01 January 2023
By Maynard Paton
Happy 2023! I hope you survived last year’s tough market and continue to find my blog useful.
A summary of my portfolio’s 2022:
- Total return of -23.3% (Q4: +0.2%)*;
- 2 holdings recorded a gain while 9 holdings recorded a loss;
- Returns ranged from up 23%, for Bioventix, to down 67%, for System1;
- One share was topped-up: City of London Investment, and;
- No new shares were purchased and no shares were sold.
(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees, paid dividends and cash interest)
- Q4 share trades
- Q4 portfolio news
- Full-year review
Disclosure: 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
The fund manager experienced a rough 2022, with funds under management (FuM) falling 17% between January and June and sliding a further 8% by September. But CLIG’s full-year results delivered a maintained 33p per share dividend that, despite the lower FuM, should still be covered by near-term earnings.
My purchase should provide a 9% yield, and I trust a wider market rebound will eventually deliver healthy double-digit returns assuming the shares can recover to their 550p high of 2021. Net cash and investments at £30m should meanwhile limit any operational trouble. This podcast has more.
Q4 portfolio news
As usual I have kept watch on all of my holdings. The main Q4 developments are summarised below:
- The seventh consecutive annual special dividend from Bioventix.
- My AGM visit to City of London Investment.
- Underlying annual profit up 20% at FW Thorpe (review coming soon).
- 2022 profit running ahead of forecasts alongside mixed comments for 2023 at M Winkworth.
- A welcome H1 special dividend from Mountview Estates (review coming soon).
- A promising trading update from Mincon.
- A reassuring trading update from S & U.
- Unimpressive interim results plus an underwhelming conclusion to a strategic review from System1 (review coming soon).
- Complicated full-year progress reported by Tristel.
- Nothing from Andrews Sykes and Tasty.
I have written a full review of all the shares I held during 2022 — 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.
The chart below compares my portfolio’s weekly 2022 progress to that of the FTSE 100 total return index:
I finished down 23.3% versus a 4.7% gain for the UK benchmark. Last year’s performance was my worst annual result for at least 20 years and was due to:
- My largest holding performing badly: System1 started the year representing 26% of my portfolio and subsequently dived 67%, and;
- Substantial exposure to smaller UK companies: My portfolio could not sidestep the wider market sell-off caused by higher base rates, rising costs and heightened recession worries (the FTSE SmallCap index fell 16% during 2022).
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 just about ahead of the FTSE 100 on this eight-year view — up 66% versus up 54%. But I have underperformed the UK benchmark during four of those eight years (2016, 2017, 2019 and 2022):
My poor 2022 was perhaps a follow-on from a bumper 2021, during which my portfolio gained 24.5% after my (then) largest holding (System1) surged 104%.
Investment returns and attribution analysis
Just to confirm, during 2022:
- I did not buy any new holdings;
- I topped up one holding (City of London Investment (Q4));
- I did not top-slice or sell any holdings, and;
- I left ten holdings untouched (Andrews Sykes, Bioventix, Mincon, Mountview Estates, S & U, System1, FW Thorpe, Tasty, Tristel and M Winkworth).
My portfolio started 2022 like this…
…and finished 2022 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 23.3% loss:
System1 crashing lower had an enormous influence on my performance. My portfolio would have lost ‘only’ 6% had I sold out of the share at the start of the year and kept the proceeds in cash.
City of London Investment delivered a neutral result for me after I bought more shares during Q4. The holding would have otherwise endured a 6% loss last year.
All my other holdings suffered during the wider small-cap sell-off, although dividends did help Andrews Sykes scrape a positive total return.
My performance was helped by the 11% average cash position held throughout the twelve months.
The rough year left 9 my 11 holdings recording negative total returns:
A positive year for the FTSE 100 meant 10 of my 11 shares lagged the index:
Dividends, turnover and costs
The clear highlight of my year was dividend income. Total payouts jumped a super 33% during 2022 and the income collectively added 2.3% to my performance:
I received no less than seven special payouts — take a bow Andrews Sykes, Bioventix, City of London Investment, Mountview Estates, FW Thorpe, Tristel and M Winkworth — which last year enhanced my ordinary dividends by 33%. Specials have in fact bolstered my ordinaries by 21% since 2015:
My ordinary dividends meanwhile gained 16% last year, which I trust means the portfolio as a whole remains in good shape despite its reduced value.
Portfolio turnover remained low. I bought shares equivalent to 2.1% of my portfolio’s year-start value, and did not sell any shares.
Trading costs were kept modest. Dealing commissions, stamp duty, foreign-exchange costs and account-management fees net of interest received represented an aggregate 0.04% of my portfolio’s year-start value.
So here we go into 2023, with my current investments confirmed below:
My top eight holdings each represent at least 8% of my portfolio, and therefore all stand a good chance of influencing my 2023 result. And this year I do not start with an oversized position that could adversely dominate proceedings!
As usual I have no idea how the market will behave during the next twelve months. But I remain convinced that pinpointing smaller businesses that offer decent accounts, capable managers, respectable prospects and modest valuations remains a sensible long-term approach.
That said, this year’s portfolio review may one day prompt some strategic tweaking. I can’t ignore the encouraging income progress for example, and perhaps I may have more success tilting my stock-picking towards dividends. The companies I hold purely for capital gains — in particular System1, Tasty and Tristel — do seem more prone to suffer frustrating setbacks than others in my portfolio.
For now at least, I will gladly take any capital gains (and dividends!) to support a portfolio rebound during 2023!
Until next time, I wish you safe and healthy investing.