December 2018 Portfolio Update

Thursday, Jan 03 2019 by

This post marks the completion of a whole year of monthly portfolio updates and with continued market volatility and sudden, daily lurches in portfolio value this has been another difficult month. That said I've now come to terms with the strategy that works for me (psychologically if not financially). This is one where I selectively top-up (or add) holdings when their valuation is at the low end of the historical range so long as trading is still improving for them - the theory being that it's deflation of their valuation multiple which has bought the price down rather than a fall in earnings. In the short term their prices may fall further but in the long run it's certain that the price will rise again so long as they continue to grow and increase earnings.

This is a marked improvement on how I felt during the initial October falls where I really suffered from cognitive dissonance. On one side I half wished that I'd somehow predicted the crash or reacted to over-stretched valuations within my portfolio holdings and sold early. Then, when I hadn't done this but instead found myself confronted by a wall of alerts as prices fell 20% or so, I dithered over whether I should sell almost everything. In retrospect I should have got rid of all of my shares at the time but I'm generally reluctant to sell when an underlying business is still trading well and growing. The problem, of course, is that predicted growth can quickly fall away when the economy falls into recession but I still don't know whether this is on the cards or not.

Anyway having spent some time reviewing the valuation levels of everything that I hold, or would like to hold (from my watch-list), I have a much better feel for how cheap/expensive these shares are compared to their long-term history and at what level I feel confident making a purchase (or a sale). From this perspective, with prices 30-40-50% down, we're a lot nearer the bottom than the top when it comes to valuations - unless we're about to have a financial melt-down as in 2008. With the possibility of a no-deal Brexit in 4 months time this is not an outcome that can be lightly dismissed but I'm an optimist and find it hard to believe that our political 'elite' will let that happen. On the upside…

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IG Design Group plc, formerly International Greetings plc, is engaged in the design, manufacture and distribution of gift packaging and greetings; stationery and creative play products, and design-led giftware. The Company's geographic segments include UK and Asia; Europe; USA, and Australia. The Company sells its products in over 150,000 stores across approximately 80 countries. It also offers a portfolio of licensed and customer bespoke products suitable for sale through multi channel distribution. The Company's products include crackers, pens and pencils, stickers, single cards and gift wrap. The Company offers its products under the brands A Star, B Stationery, Papercraft and Pepperpot. Its subsidiaries include Artwrap Pty Ltd, International Greetings UK Ltd, International Greetings USA, Inc, International Greetings Asia Ltd, The Huizhou Gift International Greetings Company Limited, Hoomark BV, Anchor International BV and Hoomark S.p.z.o.o. more »

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Palace Capital plc is a property investment company. The Company invests in commercial real estate in the United Kingdom. The Company's property portfolio includes investment properties located throughout England, predominantly regional investments outside London and consists of a diverse portfolio of commercial buildings. The Company's properties include Hudson House, York; FRASER HOUSE, STAINES, and MIDSUMMER BOULEVARD, MILTON KEYNES. The Company invests in a range of sectors, such as leisure, auto, legal, hotels, retail, health, research and development, and car parking. The Company's subsidiaries include Palace Capital (Leeds) Limited, Palace Capital (Northampton) Limited, Palace Capital (Properties) Limited, Palace Capital (Developments) Limited, Palace Capital (Halifax) Limited and Property Investment Holdings Limited. more »

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Somero Enterprises, Inc. is a manufacturer of laser-guided equipment. The Company's equipment automates the process of spreading and leveling volumes of concrete for commercial flooring and other horizontal surfaces, such as paved parking lots in North America. The Company's products include S-22E, S-15R, S-15M, STS-11M, S-840, S-485, CopperHead XD 3.0, Mini Screed C, PowerRake 3.0, 3-D Profiler and SiteShape. Its Somero Floor Levelness System monitors Laser Screed performance, operator performance and reports alert percentages of issues. The Somero SiteShape System allows for grade shaping automatically using users' motor grader, dozer or other grading machine. The Somero 3-D Profiler System allows automatic paving of contoured sites using a Somero Laser Screed equipment. The CopperHead XD machine encounters applications, such as chaired rebar, low slump and poor subgrades. The Somero eXtreme Platform (SXP) allows users use their Laser Screed equipment. more »

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  Is LON:IGR fundamentally strong or weak? Find out More »

7 Posts on this Thread show/hide all

doug2500 4th Jan 1 of 7

My annual result is also -4.5% and we share a few holdings.

I have recently bought FDM and KWS and topped up SOM and XP . I've also bought the other IG, IG Group (LON:IGG) I prefer this to PLUS even though it is more expensive. A safer or less risky choice maybe?

I see XP took a hit again today, either it is now dirt cheap or there's a fright coming on the 14th (T.U.)

Good luck this year and thanks for the write ups.

(If you're interested mine is on lemonfool but not worthy of stockopedia!)

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Damian Cannon 5th Jan 2 of 7

In reply to post #432753

Hi doug2500,

Thanks very much for the comment and the link. Looking back through your reviews it's obvious that we have a lot of holdings in common (both past and present). My only regret is that I never pulled the trigger on Fundsmith through waiting for the pullback that never came! Still I did pick up some Smithson for my wife's account.

As for top-ups my spreadsheet shows FDM (Holdings) (LON:FDM), SimplyBiz (LON:SBIZ), XP Power (LON:XPP), Volvere (LON:VLE) and Zoo Digital (LON:ZOO) to be opportunities right now and Somero Enterprises Inc (LON:SOM) certainly was a few weeks ago. Hopefully great minds think alike. With XP Power (LON:XPP) I think that the current price is simply ridiculous but I plan to wait for the trading update before committing any more funds. Elsewhere I see clear value with Pagegroup (LON:PAGE) as they're executing very well but not a lot else.

What we could do with is a decent correction!



Blog: Ambling Randomly
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cafcash49 15th Jan 3 of 7

Hi Damian,
Good report which helps as I too considered selling all and I have done so on a couple of occasions in the past.
You talk about valuing your shares. This is an area which obviously interests me and I have read a fair bit on the subject. Do you have a standard valuation methodology and if so will you be kind enough to share it with me?
Kindest regards,
Charles (We have met at Share Soc and Mello)

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doug2500 15th Jan 4 of 7

FWIW I took another small nibble at XP Power (LON:XPP) yesterday. It was quite volatile early on and I missed the low, buying at possibly the high for the day before it fell back a bit. My intended holding period is years so hopefully missing out on the last few pence won't matter in the long run.

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Damian Cannon 15th Jan 5 of 7

In reply to post #436518

Hi Charles,

I'm afraid that my valuation methodology is rough and ready! It revolves around charting the P/E history for a share and noting the low and high values which broadly constrain the range of values through all market conditions (ignoring falls in 2008/09 as these were extraordinary times). Then I can check to see how the forecast P/E sits within this range.

For REITS this isn't great so then I look to see how the NAV has compared to the share price over time. This gives a range for how the discount/premium varies and again indicates how the current value compares historically.

Something which I'm going to add to this process it to perform a peer group analysis. By charting P/E histories for companies in the same business domain I should get an idea whether any one of them is comparatively cheap or expensive.



Blog: Ambling Randomly
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blondeamon 31st Jan 6 of 7

Bottom of Bolinger Band today, bought some at 508 as this looks oversold based on CEO's slicing. Everyone needs to take some profits every once in a while and Octopus fund just went in on the recent fall increasing their stake.

Perfect results last week, this looks like a correction that won't last as we get closer to the results.

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Damian Cannon 31st Jan 7 of 7

In reply to post #442428

You did well to pick some up IG Design (LON:IGR) at 508p - an excellent price. If it gets there again I'll probably buy some more too!

Blog: Ambling Randomly
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