Half way there...

23rd Dec '20 by JollyBiologist

20 comments 1838 reads

I rarely post - I don't feel I have great insight or knowledge or skill that would benefit other subscribers. But today I passed an investment milestone that I wanted to mark in some way, and so here I am. I was fairly confident it would happen in the next week or so, but I was thrilled that today was the day my portfolio went past £500,000 in value. It seems (it is!) a long time ago that I first invested a tentative £800 into Torotrak after a close friend had urged me to take up investing and tipped this company as the next best thing.

Well, Torotrak didn't work out so well, but his general advice was sound. I read The Motley Fool book, was startled by its insights into how the investment companies work, and started regular investments into a Tracker fund. Over time, this accumulated to around £100,000 - very nice - but I was starting to see that for all their merits, an AllShare Tracker meant I was invested in companies (oil, tobacco) that I would not choose to buy shares in. So I transferred the lot into a shares ISA and started stock picking. And now, here I am, reporting a portfolio worth half a million pounds. Gulp.

Many of you, I'm sure, will view this as small beer. But for me, a part-time teacher, it's a significant life event. And it's based almost entirely on listening to experts (I know! so unfashionable!). I really can't get enough information - so I subscribe to John Rosier's Investment Chronicle, Research Tree, Growth Company Investor, Investors Chronicle and Stockopedia, as well as following Naked Trader and every Mello/Private Investor webinar/video I can get my hands on. I can't emphasize enough how much this pays off. Simon Thompson introduced me to Sylvania Platinum - profits from this alone cover IC subscription for the next 600 years. John Rosier introduced me to Sigmaroc and Venture Life, Leon Boros to Bioventix, and so on.

So thank you. Everyone at Stockopedia, John Rosier, Tamzin (what brilliant and invaluable interviews!), Leon Boros, Paul Scott, Richard Leonard, Cockney Rebel, David Thornton, Robbie Burns, Simon Thompson, all the posters who know so much more than me - I couldn't have done it without you.

Happy Christmas everyone, and let's hope for a better 2021.

Paul

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Metatron

24th Dec '20

Congratulations but what actually do you use as a buy and sell signals after you have read 'experts'?

Edward Croft

What a wonderful story @JollyBiologist. Thank you so much for sharing.

Troymcclure1970

Congratulations that must feel brilliant, like yourself I'm no expert on the thousands of criteria the pro's use to select shares so I also follow the various methods and ideas that people who make a good living from the Markets use, it's still a learning process but the seeming irrationality of the markets would seem to be where the money is to be made, especially this crazy year.

All the best and I look forward to your post on reaching a million.

Wilkonz

Thanks JollyBiologist. Great story. We all approach Damascus by different roads, but the commonalities include hard work, persistence, the ability to keep learning from mistakes and that blinding flash of light when suddenly everything seems to come together. All the best in reaching the million milestone.

JollyBiologist

Hi Metatron, thanks for the question,

So I have some basic criteria. I like companies to have lots of cash/no debt. I like big margins and strong momentum/RSI. I like high Quality scores on the Stock Ranks and a decent dividend. I like to see director buying/holding and positive recent news. I need to be able to understand what it does and I like to get a feel for how competent and trustworthy management are. Stockopedia provides the data/tools for most of this, and company presentations on Private Investors World really help with the latter point. And I also like companies that try to do the right thing with their employees and/or the community around them.

So far, so basic - I imagine many of us have similar rules. But how do I pick a stock in the first place?

I like to triangulate. So, for example, Venture Life Group (VLG) are viewed positively by John Rosier, David Thornton and Simon Thompson. The chart, the news, the criteria, all fitted, so I opened a small starter position back in June at 69p. What I then do is add more if the news continues to be good, so I've added at 73p, 80p and again at 72.6p. This limits downside initially, and allows me to build quite sizeable positions in companies that keep beating forecasts. Being a biologist, I call it my Survival of the Fittest strategy...

As for selling, it all depends what happens. I sell immediately on any kind of profit warning or if the story changes or if I want cash for another idea. I took profits in VLG recently because I wanted to invest in SUMO, for example. And I will sell to rebalance. Jarvis (JIM) has been one of my best investments this year. but it had grown to about 15% of the portfolio, so I trimmed it back to 8% - and put this money into XAAR (XAR) and Volex (VLX).

I'm currently up 32% this year and it would be much higher if I hadn't made two stupid mistakes. One was selling Games Workshop (GAW). at around £42 because the valuation seemed very high and volatility seemed likely to continue, and I was trying to be clever, hoping to buy back in the £30 area. So that's a lesson learned - never, ever sell Games Workshop! And I sold Codemasters (CDM) for a 40% profit at around the £5 level because I couldn't see any point in hanging on for months waiting for the bid to work through. I hadn't factored in a possible counter bid and it's now around 660p. I'm still cross about that one! So that's another lesson learned - be patient when an offer is made for a company.

And as a final thought - I would rank my research tools as follows:

1) Stockopedia - this has been the single most significant factor in transforming my returns. It's not just the quality and quantity of data, it's how it's presented and how accessible it makes it. If I could only subscribe to one thing, it would be this. Many, many thanks to Ed and the team. Paul Scott and Jack Brumby add lots of value with the SCVR, though I would still subscribe if they weren't part of the package.

2) John Rosier. John has vastly more experience and knowledge than I do - and he is always calm and rational. From him, I learned not to sell when the whole market goes down - you just end up selling low and buying high - this is not profitable! I get lots of great ideas from him, though I also find it reassuring when he decides to buy something that I've already got (e.g. Bioventix (BVXP) and Sylvania Platinum (SLP). And he also provides something of a benchmark - I'm ahead of him this year and catching him up!

3) Private Investors World. I love Tamzin's videos/interviews and have done really well from ideas thrown up by people like Richard Crow, Leon Boros, Richard Leonard and Andy Brough.

Remember that any subscription only has to throw up one really good idea a year to more than pay for itself, so I'll happily skip through 11 months of unhelpful Investors Chronicles to get one useful tip from Simon Thompson...

Enough from me. I enjoy reading other people's insights/stories, so I hope some of you have found this interesting in some way. But I'm off now for the family Christmas Eve walk as the sun is out, the days are short, and I want some fresh air.

Phil Mc

1st Jan '21

Thankyou for sharing your inspirational story. I use stockopedia, GCI and piworld for research ideas too and I'm also a teacher (Physics). Its nice to know there is a path I can try to emulate.

timarr

2nd Jan '21

Oh Lord. Torotrak ... that differential drive thingy. I still shudder over it. And the TMF book - all of those buy and hold forever stocks that immediately nose dived. And Games Workshop (LON:GAW) - let's really, really not dwell on that.

I've always found it's the mistakes that I learn most from, the successes tend to take care of themselves. And following experts is the finest form of plagarism - but as Munger says there's a skill in selecting the right experts and then in figuring out when they really know what they're talking about. But I'm a sucker for anyone who can admit they've made mistakes - Paul Scott and John Rosier stand out in that regard.

I'd also suggest subscribing for Trust, the Baillie Gifford magazine (it's free). They're probably the UK standard bearer as the Age of Buffett gives way to the Age of Bezos. At the very least it's an eye opener into exactly how far behind the wave the UK markets are in general and why some (but only some) of the crazy valuations out there are justified. I just wish I'd bought more Scottish Mortgage Investment Trust (LON:SMT) at the back end of 2019.

But this is just the beginning. Compounding effects snowball, especially if you can limit the losses when markets go into reverse. At 10% per year you're only 7.5 years away from a million. At 32% you'll do it in 2.5 :-)

timarr

4th Jan '21

Hi Timarr,

Many thanks both for reading and replying. Yes, mistakes are definitely the best learning experiences. And you're absolutely right to highlight Munger's point - again, I find a natural selection process works very well here.

Thanks for the suggestion. I'll follow that up pronto. My brother in law is a computer whizz - he's the lead salesman for a major software developer - and his view is that even people in the industry don't fully understand how quickly and permanently things are changing. To be more specific, his view is that Microsoft and Amazon will basically take over the world (you might argue that they already have!), so if you don't have exposure to these in some form or another (mine via Allianz Technology and Polar Capital Technology Trusts (ATT and PCT). ~Sold SMT far too soon...

2.5 years would be nice - I've averaged 32% for both of the last 2 years... 7.5 years would be fine...

Let's split the difference - 5 years gets me to 60 and I can retire comfortably...

Rusty2

Amazon are big in the US, I believe around 70% of their revenues are within the US.

Many other countries don't have much Amazon trading. There is competition in Asia and South America.

Will Microsoft overtake Apple, no sure, I hold both.

I did hold or still hold most of the UK shares you mentioned. I also sold Games Workshop (LON:GAW), thought they would be affected by the lockdown.

Bluesky Ventura

Congratulations Jolly Biologist,

It great to hear about your success and hope you pass 7 figures as soon as possible.

All the best for 2021.

BSV

Let's split the difference - 5 years gets me to 60 and I can retire comfortably..

Hmm ... if you're that close to retirement you need to consider what you'd do in the event of a serious market downturn. In 5 years at least one 20%+ fall is pretty much inevitable.

Recent market falls and rapid recoveries due to Brexit and CV-19 aren't particularly typical - the market downturns in 2000 and 2008 were prolonged and the things that recovered weren't the things that collapsed. Experts won't see it coming, either.

I'm not saying you should change anything but nowadays, as I approach retirement, whenever I look at my portfolio I always knock 30% off it and then ask "could I live with that"?

iwright7

5th Jan '21

JollyBiologist: Firstly many congrats.

My own story (and investing methodology) is similar to your own, even to the extent of training as a Biologist. I took control of my portfolio back in 2013 and hit your 5 year target some time ago. I suspect your intense desire for tipster ideas and willingness to cross reference them with quantitative data, accounts for a lot of your success.

What has struck me many times is that the statistical analysis that is so widely used in Biological experimentation is also core to Investment analysis. For example achieving statistical significance has been vital in identifying market anomalies. Many market anomalies (e.g. F Score and 52 Wk High) are the basis of the individual Q, V, and M scores. By using stock picks from the modern day Gurus, along with key Stocko metrics you have a potent Man + Machine combination. All success going forward.

P.S. Because of your scientific background and willingness to spend to dig deep I have no hesitation in recommending a book you may not have come across: The Handbook of Equity Market Anomalies: Translating Market Inefficiencies into Effective Investment Strategies, by L. Zacks. It is the best £50 on a book I have ever spent

Logical David

Hi timarr, as you say, one way to look at your portfolio and thinking of retiring is to knock off 30% and ask if you could live with that. Alternatively, when someone's portfolio is large enough, it becomes possible to live off the dividends without having to touch the capital, this allows for your portfolio to continue growing. Hence, when the next stock market correction comes along, a person can continue to live their normal lifestyle and not worry too much about corrections within the stock market.

At the moment just over half the shares in my portfolio pay a dividend, with the remainder of my shares not paying out. All my dividends get reinvested back into my portfolio. When I retire, what I plan to do is sell all my shares which don't pay a dividend and then reinvest the money into the shares which I hold and which do play a dividend. By doing things this way, I plan to live off my dividends and not worry about the vagaries of the stock market and a potential 30% correction.

Alternatively, when someone's portfolio is large enough, it becomes possible to live off the dividends without having to touch the capital, this allows for your portfolio to continue growing.

Well, UK dividends fell by nearly half last year, I'm not sure that's necessarily a solution to the problem. I haven't done the research but I wouldn't be surprised if the the companies cutting dividends were also among the biggest fallers so you'd be looking at a double whammy of dividend cuts and capital losses.

I long ago gave up considering dividends as part of my investment approach. As it happens, during 2020 this meant I saw my dividend income rise by nearly 30%. It's weirdly counterintuitive but companies that are focused on earnings rather than payouts are more likely to provide better growth in dividends because, well, their profits are growing. Higher dividend payers tend to be ex-growth, mature businesses who, over time, increasingly struggle to maintain dividends in the face of stagnent earnings.

My own approach to this will be to define what income I need from my portfolio to live on and then take it out regardless of whether that's from dividends or capital gains. As all of my portfolios are sheltered in ISAs or SIPPs then I don't have to worry about capital gains - well, not until Sunak starts tinkering with the tax regime. The challenge with that is to figure out what the maximum level of drawdown is in order to avoid miserable penury at the end of my life.

Still, these are good problems to have, are they not?

john2

In normal times that would be a good strategy. But you would have been hard pressed living off your dividends last year.

Hi timarr, it is indeed a good problem to to have.

If my memory serves me correct, out of the 1,900 or so companies in the UK stock market, about 1,400 of them had reported a profit warning during 2020 and as a result some companies withheld or stopped paying dividends.

I was fortunate because if you look at the shares which I held during the first half of last year (I didn't hold hospitality, retail, banking or travel companies) when the crash took place, none of the companies I held issued a profit warning and made a loss or had to fund raise. Only one company deferred it's dividend payment for 6 months because of the uncertainty back in the spring of 2020 but that company later reinstated the dividend during the autumn which meant I received a double dividend payment. However, like you say, not everybody would be been so fortunate.

I see Tim you are in the same boat as me with regards to your investments being in a tax free envelope. I also believe Sunak will tinker with the various tax regimes in time to come during the next 12 months. However, I don't believe he will change the past tax free regimes (can he even change the past tax laws?). My opinion is that he will change them going forward and he will try to simplify the many quirks and irregularities which exist within the taxation system.

When it comes to what is the maximum recommended drawdown in order to avoid miserable penury during later life, the figure which I have seen banded around on many occasions is a 4% drawdown. This is based on a portfolio growing very slowly (single digit growth at only a few percent per year) and receiving annual dividends in the order of around 3%. Obviously, if you can achieve double digit growth then clearly you could drawdown more but 4% is recommended as the safe maximum.

Then you were pretty fortunate. My dividend income was down by about 40% last year.

Yes very, mine was down about 50%. Around 500 companies stopped or cut their dividends, it was not just because of profits warnings.

I didn't hold hospitality, retail, banking or travel companies either apart from Tesco.

Retireyoung

6th Jan '21

I have a similar story to JollyBiologist, and am also very grateful for those sharing their knowledge on investing and for Stockopedia.

I have been investing since 2006 when, in my twenties, I inherited quite a bit of money. Shortly after, I stupidly got sucked in after my bank, HSBC, called, expressing their concern that my money wasn't working for me in my current account. After a couple of meetings with their financial advisor, I invested in their super expensive and poorly performing funds, not knowing any better at the time.

But a year or so later I came across the Naked Trader's book, read a couple of other books and sold out. I then started subscribing to Investors Chronicle, and made my first direct buys in 2008. Since then, I have a managed to achieve a CAGR of 18.5%, largely thanks to decade of holding/dividend reinvesting companies like Diploma (LON:DPLM), Xp Power (LON:XPP) and Telecom Plus (LON:TEP) - which were stock tips I picked up from IC, Robbie Burns and Interactive Investor. I managed to boost my CAGR up from 16% in this last year alone thanks to subscribing to Stockopedia and reading all of your posts. In the last seven months alone my gains have been double a good full-time annual salary.

Basically, I have made a 6-fold increase in the capital I originally invested, the bulk of which was between 2008-10. Much better than my siblings, who either invested their inheritance in property, or, much worse bought new cars etc.

Honestly speaking, I can't really analyse companies accounts, but I do somehow manage to buy more or less good companies or sell those that weren't such good picks before they go too far south. I use a range of loose criteria and, yes, gut feelings, so Stockopedia helps massively. I now do the same for my wife and kids to a similar affect, albeit with more specialist ETFs (AI, Data, Battery Value Chain, etc) due to European tax reasons, lack of time to follow individual European companies and to maintain diversification.

Its not a very clearly defined strategy based on sound analysis, but if I can keep this up, I will definitely be able to get my kids through Uni with ease and retire young.

Good luck to you all in 2021 and beyond!

Chris Fraser

Congratulations Jolly!

I've only just started my journey so hopefully will be able to report the same one day

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JollyBiologist

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