01 January 2021
By Maynard Paton
Happy 2021! I hope you survived last year’s volatile market and you continue to find my blog useful.
A summary of my portfolio’s 2020:
- Total return of 16.9%*;
- Eleven holdings recorded a gain while one holding recorded a loss;
- Returns ranged from Daejan, up 43.5%, to System1, down 9.6%;
- Two shares were topped-up: S&U and System1, and;
- One share was sold entirely: Daejan.
(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees and paid dividends)
- Q4 share trades
- Q4 portfolio news
- Full-year review
Maynard owns shares in Andrews Sykes, Bioventix, City of London Investment, Mincon, Mountview Estates, S&U, System1, Tasty, FW Thorpe, Tristel and M Winkworth.
Q4 share trades
I made two share trades during the fourth quarter. I bought more S&U and System1.
I increased my S&U investment by 20% at £17.20 including all costs.
Half-year figures from the motor-finance specialist were not that bad in the circumstances. The main ‘highlight’ was additional pandemic write-offs representing a manageable 5% of the pre-lockdown loan book. Other positives included collection rates recovering well and the declaration of a dividend (albeit reduced). I calculated the shares might deliver double-digit returns should earnings return to 2019 levels during the next few years. Read more.
I increased my System1 investment by 225% at 173p including all costs.
The advert-testing specialist reported a remarkable turnaround from Q1 loss to Q2 profit within its interim statement. Of major significance was an earlier agreement with ITV, which validated the merits of System1’s unique ad-testing data and appears to have attracted new clients. I felt an estimated P/E of 8 bolstered by substantial net cash provided ample upside opportunities. Read more.
Q4 portfolio news
As usual I have kept watch on all of my holdings. The Q4 developments are summarised below:
- Intriguing higher gross margins at Mountview Estates.
- A remarkable return to profit at System1.
- Predictably awful results from Tasty.
- A satisfactory-given-the-circumstances update from S&U.
- An encouraging Q3 report and dividend reinstatement from Mincon.
- The important re-introduction of the dividend-cover template by City of London Investment.
- A less pessimistic update from FW Thorpe.
- A promising dividend declaration from M Winkworth.
- No significant announcement from Andrews Sykes.
I have written a full review of all the shares I held during 2020 — simply click here for the complete run-down.
I always study my portfolio’s performance at the start of every year.
I am keen to discover where my gains and losses occurred during the previous twelve months, and check whether my portfolio decisions have become consistently good, bad or indifferent.
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The chart below compares my portfolio’s weekly 2020 progress (in green) to that of the FTSE 100 total return index (in blue):
I finished up 16.9% versus an 11.5% loss for my benchmark. My 2020 outperformance was due to:
- Not panic selling: An emergency portfolio review in March helped prevent impetuous exits during the pandemic crash.
- Avoiding major calamities: My portfolio (amazingly) did not suffer a catastrophic profit warning.
- Balance-sheet strength: A preference for cash-rich companies limited dividend reductions and sidestepped rights issues.
- Significant portfolio cash: Assisted by a takeover, my portfolio averaged a 21% cash position during the year.
- Owning a Covid beneficiary: My largest holding fortunately manufactured hospital disinfectants.
I am sure the pandemic will eventually retreat and in turn lead to some notable recoveries within my portfolio.
I am particularly hopeful that Andrews Sykes, S&U, System1, FW Thorpe and M Winkworth can rebound strongly as they capture greater market share from weakened rivals.
In the meantime I am convinced that investing in respectable businesses that offer decent accounts, capable managers and modest valuations remains a sensible long-term approach.
The next chart compares my portfolio’s monthly progress to that of the FTSE 100 total return index. The chart commences at 2015, which coincides with me becoming a full-time-ish investor:
I am pleased I am ahead of the FTSE 100 on this six-year view — up 74% versus up 25%. But I have underperformed the FTSE 100 during three of the last six years (2016, 2017 and 2019):
During this time my gains were curbed by an awful investment in Tasty. My overall compound return between 2016 and 2019 would have doubled from 25% to 50% had it not been for owning (and buying more!) shares in the hapless restaurant chain.
I am optimistic my results for 2021 and beyond will continue to show an improvement.
Investment returns and portfolio contributions
Just to confirm, during 2020:
- I did not buy any new holdings;
- I sold one holding entirely (Daejan (Q1));
- I did not top-slice any holdings, and;
- I left nine holdings untouched (Andrews Sykes, Bioventix, City of London Investment, Mountview Estates, Mincon, FW Thorpe, Tasty, Tristel and M Winkworth).
My portfolio started 2020 like this…
…and finished 2020 like this:
This next chart shows the total return (that is, the capital gain/loss plus dividends received) each holding produced for me during the year:
And this chart shows each holding’s contribution towards my overall 16.9% gain:
During an extremely difficult year for many shares, I am very pleased 11 of my 12 holdings recorded a positive total return:
I am stunned every one of my 12 positions outperformed the FTSE 100:
Each year my portfolio tends to exhibit only one or two large winners — and losers! — while most of the other shares do not really add much to the total performance.
For example, 6 of my 12 positions during 2020 contributed total portfolio returns of between -1% and +1%.
Previous years have also witnessed many of my shares contributing very little to my portfolio’s overall result:
I am hopeful this trend may reverse during 2021 if I can increase the concentration of my portfolio further.
My top five holdings currently represent 58% of my portfolio (2019: 53%) while my bottom five represent 21% (2019: 18%).
The higher concentration ought to give each holding greater influence over my portfolio’s total performance.
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Portfolio turnover, dividends collected and trading costs
Some other stats you may find interesting:
- Portfolio turnover: I can never remember how to calculate this ratio properly. But during 2020 I:
- Sold shares equivalent to 12.5%, and;
- Bought shares equivalent to 12.1% of my portfolio’s year-start value.
- Dividends collected:
- Company payouts represented a so-so 2.90% of my portfolio’s year-start value;
- Portfolio income — including and excluding special dividends — fell 9% due to pandemic-related cuts and suspensions at Mincon, S&U, System1 and M Winkworth.
- Special dividends were received from Andrews Sykes and Bioventix.
- Trading costs:
- Dealing commissions, stamp duty plus account-management fees less interest received represented an aggregate 0.06% of my portfolio’s year-start value.
So here we go into 2021, with my current investments confirmed below:
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 2021 at 6,461 and 6,175 respectively.
Until next time, I wish you safe and healthy investing.
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