January 2018 Portfolio Update

Wednesday, Jan 31 2018 by
27

They say that investing is a learning process and that's certainly true in my case. While I've had various amounts of money invested in shares for almost 15 years now I've never quite reached the point where I feel that I know or do enough (quite the opposite in fact). An example of this is that I've never systematically recorded my reasons for buying shares (or continuing to hold them for that matter) and without an audit trail it's hard to identify what I'm doing well/badly. This became obvious when I wrote my review of 2017 and so this post is the start of my attempt to be a bit more organised when it comes to trading.

Essentially my plan is to write up short, contemporaneous notes of my investment decisions on a monthly basis. This will include brief thoughts on trading statements and results even where I do nothing as deciding not to trade is just as significant a decision as buying or selling. Finally I'll probably tag on a few sentences regarding the portfolio performance in the month and which shares made the difference; this should make other people feel better if nothing else.

Purchases

H&T Group Bought 355.5p - Jan 18

As a first trade of the year I've promoted H&T Group to a full position size. My initial holding was only taken out in December but their Trading Update of 8th Jan speaks of profits being ahead of market expectations with the Personal Loans book increasing by a remarkable 94.7%. Note that this follows a previous "above expectations" update on 3rd Nov. So H&T clearly have the wind in their sails and aren't notably expensive on a forward P/E of 12.4 when they're flagging up 33% profit growth for 2017 and 13% in 2018. This latter figure feels too low given the way in which the business is performing.

Boohoo.com Bought 205.5p - Jan 18

Like many small-cap investors I've been aware of Boohoo for over 3 years now; all the way from Paul Scott's prescient post identifying their early profit warning as an excellent buying opportunity. Sadly I wasn't open to this at the time and missed out as the share price 10-bagged. Such is life. Still I've kept half an eye on their trading and operating performance and noted how the management have done an…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

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.


Do you like this Post?
Yes
No
28 thumbs up
1 thumb down
Share this post with friends



H&T Group plc is a non-trading holding company. The Company provides a range of simple and accessible financial products tailored for a customer base, which has limited access to, or is excluded from, the traditional banking and finance sector. Its segments include Pawnbroking, which is engaged in providing secured loans against collateral (the pledge); Gold Purchasing, which is involved in buying Jewelry directly from customers through its stores; Retail, which is involved in retail sales of gold and jewelry, and the retail sales are forfeited items from the pawnbroking pledge book or refurbished items from its gold purchasing operations; Pawnbroking Scrap, which comprises various other proceeds from gold scrap sales other than those reported within Gold Purchasing; Personal Loans, which comprises income from its unsecured lending activities, and Other Services, which comprises third party check encashment, buyback, prepaid debit card product and foreign exchange currency services. more »

LSE Price
351p
Change
-1.1%
Mkt Cap (£m)
139.4
P/E (fwd)
9.7
Yield (fwd)
3.4

FDM Group (Holdings) plc is a United Kingdom-based company, which is engaged in providing professional services focusing on information technology (IT). Its four geographical operating segments: the United Kingdom and Ireland; North America; Rest of Europe, Middle East and Africa, excluding UK and Ireland (EMEA), and Asia Pacific (APAC). The Company's principal business activities are recruiting, training and placing its own permanent IT and business consultants (Mounties) at client sites. The Company also supplies contractors to clients, either to supplement its own employed consultants' skill sets or to provide greater experience where required. It is engaged in a range of technical and business disciplines, including Development, Testing, Support, Project Management Office, Data Services, Business Analysis, Business Intelligence and Cyber Security. more »

LSE Price
767p
Change
0.7%
Mkt Cap (£m)
837
P/E (fwd)
19.2
Yield (fwd)
4.8

Henry Boot PLC is a land development, property investment and development, and construction company. The Company sources and acquires land; promotes planning consents; acquires, develops, manages or sells investment properties and service constructors with plant; runs its Private Finance Initiative (PFI) project, and refurbishes and constructs buildings. Its segments include Property Investment and Development, which includes property investment and development and trading activities; Land Development, which includes land management, development and trading activities, and Construction, which includes its PFI company, plant hire and regeneration activities. Its subsidiaries include Hallam Land Management Limited, Henry Boot Developments Limited, Stonebridge Projects Limited, Henry Boot Construction Limited, Banner Plant Limited and Road Link (A69) Limited. more »

LSE Price
235p
Change
-2.1%
Mkt Cap (£m)
312.9
P/E (fwd)
8.0
Yield (fwd)
4.5



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


9 Posts on this Thread show/hide all

Howard Adams 1st Feb '18 1 of 9
1

Hi Damian

An interesting posting, thanks for that. I also hold a few of the stocks you mention (and have investigated most of the others at some point) and it was interesting to read your thoughts.

As a matter of interest do you work purposely to a particular style of investing?

Do you assess buy, hold, top ups or exits against any specific metrics which you favour?

I am interested to read your thoughts as, for example, I am working on incorporating quite a few of Mark Minervini's ideas into my own evolving style and have found the new disciplines to be illuminating both with regard to the stocks I examine as well as how they are encouraging me to apply greater rigour to my investing behaviours.

Regards
Howard

| Link | Share | 1 reply
Damian Cannon 1st Feb '18 2 of 9
3

In reply to post #307843

Hi Howard,

Thanks very much for your comments. I've shifted my approach pretty radically in the last year or so and now almost exclusively employ a checklist approach. What I'm looking for is a mixture of quality, momentum and value but, of course, using all of these criteria within a single filter means that you end up with very few matches. So I have a multi-step process to find interesting companies:

1) I run three separate filters (one quality, one Zulu inspired, one Minervini inspired)

2) I combine the lists produced by all of the filters into a master list and score every company on how well they rank for each filter (Stockopedia is great for showing you how closely any share missed being selected by)

3) I then rank all of the companies by their combined score to give a master ranking

4) Then I go through them from the top making short notes on pros and cons, how positive their last update was and suchlike (the manual sanity check)

5) Any near the top which I don't already own are then candidates for purchase

It is a fair amount of work but I don't need to do this too often as I'm usually fully invested. As for other price targets I like to take my holdings to an average position size and then leave them alone. Exits are only really a response to profit warnings or an unexpectedly large fall taking out a stop loss (although selling here is very much at my discretion).

I haven't read Minervini yet but I have used some of the work done by others in this area - thanks guys!

BTW I put together a post reviewing my changing approach in 2017 the other day which may shed more light on my strategy: https://www.stockopedia.com/content/portfolio-review-2017-305543/

Damian

Blog: Ambling Randomly
| Link | Share | 1 reply
Howard Adams 1st Feb '18 3 of 9
4

In reply to post #307943

Hi Damian

Wow, thanks for such a clear and comprehensive response and the link to your post 2017 review.

I like your three filters approach. Minervini recommends multiple filters and I am certainly heading in that direction more so than I have in the past.

I have also adopted Minervini's approach to exiting a holding and this has proved extremely useful (drawn from the last two Chapters of his first book). In brief, if a trade is going against you exit 50%, if it continues to deteriorate exit 100% (I believe Ed uses 33%, 50% 100%). This guidance really helped me not to hold positions that little bit too long.

As you have adopted, I am also evolving the checklist procedure and plan to augment it with a scoring for each of the assessment tests I feel are important (some of which a qualitative in nature e.g. biographies of top team). These evolutions to my system are in their early stages so your note has been a helpful addition to my own reflections.

Many of your comments resonate - the volatility you experienced over different years; how your style has evolved and your desire to incorporate a more systematic approach to recording buy and sell reasons. I think all of these are going to be very necessary in 2018 and beyond.

Now, having tuned into your investing thoughts and stock picks I will look forward to reading how things develop over the next months/year.

Thanks again for taking the time to write up your approach. I appreciate it.

Regards
Howard

| Link | Share | 1 reply
Damian Cannon 1st Feb '18 4 of 9

In reply to post #308033

Hi Howard,

Thank you for your generous response. This is exactly the kind of conversation that I was hoping to stimulate by sharing the nitty-gritty details of my process and how it works in practice. As time goes by I'm increasingly aware of how we all need our own individual strategy which matches our psychological and emotional traits.

So while I am ever impressed by the posts of Ed and Paul on this site, and the returns which their very different approaches generate, I can't personally walk either of their paths. Instead I'm happiest when the dispassionate rigour of a checklist combines with my own gut feel around management, sector, forecast earnings and future outlook. Which is to say that I believe that we're of a similar mind on this front.

Anyway I'm glad to have provided a little input into your journey and look forward to hearing your thoughts in the future.

Damian

Blog: Ambling Randomly
| Link | Share
Trigger14 1st Feb '18 5 of 9

Hi Damian

Thanks for sharing your notes and approach. I’m all for more discussions about investing strategy. There’s a clear tilt to QM in your holdings that resonates with me. I have several of the same holdings in my portfolio or watchlist. Your structured multi-filter then combined ranking system also resonates with me. Do you have any further thinking about why those particular filters fit well together or is it just about balancing QVM as best you can?

I’ve been experimenting with similar sorts of approaches. My current approach is a quality filter to identify a watchlist of the 100 highest quality shares I can find. This has a qualitative element looking at competitive advantage and growth prospects as well as a quant screen looking at ROCE, margins and consistency of growth. I then pick between them based on ranking momentum and value (though with more focus on momentum). I’ve done my screening this way because I don’t want to compromise on quality and it shouldn’t vary much over time - so I think merits a bit more detailed focus. That said I want to see if I can do better than just buying and holding the highest quality by also trading momentum and valuation. It’s work in progress for me but seems to be working out pretty well so far.

Trigger

Blog: Quality Share Surfer
| Link | Share | 1 reply
Damian Cannon 1st Feb '18 6 of 9

In reply to post #308113

Hi Trigger,

Thanks for the comments. From taking a look at your blog, which is both interesting and well argued, I can see that our approaches have a lot in common on the QM front. It looks like your portfolio really took off in mid-2016 and has barely looked back. Impressive. Did you change your approach at that time?

On the filtering front I believe that the filters play well together because they are really selecting along three different dimensions - quality, momentum and value - but in a different way to the stock ranks. The quality filter cares most about ROCE and margin, the momentum filter is really about price and earnings forecast action while the value one uses PEG values. But, I hasten to add, none of this has been tested rigorously; it's just a combination of the characteristics which I like and seem to underlie decent investments. To paraphrase though I'm trying to be approximately right rather than exactly wrong.

Anyway we're clearly working along similar lines although I try to sell as infrequently as possible - especially when a company is putting out in-line or above expectations announcements. To my mind I should run my winners, which means keeping the ones that are doing well operationally and going up in price, while always selling my losers (which means anything that warns on profits or any company which is very much hedging its bets in announcements and the price drifts down to my stop loss).

Damian

Blog: Ambling Randomly
| Link | Share | 1 reply
Trigger14 1st Feb '18 7 of 9

In reply to post #308153

Thanks. Yes I did change my approach quite drastically around mid 2016 to be more systematic and rigorous in only selecting from a high quality watchlist (well high quality as far as I can tell). I started the blog to keep track shortly afterwards and have been refining/experimenting with the details since then. It seems to be working out well so far though not been long yet.

I’m trying to run winners as well, though at the moment I’m probably being overly zealous in jumping ship if the price starts falling. I think maybe reading Minervini’s books has been a bad influence in making me want to trade too much, though it’s also partly because I’m preoccupied with how to approach a possible market crash e.g. when to start holding cash vs being fully invested. Do you have a plan for that or would you remain fully invested?

I think your filters sound well chosen so I’m interested to keep track of how they work in combination. I’ve noticed you also have a blog so will have a look. Best of luck

Blog: Quality Share Surfer
| Link | Share | 1 reply
Damian Cannon 2nd Feb '18 8 of 9
2

In reply to post #308223

Well I'm pretty much fully invested at the moment and was also fully invested in 2008-09 (which was a painful experience). I don't have any plan to start selling and moving to cash because I don't believe that I can forecast the next crash (I certainly couldn't last time).

However, unlike last time, I am now much less inclined to hold shares through thick and thin in the belief that they'll eventually recover. Now I'm much more likely to sell out even though that will crystallise an immediate "loss" and particularly so if most of my holdings are falling simultaneously. Obviously the devil is in the detail here - in a crash liquidity dries up and I may be simply unable to sell out at any reasonable price.

This being the case my underlying hope is that by choosing shares with some level of resilience and quality then they should be able to continue trading reasonably well during a market crash - which should lead to any correction being relatively short lived and/or shallow.

Still who really knows what will happen in the next crash and how I'll need to react!

Damian

Blog: Ambling Randomly
| Link | Share
RMundy 9th Mar '18 9 of 9
1

Interesting post Damian, and thought-provoking comments all. Thanks for taking the time.

The area I need to work on most is definitely the exit strategies, and having some firm rules like Minervini's 50% that you describe is something I think I need to implement. Perfect example is Fulham Shore (LON:FUL) which I should have scaled back months ago...

Have a good weekend chaps, R

Website: Research Tree
| Link | Share

Please subscribe to submit a comment



 Are LON:HAT's fundamentals sound as an investment? Find out More »





Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis