We have now reached the third quarter for year 1 of the Passive v Reactive Whittler portfolios so it’s time for a quick review to see how my meddling has done compared to Mr Cool who simply sits on his hands and lets time do the work. I have again restated the basic rules for the management of the portfolios; see the last section of this article. All of the ten stocks common to the three portfolios were identified via my routine free cash flow+ returns on capital screen i.e. they all exist within my whittled down universe from which I make the majority of my real life share purchases. At the time of this third quarter update, I hold positions in five of the ten companies: SOM, CCT, AMO, NFC & PSN. I also held Hikma as a spread bet so that’s a financial interest in 60% of the stocks within this exercise.
Update & Trading in Third Quarter of Year 1 (Aug to Oct 2016):
Of course following the rules of the exercise no trading took place in the 3YL (three-year life portfolio) or the ASH (annual sit on hands) portfolios. Trading did take place in the Tinker portfolio and these are listed below:
3/8/2016: sale of 90% of position in Hikma Pharmaceuticals following a fairly mild profits warning. Note: following a profits warning I almost invariably sell at an early point; it’s what works for me and fits my approach to investing.
Reinvestment of the £10570 from 90% of the Tinker holding in Hikma Pharmaceuticals:
I was very tempted to purchase another block of Somero shares but that would have made the Somero investment far too weighty within the portfolio and therefore not the best risk mitigation management: Somero is, after all, a fairly low market capitalisation stock at about £90m.
So, the £10570 surplus cash was reinvested by equal amounts in two stocks:
3/8/2016 Next Fifteen Communications with the purchase of 1748 shares at 305.5p per share.
Reason for the purchase of NFC: simply the performance of the shares and very encouraging outlook/update statements from the business.
3/8/2016 Persimmon with the purchase of 314 shares at 1679p per share.
Reason for the purchase of PSN: the post Brexit gradual recovery of house builders after they were initially trashed following the vote to leave the EU. I also consider PSN to be a high-quality business.
So in the third quarter we have a had a touch of tinkering but in reality the amount of tinkering over the first three quarters of the like of the portfolio closely reflects my usual approach to the markets where I do not over trade and generally take a patient outlook to life unless I see a reason to alter a position due for example to a compelling good or bad news RNS from the company.
How are the three Portfolios doing now we have reached the end of the third quarter? Well as 3YL & ASH are identical composition and allocation in the first year, they are identical with the original £100k now reaching £115.0k, a 15.0% increase in the first 9 months of the exercise. The Tinker with its three partial sales of holdings and associated reinvestment over four other current holdings; in effect top ups, now sits at £117.0k an increase of 17.0%. The comparator for “how are we doing” is the FTSE ASTR (ASX.TR) which rose by 17.6% in a generally volatile February to October period that included the once in a lifetime Brexit event and the following market turbulence.
As ever, dividend which contributed approximately £3250 for each portfolio over the 9 months were reinvested in the relevant stock.
Overall, all of the three portfolios are performing well enough at this early stage: the five best performing stocks over the first three quarters of investment were:-
Next Fifteen Communications, Amino Technologies, Somero Enterprises, Elementis and Dignity.
The full 9 month performance of the 10 stocks is listed in the table below for the ASH “sit on my hands” for a year and don’t trade portfolio and the Tinker:
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