Portfolio performance after a Covid year

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Seven and a half years ago that I left a tenured professorship to concentrate on investment.  Back then the FTSE 100 was around 6,600. The market as a whole has not exactly moved strongly in a positive direction over that time. It is now 6,620 (although there have been dividends of around 3-4% per year).

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Despite this, I suppose I can be pleased with my performance so far, especially in light of the fact that my approach – deep value – generally has not done well in an era of great excitement about growth companies.

The remarkable downs and ups of this year were a challenge for all investors. Caution was the watchword in February and March when I sold a number of companies vulnerable to deep recession to raise cash for a hunkering down. Out went Dewhurst (at 722p, now 600p), T Clarke (at 112.15p, now at 95.4p), Northamber (at 57.2p, now at 52p) J Smart (at 110p, now at 110p) Caledonian Trust (at 139.1p, now at 140p).

Having built up cash reserves I was ready to look for bargains in the panic – always “look for opportunity in the flux”.

The first I found was Connect Group (recently renamed Smith News) where I doubled my holding at a price of 15.1p. These shares are now trading at 28.1p.

Then I doubled my holding of Character Group in June at 252p. These now trade at 410p.

I had to wait until October before I felt ready to gain exposure to the property sector again.  But the attractive net current asset value, NCAV, of McCarthy and Stone was just too tempting. Even if the recession turned out to be prolonged this company had so many assets, and manageable debt, that it was a bargain at 71.8p.

It wasn’t long before an American private equity company concluded that it was a good business packed with assets, and made a takeover bid at 120p per share. I sold out in early December at 118.5p, a return of 65% in two months.

Then there was the owner of Covent Garden, Capital and Counties Properties, which Mr Market had dumped alongside other office and shop owners. It was selling far below its NCAV, even taking a pessimistic line on where property prices were going.

But Covent Garden is not like other shopping/office/leisure areas, being dominated by tourism and activity in central London. I thought it would bounce back sooner or later, so I bought at 103.2p. Low and behold, my timing was perfect (pure luck) I bought on the Friday (6th Nov) and on the Monday the Pfiser vaccine was approved resulting in estimates of future footfall within London being revised upward. It is now trading at 144.4p.

These two investments demonstrate the benefits of deep value investments: you don’t know what is going to correct the under-pricing – a takeover bid, a management revamp, Mr Market switching from pessimism to optimism, or the liquidation of a competitor – nor when it will occur, but you do know (probably) that one day it will rise to somewhere near intrinsic value.

So, all you have to do is estimate intrinsic value, compare that with what the market is asking for the shares, see if there is a good margin of safety and be bold in buying.

And be bold in selling. I sold Tandem in August at 370.7p when I was still pretty nervous about the economic outlook and after it had risen to give a 139% return.  It was not that I was pessimistic about the company, just that I was concerned that things might go wrong at the company (bicycle enthusiasm has pushed this one up, despite it losing money in its bicycle division for years and having difficulty sourcing bikes to sell in the UK).

In hindsight I should have let the share run because it rose above 550p. I comfort myself with the thought that much of the money raised went into McCarthy and Stone and Covent Garden.

The money also went into buying back into, and purchasing more of, Dewhurst “A” shares at a price much lower than I sold in February – sold at 722p, bought back at 594p.

Very recently I’ve more than doubled my holding in MS International at 129.2p and tripled my Wynnstay holding at 340.5p – I’ll set out my reasoning in a set of Newsletters soon.

The Deep Value Strategy performance tables

The results (so far) of all the shares bought for the portfolios I’ve been writing about in my Newsletters are shown in the tables below. The comments I made at the time explaining the rationale for each investment are available for you to read in older newsletters – there is nowhere for me to hide from my appraisals made three, four or seven years ago.

I present the returns after taking the hit on broker costs, stamp duty and bid/offer spread.

(Some of you have joined us recently so, in case you are not familiar with them, I briefly describe the criteria for my portfolios following the portfolio performance tables.)

The 2013 Net Current Asset Value, NCAV, portfolio

 Company Purchase date   Purchase price   Divs to 31 December 2020   Price 31 December 2020   Return to 31 December 2020
French Con. 25.7.13 £0.3047 zero Sold July 2015 £0.4378 44%
Caledonian T 25.7.13 £0.70 zero Sold April 2020 for £1.391 99%
Fletcher King 6.8.13 £0.30 14.25p Sold June 2016 for 46p 101%
Northamber 22.8.13 £0.287 1.6p Sold Oct 2016 £0.303 11%
Titon 5.9.13 £0.379 6.5p Sold May 2016 £1.06 197%
Mallett 12.11.13 £0.7682 12.7p Sold Nov 2014 £0.60 -5%
AVERAGE                      75%

The 2014 NCAV portfolio

Company Purchase date Purchase price Divs to 31 December 2020 Price 31 December 2020 Return to 31 December 2020
Holders Tech 10.10.14 & 3.11.14 £0.47 1p Sold March 2017 £0.33 -28%
Airea 4.11.14 £0.1195 0.9p Sold Sept 2016 £0.309 166%
Northamber 17.11.14 £0.4265 0.7p Sold Oct 2016 £0.303 -27%
Caledonian T 30.12.14 £1.39 zero Sold April 2020 for £1.391 0
AVERAGE                 28%

The 2015 NCAV portfolio

 Company Purchase date Purchase price Divs to 31 December 2020 Price 31 December 2020 Return to 31 December 2020
PV Crystalox 15.1.15 £0.122 zero Sold Dec 2016 £0.237 94%
Arden Partners 1.9.15 £0.422 1p Sold May 2018 £0.364 -11%
Northamber 4.9.15 £0.443 0.4p Sold Dec 2016 £0.303 -31%
AVERAGE                 17%

The Buffett-style portfolio

This type of share is rarer than the others, and so I combine all years.

Company Purchase date Purchase price   Divs to 31 December 2020 Price 31 December 2020 Return to 31 December 2020
 Dewhurst 9.4.14 £3.18 70.5p Sold February 2020 £7.217 149%
MS International 9.10.19 £1.723 3.5p £1.15 -31%
Character 20.1.20 & 5.6.20 £2.811 15p £4.10 51%
Dewhurst 11.11.20 £5.94 0 £6.00 1%
MS International 16.12.20 £1.292 0 £1.15 -11%
AVERAGE   40%

(I bought some more of Dewhurst in June 2014 at £3.11, December 2014 at £3.75, November 2017 at £5.46, February 2019 at £5.54 and April 2019 at £5.64.These were sold Feb 2020).

Modified price earnings ratio portfolio 2015/16

Company Purchase date Purchase price Divs to 31 December 2020 Price 31 December 2020 Return to 31 December 2020
Haynes 11.2.15 £1.159 33.5p Sold 2.10.19 £2.9175 181%
AGA 11.3.15 £1.002 zero Taken over June 2015 £1.456 45%
Hogg Robinson 10.4.15 £0.4709 2.37p Sold June 2016 £0.656 44%
MS International 3.7.15 £1.86 36p £1.15 -19%
BHP Billiton 24.9.15 £10.43 127p Sold May 2018 £16.90 74%
TClarke 5.11.15 £0.7916 13.61p Sold Feb 2020 £1.1215 59%
Premier Farnell 8.4.16 £1.222 3.6p Taken over 20.6.16  £1.632 36%
AVERAGE   60%

The AGA holding was doubled 30 April 2015 at a price of £0.9466.

Modified price earnings ratio portf  ………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

 

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