with no other income, I’m finding it a tough balancing act between being bold and being reckless with my buying. I doubt 2017 will be any easier!

This is how my portfolio has changed since the start of the year

You may already know from my previous updates (Q1, Q2  and Q3) that I publish a portfolio review after every quarter. So here is the recap of my October/November/December activity.

The table below shows how my portfolio stood at the start of the year, as well as at the end of March, June, September and December:

HoldingWeighting
01 Jan 2016 (%)
Weighting
31 Mar 2016 (%)
Weighting
30 Jun 2016 (%)
Weighting
30 Sep 2016 (%)
Weighting
31 Dec 2016 (%)
Andrews Sykes2.72.32.93.03.4
Bioventix---4.75.3
BrainJuicer-0.92.02.62.6
Castings8.19.08.37.46.7
City of London Inv6.86.66.97.86.5
Daejan1.75.07.06.97.1
Electronic Data Proc2.83.03.33.02.8
French Connection5.06.65.1--
Getech3.33.43.23.53.8
Mincon2.83.03.43.33.3
Mountview Estates10.310.99.89.58.9
Record4.54.54.84.25.7
Tasty13.011.512.18.77.6
FW Thorpe9.97.07.57.69.1
Tristel18.66.86.68.78.0
M Winkworth0.70.83.65.45.6
World Careers Network2.04.03.63.84.4
Cash7.814.79.99.99.2
TOTAL100.0100.0100.0100.0100.0

Company updates from the last three months

As usual I have kept tabs on all of my existing holdings during the quarter — trying to seek out bargain buys just in case.

Here is a summary of Q4 developments:

* Satisfactory progress reported at BrainJuicerBioventix, DaejanMountview Estates and Tristel;

* Acceptable updates from MinconRecord, Tasty and World Careers Network;

* Mixed news from CastingsElectronic Data Processing, Getech and M Winkworth;

* Nothing from Andrews Sykes, City of London Investment and FW Thorpe.

I’ve written a full review of all the shares I held during 2016 — simply click here for the complete run-down.

So that brings me on to my 2016 performance

I always like to study my portfolio’s performance at the start of every year.

It’s just that I’m keen to discover where all my gains (and losses!) occurred during the previous twelve months, and to see whether my portfolio decisions were consistently good, bad or indifferent.

Here are my performance ground-rules:

* My year-end portfolio weightings and returns are calculated using bid prices;

* All dealing costs, withholding taxes, broker-management charges and paid dividends are included;

* My benchmark is the FTSE 100 Total Return Index (that is, the FTSE 100 index with dividends reinvested, as published by FTSE.com)

Now here’s a summary of my portfolio’s performance for 2012, 2013, 2014, 2015 and 2016:

YearMy PortfolioFTSE 100 TRI
201246.1%10.0%
201329.1%18.7%
201416.0%0.7%
201518.3%(1.3%)
20167.6%19.1%
Compound return178.6%54.5%

I have to say that I was a tad underwhelmed when I worked out my performance for 2016. I have not lagged the market for a few years now and I do hope my performance can improve for 2017 and beyond.

I’ve looked at where my 2016 gains and losses came from, just to check where I went right and wrong.

Here’s the table containing all the stats

Below is another table listing every share I owned during 2016. Alongside each holding is my portfolio’s weighting at the start and end of 2016.

This table also shows the total return (that is, the capital gain/loss plus dividends received) each holding produced for me during the year. Each holding’s contribution towards my overall 7.6% gain is disclosed, too:

HoldingWeighting
01 Jan 2016 (%)
Weighting
31 Dec 2016 (%)
Holding
Return (%)
Portfolio
Return (%)
Andrews Sykes2.73.445.51.2
Bioventix-5.318.80.9
BrainJuicer-2.671.01.2
Castings8.16.7(2.2)(0.2)
City of London Inv6.86.510.20.7
Daejan1.77.110.90.8
Electronic Data Proc2.82.815.90.4
French Connection5.0-12.20.6
Getech3.33.825.00.8
Mincon2.83.332.00.9
Mountview Estates10.38.9(4.9)(0.5)
Record4.55.742.91.9
Tasty13.07.6(23.3)(3.0)
FW Thorpe9.99.126.22.6
Tristel18.68.0(0.7)(0.1)
M Winkworth0.75.6(17.4)(1.3)
World Careers Network2.04.417.10.7
Cash7.89.2--
TOTAL100.0100.07.6

I hope the above table makes sense.

Just to confirm, during 2016:

* I bought two new holdings (BrainJuicer and Bioventix);

* I sold one holding entirely (French Connection);

* I trimmed three holdings (FW Thorpe, Tasty and Tristel);

* I topped up three holdings (Daejan, M Winkworth and World Careers Network), and;

* I left eight holdings untouched (Andrews Sykes, Castings, City of London Investment, Electronic Data Processing, Getech, Mincon, Mountview Estates and Record).

Here are a few thoughts on my 2016 stats

* 12 of the 17 shares I held during the year recorded positive returns (at least for me) — and all of those 12 produced double-digit returns. Sadly only one share gave me a substantial (50%-plus) gain. Still, I am satisfied with the overall consistency.

* Each of my three largest holdings at the start of 2016 — Mountview Estates, Tristel and Tasty — ended the year in the red (at least for me). Out-running the market can be tough when your top positions produce negative performances.

* My three biggest winners of 2016 — BrainJuicer, Andrews Sykes and Record — were relatively small holdings at the start of the year. Out-running the market can also be tough when your best performers are among your smallest bets.

* My top-slicing of FW Thorpe, Tasty and Tristel has meant I am currently running a less concentrated portfolio. During 2016, the proportion invested in my top five holdings decreased from 60% to 41%.

* My portfolio enjoyed a year that was free of obvious howlers. In fact, during 2016 I did not suffer any massive profit warnings — nor did I need to panic sell an entire holding at a thumping loss. I just wish that could be the case every year!

* 15 of my 17 holdings generated total portfolio returns within 2% either way of zero. Not exactly thrilling I know, but this army of smaller performances all added up to +8.1% to beat my overall portfolio return.

Here are some other stats you may find interesting

* Portfolio turnover: I can never remember how to calculate this ratio properly. But for what it is worth, during 2016 I i) sold shares equivalent to 19%, and; ii) bought shares equivalent to 21% of my portfolio’s year-start value.

* Dividends collected: Company payouts represented a useful 3.52% of my portfolio’s year-start value. That income included no less than five special dividends.

* Trading costs: Dealing commissions, stamp duty and account-management fees represented an aggregate 0.15% of my portfolio’s year-start value.

I am 91% invested in shares going into 2017

So here we go into 2017, with my current investments confirmed below:

HoldingWeighting
31 Dec 2016 (%)
Andrews Sykes3.4
Bioventix5.3
BrainJuicer2.6
Castings6.7
City of London Inv6.5
Daejan7.1
Electronic Data Proc2.8
Getech3.8
Mincon3.3
Mountview Estates8.9
Record5.7
Tasty7.6
FW Thorpe9.1
Tristel8.0
M Winkworth5.6
World Careers Network4.4
Cash9.2
TOTAL100.0

 

As usual, I have no idea what the market will do in the next twelve months. All I can say is that the FTSE 100 index and FTSE 100 Total Return index start 2017 at 7,143 and 5,824 respectively.

So… can I return to beating the market this year?

I’ll be content if the majority of my shares once again put in positive performances — and I can avoid any major mistakes. Well, I have my fingers crossed!

Until next time, I wish you happy and profitable investing!

Maynard Paton

Disclosure: Maynard owns shares in Andrews Sykes, BrainJuicer, Bioventix, Castings, City of London Investment, Daejan, Electronic Data Processing, Getech, Mincon, Mountview Estates, Record, Tasty, FW Thorpe, Tristel, M Winkworth and World Careers Network.

13 thoughts on “Q4 2016: Up 7.6% For The Year

  1. Ken Bywater

    “As a full-time investor with no other income, I’m finding it a tough balancing act between being bold and being reckless with my buying. I doubt 2017 will be any easier”

    Having been an investor since 2006 I too, like you, have to live off my investment returns. It’s a whole different ball game compared to investors that can afford to lose the lot! So I am skeptical when reading about other investors who claim extraordinary returns. It’s only now where many investors are saying the first half of the year was poor/negative and post Brexit things improved. Funny how I do not recall anyone posting about their losses at the time…

    If a comparison with an index is to be made then I would have to enquire as to why you chose the FTSE100. Is that an appropriate comparative index given the size of companies you are invested in?

    Relying on a portfolio of shares to live off gives rise to the question of what is the suitable number of shares in a portfolio? I think it does come down to a ‘conviction’ level for each share. Ideally I aim for 5 shares but in recent times have not had that level of conviction per share so have been averaging around 12 shares. The urge to dabble is also too strong sometimes! Historically I have done much better with my conviction shares than any others but equally feel exposed to missing out on a general market rise by not being invested! In practice this is a self defeating exercise because being invested in less than ideal shares usually results in poor performance or a loss. Have always maintained that investing is primarily about psychology with a passing interest in the balance sheet (sort off!)

    Perhaps you can start recording your conviction levels for each of the shares you are interested in?

    For me, I ended the year up 18.8% after being down 13% immediately post Brexit vote. I took a savage knife to my portfolio post Brexit and it paid off rather well although it was an anxious time back then.

    Carcosa

    Reply
    1. Maynard Paton Post author

      Hello Carcosa,

      Thanks for the Comment, and yes, I agree, it is a whole different ball game.

      I use the FTSE 100 as a comparison as it is the main UK index benchmark and probably the index I would invest through a tracker were I to give up this stock-picking lark.

      I don’t know if there really is a suitable number of shares for a portfolio. I guess it depends on your own experience, the opportunities about at the time and gut feel. In terms of conviction levels, I have a rule that any new share I’d like to buy has to represent at least 5% of my portfolio — i.e. so it concentrates my mind on whether the opportunity is really that good or not.

      I think I would like to trim my portfolio from 16 shares to something lower, but sometimes a company is good enough to keep holding for many years. That can make developing a concentrated portfolio difficult if you never entirely sell certain positions… while at the same time occasionally buying new shares.

      Well done on your 2016 performance, and I trust your fare as well in 2017.

      Maynard

      Reply
  2. Martinthebrave

    I am an avid reader of your Blogs Maynard & you really do deserve a better return for your efforts. Impressed by the level of detail that you go in and I like most of the stocks that you are in. However, since Brexit investment life for me is all about $$$$ earners & I think it will be that way during 2017 no matter how good the fundamentals are for individual UK facing stocks. On your watch list you have ABDP which is a current favourite of mine. I wish you well & continue to follow you on Twitter.

    Reply
    1. Maynard Paton Post author

      Hello Martinthebrave

      Thanks for the Comment and I am glad you find my Blog useful. As I do not buy and sell that much, I guess I will have years when decent performers of the past pause for breath in my portfolio. I suppose I could have improved my return last year by buying more of the two new shares I did buy, but I am not sure it would have made an incredible difference. There are a few USD earners in my portfolio, but I am happy to stick to what has mostly worked for me and an approach based on management, financials, prospects, valuation, etc.

      Maynard

      PS I will endeavour to revisit ABDP and other watch-list shares during 2017 — at least that is the plan!

      Reply
  3. Chris Perry

    Hi Maynard,

    I’m an occasional reader of your blog – but I do enjoy reading some of your posts. When you review companies you sometimes pick out points that I would certainly have missed, which helps me.

    Do you have specific learning points from 2016? This is mainly for your benefit – so there’s no need for you to put them in an answer to my comment (unless you want to). One of mine is that in 2016 I made one attempt to time the market. I had to wait many months to buy back in and the result was only half satisfactory. So I’ll think twice (and thrice) before I try to time the market again.

    I wish you a successful 2017!

    Regards, Chris.

    Reply
    1. Maynard Paton Post author

      Hello Chris

      Thanks for the Comment. I don’t think I have any specific learning points, other than having to be a tad bolder with my buying now that I am a full-time investor. Such boldness was never a problem when I was employed, as there was always extra money coming in to average down. Now there isn’t. A lot of the big winners of 2016 were miners or growth shares already on extended multiples, which I would never have considered this time last year.

      Maynard

      Reply
  4. steve

    if you put all your money into brain juicer you would have made 71% in a year. can you imagine that?

    warren buffett says; if you want to get rich put all your money in your best idea.

    the good thing about being a small investor is we don’t need to diversify.

    cheers

    Reply
    1. Maynard Paton Post author

      Hello Steve

      Thanks for the Comment.

      Not sure I would ever put all my money in one share. Even Buffett would have come a cropper in the 70s had he put everything into GEICO. That said, I ought to be a tad bolder with my buying and your point is taken.

      Maynard

      Reply
  5. Paul

    Hi Maynard

    First let me congratulate you on the blog – I have enjoyed following it this year – it’s very well written with lots of interesting ideas and analysis. Please keep it up! There is not much written in the ‘quality’ sphere as far as I can tell – yours is one of very few I follow…

    Following some of the other comments I wondered what your thoughts on risks, diversification and share price liquidity are more generally? To me your portfolio seems quite concentrated and UK focussed with holdings in some very small cap (sometimes cyclical) stocks that I guess would be difficult to sell easily given size of your holdings. Do you think about your portfolio as a whole? Do you see there to be a trade-off between risk from portfolio concentration and ‘conviction’? How do you think about it?

    (I would say my portfolio is not so dissimilar to yours but somewhat less concentrated and much smaller in value (and my strategy is to always sell immediately on bad news). Managing/minimising my exposure to the business cycle is something I think about quite a lot.)

    Reply
    1. Maynard Paton Post author

      Hello Paul

      Thanks for the Comment and I am glad you find my Blog useful.

      I am happy with the concentration of my portfolio and if anything would prefer it to become more concentrated.

      Over time I have concluded that I have to be somewhat bold with my investment decisions for them to pay off in a significant way.

      You could argue such an approach brings extra risk, and yes it can do, but I hope to limit that risk by focusing on respectable businesses run by capable managers at modest valuations.

      One thing I do consider is that the founders/bosses at many of my companies do have a lot of money riding on their businesses through substantial shareholdings.

      These leaders have much more concentrated ‘portfolios’ than me — and I’d like to think they will do their utmost to protect and grow their own investments over time. And if they can do that, I should benefit as well.

      True, some of my holdings will be difficult to sell easily. I do look at liquidity before buying, and — you may find this strange — I am actually attracted to illiquidity.

      You see, illiquid shares tend to be off the City’s radar for one reason or another, which could make them very good value.

      Often there is a dominant shareholder in charge, who is plugging away building the business long term, and does not need/want much City exposure. I am attracted to these opportunities, assuming the business is growing.

      If the dominant shareholder is not looking to sell (and they typically are not), then I don’t really think about exiting either.

      Something I always consider before buying is whether I would buy more of a share if there is bad news. If the answer is no, then the share is not for me.

      With my shares (or most of them anyway), I hope for bad news as the companies have the products, people and past history to suggest a recovery ought to be forthcoming. Thus any share-price slump ought to be relatively short-lived and should prove to be a good buying opportunity. Well, that is the theory anyway!

      Maynard

      Reply
  6. Paul

    Thanks for taking the time to reply. I can see how thorough analysis and confidence in capable management who have ‘skin in the game’ can give you the conviction to hold a more concentrated portfolio, particularly if you take a long term perspective.

    You must have a strong constitution to hope for (temporary) bad news in the shares you own! Well they say fortune favours the brave – best of luck for 2017 and beyond!

    Reply
  7. Ob

    Hi Maynard,
    I have been a full time investor for the last 12 months, following 20 years of active trading.
    What I’ve learnt for index beating returns is to examine sector charts and look at getting in early on a reversal of a bear trend. This I do from a purely technical standpoint as I find fundamentals are so often misreported in mainstream media. This often leads to easy gains before the wider investment community get on board. Key examples this year include financials, oil majors and the big miners.
    Best regards
    Ob

    Reply
    1. Maynard Paton Post author

      Hello Ob

      Thanks for the Comment. I hope you enjoyed a decent 2016 and your trading can generate a full-time source of income (if that is the plan) from here. Something I have learnt in the two years since I went full time is that you may take less risks (and perhaps make less money) knowing that there is no salary to fall back on if your ‘part-time’ investing/trading does not work out in a particular year. I started on a fundamental path to investing, found it worked alright for me, so have never really looked at charts.

      Maynard

      Reply

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