2013 review: Mistakes made and lessons learnt!

2013

A very good year for equity markets in general with really only emerging markets not joining the party. Japan lead the way, up 56%, followed by the US S&P 500 Index +28.4% and then European markets with the German DAX up 24%, Spanish IBEX +19.9% and the Italian MIB +17.5%. At the other end of the scale Brazil fell 16.4%, China -8.0%, Russia -5.5% and Korea -2.2%. In the UK the FTSE 100 rose 18.3% but was outshone by the FTSE 250 Index which was up 33.0% and FTSE Small Cap, up 30.4%. The wider FTSE All Share Index returned 20.8%. The AIM market rose 22.4%, benefiting massively during the second half from its constituents being allowed to be held in ISA accounts for the first time.

The JIC portfolio returned 41.5% over the year and recorded a positive return in every month but two; the FTSE All Share had negative returns in three of the 12 months. Statpro plc’s Revolution risk measurement system records the annualised volatility for the JIC Portfolio at 9.6% in 2013, below that of the FTSE All Share at 10.8%! Particularly pleasing were April and November where the Portfolio returned +0.9% and +3.0% respectively against -2.2% and -0.7% for the Index. The main contributors to the 2014 performance were Regenersis (LON:RGS),easyJet (LON:EZJ),Dixons Retail (LON:DXNS),Globo (LON:GBO),Gable Holdings Inc (LON:GAH),Biotech Growth Trust (LON:BIOG),Vislink (LON:VLK) and Thorntons (LON:THT). All except Globo and Gable are still held in the portfolio.

Mistakes of 2013 included holding on to a couple of stocks, (Agriterra (LON:AGTA) and £POL) too long, (not being disciplined with my stop loss), when I could have/ should have put the money to better use elsewhere. Both these cases are value plays, standing at discounts to asset value, but the problem is that they are in sectors/themes that the market is not keen on. With patience I am sure these stocks will come right but at the moment I have better fish to fry.

There were a few stocks which I sold too early, (not letting my winners run); Fenner (LON:FENR) and Staffline (LON:STAF) stand out. There were other positions such as Findel (LON:FDL), Quindell (LON:QPP) and Gable where I sold, (in Quindell and Gable's case booking big profits), when they hit my stop loss but which after falling further, subsequently recovered and went on to make strong gains. I was guest speaker at an investment club in October where one member said he had done some work demonstrating that had they bought back, at the stop loss price at which they had sold, those stocks which subsequently recovered, they would have done immeasurably better. I guess that often the initial analysis is correct but hiccups along the way causes volatility in the share price which can trigger the stop-loss. In 2014 I will endeavour to keep more of a watchful eye on stocks I have sold out of on a stop-loss and keep an open mind!

As for 2014, who knows? As I said last week in my December review, “many commentators are calling for a correction in the market but as always timing such an event is difficult. Clearly equity markets have had a good run but the UK, at least, does not look overly expensive in absolute terms and apart from a tactical holding in cash, there do not, in my view, seem to be many sensible alternatives; Gilts have ridden a 20 year bull market on the back of falling interest rates and with the UK economy staging a reasonable recovery, do not seem an obvious place to make money. I am happy entering the New Year with the JIC Portfolio fully invested.”

I also like Japan, where I have 8% of my money split equally between the Bailie Gifford Japan Trust and Baillie Gifford Shin Nippon, and I continue to be keen on the biotech/healthcare theme, (12.4% of JIC) which I am playing through Biotech Growth Trust, Worldwide Healthcare Trust and International Biotechnology Trust.

Whatever 2014 throws at us I endeavour to find some more exciting investment ideas and to react in a timely fashion to changing conditions.

Happy Investing!