July the 4th marked the two year point for the portfolio, landing (a little sadly) while I was away. This meant the portfolio update - and the birthday celebrations, with a dollar-shaped cake and novelty £50 pound note serviettes - were delayed for a while, notably until after I'd actually caught up with what was going on and rambled on about Communisis for a little bit. We're here now, though, and after the extremely tedious task of updating all the spreadsheets which keep my backend calculations in working order, I've put together the usual charts and figures Satisfying reading they make for, too! Through a combination of blind/beginner's/sheer luck and some modicum of improving stock picking analysis, its done rather well for itself over the last couple of years:
Though, I must say, the graph is flattered by two factors. Firstly; the benchmark I use, the FTSE All-Share, is quoted as an index. This means it's just the value of all the shares inside it. If you were to actually buy an All-Share tracker, you'd receive or reinvest dividends. Over the two years shown, that probably accounts for about 7% more growth than the graph above shows - so you can safely bump that line up a little. Secondly, and more intangibly, the choice of benchmark used will always alter perception of performance. The FTSE Small Cap (ex investment trusts), another perfectly reasonable benchmark for me to go against, is up 28% (pre-dividends) in the same time span - significantly more than the 12% gain the All Share is sitting on. Which is a fairer benchmark? In favour of the All Share, I don't limit myself to small caps - I've had several FTSE 250 companies in the portfolio, and currently about a quarter is invested in companies falling into that category. The majority weighting is still in small caps, though, and since my portfolio is likely to be much more volatile over the long-term as a consequence of this, there's a strong argument for using that index instead. The choice of benchmark doesn't hugely bother me - it's just a nice comparator, and since I'm up on both, I'm not hugely fussed.
I've also compiled a list of all the equities the portfolio has ever owned, along with their performance. To save my sanity, I haven't included dividends, so like above with the index my returns figures here slightly downplay the actual performance.
The flat mean performance of the group is +50%, which is mainly down to two things. Firstly, my allocation has been pretty good, since the portfolio is up significantly more than that - even after taking dividends into account! Evidently, I haven't put too much into shares that have gone down. Perhaps I should only stick with my higher conviction picks? Perhaps it's just chance, though, and time will tell on that one. Secondly, the returns figures for a number of shares understate my attempts at market timing. The way I've calculated the 'return' for my shares is by simply dividing the price the stock exited my portfolio by the price it entered it at. This is fine in most cases, but in some - for example Barratt - I bought a huge number of shares after their price halved. The returns figure doesn't take into account that I (rather shrewdly in hindsight) picked up some shares at 60p, which then went on to be sold at over 300p - more than a 400% gain.
The table does make for interesting reading for me, though, and reminds me of some of my poorer decisions. Positively, I think a lot of the shares nearer the bottom - RSM Tenon without a doubt, and perhaps Stadium/Morson/Character, wouldn't meet my criteria nowadays. It's easy to say that looking back, though. Maybe I also wouldn't have picked up Communisis or Barratt. As ever, talk is idle and pointless - the only way to judge an investor's value is by the choices he makes. It's easy to be an armchair warrior.
Hopefully I'll continue to improve as a stock picker, and the portfolio will come with me. I don't expect a continuation of this fantastic performance - this really is right at the top end of what anyone can reasonably expect with an extremely generous heap of good fortune - but the real test will come if the market starts falling again. It could well be that my method of picking shares is simply particularly good in bull markets, where opinions on the economy are markedly improving - as they have done. I almost hope we'll see a bear market, so I can test out that theory and see how I fare.
As ever, thanks for reading and emailing/commenting - it's made the last two years a lot of fun!