It’s time for the first quarterly update on the Passive v Reactive Whittler portfolios; I have again restated the basic rules for the management of the portfolios; see about 5 paragraphs down. All ten stocks common to the three portfolios were identified via my routine free cash flow+ returns on capital screen. At the time of this update I hold positions in three of the ten companies: SOM, CCT & NFC.
Update & Trading in Quarter (Feb, March, April):
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:
1/2/2016: sale of 60% of position in Bodycote following a broker downgrade and the funds used to purchase further shares in Dignity.
1/3/2016: sale of 50% of position in Amino Technologies & the reinvesting of the proceeds in Somero following excellent preliminary results.
On reflection the sale of 60% of the Bodycote shares was a slightly poor move that came about due to my listening to the market noise: yes I do whilttle on about not listening to market noise but somehow I did.
How are the three Portfolios doing? Well as 3YL & ASH are identical composition and allocation in the first year, they are identical with the original £100k now reaching £109.9K, a 9.9% increase in the first 3 months of the exercise. Strangely the Tinker with its two trades also sits at £109.9k an increase of 9.9%. The comparator the FTSE ASTR (ASX.TR) rose by 7.3% in a generally happy February to April for the indices.
The three best performing stocks were the smaller market capitalisation: NFC, ADT & SOM. The best performing large cap stock was BOY; the one where I listened to the noise and sold 60% on the holding in the actively traded Tinker portfolio.
Reminder Of The exercise Rules.
The three portfolios will be firstly a buy and hold for three years, ploughing on regardless through economic conditions, profit warning and any other news either good or bad. I will call this the three year life portfolio (3YL). The only time a change to the portfolio will be permitted is if a business is de-listed for any reason: the funds liberated would then be discretionally invested between the remaining stocks in the portfolio.
The second portfolio will start out with exactly the same holdings as the 3YL but each January the same cash flow screens/returns on assets screen will be run and a revised set of ten stocks nominated. This revised set of stocks will have the proceeds of the sale of the previous years stocks equally divided between them i.e after one year we have £110k of funds then a purchase of £11k will be made for each of the ten stocks. I will call this the annual sit on your hands portfolio (ASH).
The third portfolio will again start the same as the 3YL & ASH portfolios but I will alter the percentage invested in each position within the portfolio in reaction to RNS announcements from the companies, economic conditions or any other reason that seem valid for altering, reducing or increasing a position. I will call this portfolio the managed annual tinker portfolio or simply the TINKER. All 10 stocks will remain within the portfolio throughout the year although the investment in each stock may vary. For example one stock, let’s say Hattersville Dream Co. may issue a particularly bullish RNS “results will be appreciably ahead of market expectations”. The Tinker may sell down one or more of the other holdings to invest more in Hattersville but still retain a position, although not equal positions, in the same 10 stocks that we started within January each year. In January 2017, 2018 & 2019 this portfolio would be treated in the exact same way as the ASH and funds equally balanced across the each of the ten stocks starting that year.
The common rules for all three portfolios:
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