Fantasy Fund : Technology Trend

Monday, Mar 11 2019 by
22

One of the features I have always loved about Stockopedia is the Fantasy Funds capability. I know that you can run fantasy portfolios on lots of sites but I think Stockopedia does them particularly well although its surprising to me sometimes how underused they are.
I personally find the insight into how other people are investing and trading in their portfolios (real or not) to be useful to me. It helps me to generate ideas and I can see how different strategies work in different market conditions. In my view, if I can see what is working or not working for other people then that information may well be useful to me.
I’m working on the assumption that the same principle will apply if I share my thinking behind the Technology Trend portfolio, maybe others will look at the choices being made and get some use out of them. I plan to update this article with details of which shares I am buying and selling into the fund and why. It won’t be as detailed an analysis as you might find in Stockopedia’s own articles or from many of the other excellent contributions from subscribers but I hope it will still be useful to someone.

I have been running my Fantasy Fund (Technology Trend: https://www.stockopedia.com/fa... ) for over 2 years now and March 2019 marks the one year anniversary of me “rebranding” the fund and giving it the more specific Technology Trend purpose. Up until March 2018 I had been pursuing a general investing strategy loosely based on the principles in Naked Trader’s books but with tweaks of my own. When you look at the chart up until March 2018, it looks like the strategy was working really well – the returns are great but consider that those returns took place against the backdrop of one of the “easiest” periods of time to make money in the Stockmarket that I have ever seen. You could have bought a US Index tracker and done incredibly well, you could have bought just about anything and done very well, or at least it feels like that looking back.

So, in March 2018 I was arrogant enough to think “This is too easy! I started to consider what would happen if I tried pursuing a more niche strategy. Would my returns get better or worse if I invest in something I know more about rather than general stock picking? For my day to day job I work for a large technology company and IT and technology is a sector that I know very well. Could I use my personal experiences to pick shares in the Technology sector and outperform my previous picks which had much wider sector diversification. As a result the “Technology Trend” Fund was born and its been a very interesting ride since then.

So exactly how Fantasy is this portfolio?
One of the criticisms of Fantasy Funds is that they aren’t real money although and some people feel that detracts or limits their value. Probably some people use Fantasy Funds to run experiments that they have no intention of replicating with their own money. On the other hand, I know of many Stockopedia subscribers who use their Fantasy Funds to publish to the world their real world performance and they make sure the buys to the Fantasy fund match their real purchases PhilH’s Fund is a great example of this https://www.stockopedia.com/fa... . So which end of the spectrum is Technology Trend?
In fact, the Technology Trend is pretty closely aligned with my real life Portfolio. I would say a 70 to 80% match, I personally own at least 70% to 80% of the shares listed in the Technology Trend fund although obviously in smaller quantities. The reason for the mismatch is that many of the shares from outside of the UK and the US are not available to buy via my current broker. I have no way to easily buy smaller European companies or Asian or Australian securities, if I could do then I would, but unfortunately I don’t. So a 70 to 80% match is as close I can get to putting my own money where my mouth is. Sometimes I will add a share to the fund but then not buy it in my real world portfolio for some days or even weeks after its been added to the fund, just because I want to see which way the momentum is going.

What rules am I applying here?
The shares in the Technology Trend are, as the name implies, all Technology focused. That means a lot of concentration in software and platform companies but other areas of Technology are covered in some cases. There is no hard and fast rule around this, if I can find some technology angle in a share that I would like to own then I’m going to consider it for the portfolio. I try not to push the envelope too far though, if its obviously an Energy company or a Bio-Tech rather than pure Technology company then I won’t include it (although I may still buy it for my own real world portfolio).
I also try to avoid buying the obvious large tech giants. I don’t expect to add Alphabet or Apple or Facebook to the portfolio. Somehow that feels like cheating, its much more fun to find smaller more obscure companies, after all that’s what a Fantasy Fund is all about, finding and test running some choice that maybe isn’t obvious to everyone as a technology play.
Other than that, there are no real rules to follow other than the Stockopedia Fantasy Fund general rules of Equity Invested > 60% , Largest Holding < 25% of the Portfolio, number of stocks > 5 and < 50. Although I can’t diversify across sectors do try and keep diversified based on size and geography but I don’t have any hard or fast rules around this.

Choice of Benchmark….. when I started the fund I chose the FTSE 100 as the benchmark for the fund as it seemed the most appropriate at the time. I kind of regret that choice, especially as it doesn’t seem that it can be changed and especially since I changed the focus of the fund to be Technology focused. Unfortunately, I’m stuck with that choice for the moment but I hope the funds performance speaks for itself regardless of the benchmark you compare it against.

Performance so far : As you can see the performance of the fund has been really good. I’m really happy with the current 29% annualised return and I hope to maintain it if I possibly can. As you can see there is a significant volatility risk of running a portfolio concentrated in Tech stocks with high P/Es. When the market dipped in October 2018 the fund dropped much harder than the general market. On the flip side of the coin it generally recovers with the same amplification of the general market. I have previously tried to make some defensive moves when the market dips and may try different strategies next time something similar happens.

So what next? I plan to keep adding details of my buys and sells from the Fund to this discussion as I make them with along with some explanation of why. I invite questions from anyone on anything related to the Fund and its performance along with suggestions for things I should consider.
I hope that people are interested in what I am buying and why, feel free to ask me questions. If its not something that interests you then feel free to happily ignore this thread.

Remember, as Paul always says “Investing is a Team Sport”. Good luck with your own portfolios, fantasy or not. Maybe this article inspires you to start to manage your own Fantasy fund or to update one that you haven’t been maintaining for a while. If you can, keep an eye on Technology Trend and tell me about your own Funds and their performance. … https://www.stockopedia.com/fa...
Cheers
Carey


Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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8 Posts on this Thread show/hide all

Carey Blunt 11th Mar 1 of 8
3

Todays buys...... today I added Electronic Arts and Upwork to the fund. In each case I bought my normal 50k starter amount.
Why?
In the case of £EA its a momentum play based around the performance and hype around their Apex Legend title. Today my 10 year old son declared to me that "Fortnite was dead and Apex Legends is the thing everyone is playing" and that was good enough for me to start a holding in the Technology Trend portfolio (and also in my own real world portfolio). Of course a company like £EA shouldn't really move on a single title but Apex Legends now has 50 million players after only 2 weeks since it was released. It took Fortnite 4 months to reach the same number. The media hype is likely to increase and i think that will drag up the SP. I will sell if I think the momentum is beginning to drop off, either the share price momentum or the media hype momentum.

In the case of £UPWK , I only just realized that this company had IPO'ed. A Motley Fool newsletter alerted me today to the fact that it had and come to the market in November 2018 and I had somehow missed it.
I have been a user of Upwork for many years now and I really like the way the site works and the general gig economy story around the stock, I feel it has great potential. For those who are not aware, Upwork is the "Uber of Freelance work", you can use it to hire just about anyone to do freelance work for you like website design or graphic design or voiceovers or illustrations or coding or 100 other things.

That doesn't of course mean its a great investment but it doesn't seem too expensive and i'm willing to buy some and see how it plays out. Again, I expect to add this to my real world portfolio in the coming week.

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seismo101a 11th Mar 2 of 8
2

Hi Carey, excellent post, and look forward to reading updates as to how the fantasy fund is fairing (the good, the bad, and the ugly). Are you screening or primarily basing buys and sells based on where you feel you have some sort of discretionary edge?

For example why is Frontier Developments in your portfolio (I'm partly playing devils advocate here, as I think they are a great company, and did hold them for a quite well, and will likely hold them again once they have a better Share Price trend that I feel more confident about).

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gus 1065 12th Mar 3 of 8
2

Hi Carey.

Thanks for the post. This is a sector I’m interested in but have no particular affinity for. One of the portfolios I monitor is a group of 20 investment trusts that I’ve held since a February 2017. Of these 20 the two best performers (by far) have been Allianz Technology Trust (LON:ATT) and Polar Capital Technology Trust (LON:PCT) with returns of 60 and 40% respectively suggesting on a wider scale that Technology as a sector has done well recently. Look forward to future posts.

Gus.

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ricky65 12th Mar 4 of 8
1

In reply to post #456853

Thanks for the post Carey. I consider you Fantasy Fund one of the best on here so I look forward to your future posts on buys and sells.

P.S Thanks for bringing $UPWK to my attention.

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Carey Blunt 12th Mar 5 of 8
1

In reply to post #456838

Hi Seismo,
Ideas come to me from a variety of sources, some from my everyday job, some from screens, some from newsletters and online forums and I then do a deeper level of research on individual shares.
I don't feel I have a specific edge apart from the fact that maybe I understand the technology and potential impact of some companies better than someone who doesn't work in the IT arena.

In the case of Frontier Developments this is a share that I have tracked right from IPO and I have historically been very skeptical of. I'm old enough to be one of the first players of the original "Elite" game on BBC Micro back around 1984 and it was my favorite game growing up. Although I love the game I had very high doubts given the previous attempts over the past 30 years that the Elite concept could be brought back to life in a way that made any serious money. Given competition like the "X" franchise I didn't hold out much hope that "Elite: Dangerous" was going to have any longevity. So I tracked the share just due to Nostalgia but with the thought that it was probably a bad investment.

Sure enough it did exactly what I thought it would and went up a lot based on hype and then fell as reality sank in. I guess I could have tried to trade it but I considered the risk to be too high.
However, I recently decided that Frontier Developments (LON:FDEV) now have enough depth in the range of franchise titles that they have delivered and I have enough confidence in their ability to deliver to dip a toe in the water. Its not a massive conviction buy for me, it forms a smaller percentage of my real world portfolio than it does in the Fantasy Fund.
I now consider that the upside potential is now worth considering and the downside is (hopefully) now limited.
cheers
Carey

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Carey Blunt 12th Mar 6 of 8

In reply to post #456853

Hi Gus,
Thanks for your post, I wasn't aware of those investment trusts but its striking how their 2 year charts match the 2 year chart of my Fund. I will certainly have a look at them and see what their top investments are.
In many cases, trusts like that go for the tech superpowers like Apple, Facebook and Alphabet which are stocks I try to avoid mostly due to them being a bit boring compared to looking for new things.

Perhaps those trusts are a good way for people to get quality exposure to tech shares with less risk than individual picks.
cheers
Carey

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DaveGJones 14th Mar 7 of 8

Your fund performance is inspiring. I think you’re on the right track linking your post to fund performance as I tend to ignore verbose in-depth post if the authors fantasy fund performance doesn’t indicate special insight.
Will follow...
Continued success.
Dave

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Carey Blunt Mon 2:39pm 8 of 8
1

Today I added Atlassian ( £TEAM ) to the fantasy portfolio. Its a stock that I have wanted to buy for a while but have never manged to pull the trigger just because the eye watering PE scared the life out of me. Currently the 12 month rolling PE Ratio sits at 115 according to the stock report ! In the meantime, while I have been waiting the stock is up over 100% in the last year.

In all honestly it will probably still be part of the 20 to 30% of the portfolio that I don't immediately buy in my real money portfolio. I maybe need the fantasy portfolio to show me a green number to get over the mental hurdle. I know that makes no sense but sometimes you have to help yourself "manage the monkey".

For those of you who are not aware, Atlassian produce software development tools, specifically those related to Agile Software development methodologies. Their most famous product is called JIRA which is a tool you use to develop software in an Agile way. Basically you use JIRA to set up your software development project, assign work to developers and track progress.
The reason I started looking at Atlassian is that their software is particularly sticky and Agile is a growing area.
I recently talked to some software developers about if they would move from JIRA to the SDLC module of ServiceNow and they were very resistant, even where the functionality is the same or very similar.
Basically, if you use JIRA and Confluence and BitBucket then you love them and you don't ever want to give them up, they are fast becoming the standard for the management of software development life cycles. If you know how to use them then your skills are very transferable to other software development companies.

So that's why we have such a very high PE, its popular, growing and sticky in a huge market. So i've bought my normal 50k chunk in the Fantasy portfolio and will follow up with my own money when I am comfortable.

I'm now fully invested and arguably overweight in US stocks. However, that's where the tech trend opportunities are.
Happy investing all. Cheers.

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