This investment case study will dig into many of the specific steps I take to buy, hold and sell great businesses for income and growth. But before I begin, I want to point out one thing.
Annualised returns of 33.7% are NOT a realistic expectation for any investment in the stock market. The returns for this investment were extremely high because the UKVI portfolio only held the shares for 12 months, which means that the random movements of the stock market created abnormally high returns. If you go into the stock market expecting 20% or 30% per annum you are very likely to be disappointed.
Overview
If you’ve been following my writings for any length of time you probably already know that I invest in ‘world-class’ businesses for income and growth using a relatively defensive value investing strategy.
The goal is to manage a portfolio of outstanding businesses, where the portfolio always has a higher yield than the FTSE 100, and at the same time is able to grow that income faster than the index. That growing income stream in turn becomes the driver of future market-beating capital growth (although of course there are no guarantees).
I bought UK Mail (LON:UKM) in October 2011 for 210p and sold it in October 2012 for 262.5p. During that time it also paid out dividends of 18.2p for a total gain of 70.7p, which is 33.6%, or 33.7% annualised.
How did I work out what to buy, when to buy and when to sell?
I have an investment process which I work through every month, either selling the most overvalued holding or adding a new undervalued investment from the market. This helps to constantly improve the portfolio, always pushing it towards more income, more quality and more growth.
It also means that I don’t have to guess what I’m supposed to do next. October 2011 was ‘buy’ month, so that allowed me to focus completely on the task of buying the most attractive investment that I could find.
Buying: Why pick UK Mail Group?
UK Mail (LON:UKM) fits my criteria as a market leading company with a long history of profits, cash generation and dividend payments to shareholders. The 2012 annual report puts it like this:
UK Mail is the leading…
