March 2018 Portfolio Update

Thursday, Mar 29 2018 by

Another volatile, and cold, month with the FTSE swinging one way and another. While my portfolio struggled higher, courtesy of sparkling results from some of my holdings, this was against a backdrop of my less-loved shares slipping relentlessly backwards on limited news-flow. On the whole I don't like to sell a share just because it's gone down since that's the nature of volatility - in any one year I expect most of my shares to oscillate by at least 20% for no good reason. So my preference is to wait for concrete news and then make a decision. Still I don't mind saying that it's a lot easier to follow this plan in the abstract than it is to sit tight as a share drops by 3-5% every day without having the decency to rally every once in a while!


Focusrite Bought 365p - Mar 18

Focusrite keeps a fairly low profile and maybe that's ok given how it's a small company servicing a specific market niche. This does, I think, lead to the share price treading water between updates though. This is a shame as there's a profitable, growing, cash-generative business here. On the other hand for investors this means that positive updates can lead to some sharp upward moves such as the 20% increase since the trading update a couple of weeks ago. Luckily I was in a position to react quickly to the announcement and managed to establish a full position at a decent price. Given the earnings momentum that Focusrite has had since listing I feel reasonably sure that this will continue even if the ride is a little bumpy.

Burford Capital Bought 1313p - Mar 18

As mentioned below the FY results for Burford exceeded all expectations which is probably why the shares rose by 40% over the next week. I was quite keen to increase my position here but I couldn't happily weather the vertiginous rise in price despite the relatively low multiple being asked for outstanding performance. Fortunately the founders came to my rescue by announcing a placing of around 4% of the company at a price of 1350p (a 12% discount). I can understand why they'd like to lock in some very substantial gains but personally having the share price pushed down to around 1330p delivered a useful top-up point for this private investor. I fully expect Burford to beat expectations…

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Focusrite Plc is a music and audio products company supplying hardware and software products used by professional and amateur musicians. The Company is engaged in the development, manufacture and marketing of professional audio and electronic music products. It operates through three segments: Focusrite, Novation and Distribution. The Focusrite segment includes the sales of Focusrite branded products. The Novation segment includes the sales of Novation branded products. The Distribution segment includes distribution of third-party brands, including KRK speakers, Ableton, Stanton, Cakewalk and sE Electronics. The Company sells its products in approximately 160 territories and countries around the world. The Company offers Scarlett, which is an audio interface; Blocs Wave application, which is used by musicians to create their own sounds and songs on any iPhone Operating System (iOS) smartphone or tablet, and e-commerce Websites. more »

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Burford Capital Limited is a Guernsey-based finance and investment management company focused on law. The Company's businesses include litigation finance and risk management, asset recovery and a range of legal finance and advisory activities. It provides investment capital, investment management, financing and risk solutions with a focus on the legal sector. Its segments include provision of investment capital in connection with the underlying asset value of claims; investment management activities; provision of litigation insurance; and exploration of new initiatives related to application of capital to the legal sector until such time as those initiatives mature into full fledged independent segments. Its provision of litigation insurance segment reflects the United Kingdom and Channel Islands litigation insurance activities. more »

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10 Posts on this Thread show/hide all

tripuram 30th Mar '18 1 of 10

thanks for sharing Damian. Lot to learn from your disciplined approach.

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matylda 30th Mar '18 2 of 10

Yes, great update thanks Damian.

Blog: Briefed Up
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herbie47 30th Mar '18 3 of 10

Damien, thanks for the update, I do hold quite a few of those shares myself although I did sell Computacenter (LON:CCC) because of the outlook and the profit margin. Also took profits on Fevertree Drinks (LON:FEVR). Many on here would be selling if the share drops over 10%, it's an interesting subject, certainly on Burford Capital (LON:BUR) I saw it as an opportunity to top up.

I have a request please, would it be possible to show your portfolio in a table, would make it easier to see the performance.

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Damian Cannon 31st Mar '18 4 of 10

In reply to post #347793

No problem tripuram. I'm finding that just the discipline of writing up my reasons for trading and my thoughts on company announcements tremendously helpful so far. Worth doing!

Blog: Ambling Randomly
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Damian Cannon 31st Mar '18 5 of 10

In reply to post #347838

Thanks herbie47. Share falls are a subject for endless discussion and if you can believe it I'm far more ruthless than I ever used to be. Maybe Stockopedia could do some analysis on whether to sell when the price falls without a profit warning?

As for the portfolio in a table I guess that I could do that. Luckily I don't have 150 holdings!


Blog: Ambling Randomly
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Edinburgh Investor 31st Mar '18 6 of 10

I'm quite intrigued by the recent share price strength in Next (LON:NXT) . I currently hold Ted Baker (LON:TED) which despite positive results that are bucking the trend the share price has gone the other way. Can anyone explain the high PEG ratio of 47 for Next (LON:NXT) ? I would see that as a red flag usually bit may be a good reason for this?

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ISAallowance 1st Apr '18 7 of 10

In reply to post #348088

Next (LON:NXT) isn't really a growth stock, so PEG becomes a bit meaningless. In the limit, a company with exactly zero growth would have an infinite PEG.

Just because it isn't a growth stock doesn't mean it can't be a good investment at the right price of course. But PEG certainly won't be the right metric to judge the investment case on. For an ex-growth stock, I think P/FCF would probably be the first thing I'd look at.

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Edinburgh Investor 1st Apr '18 8 of 10

In reply to post #348253

Great, thanks for the insight.

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Merlotman 4th Apr '18 9 of 10

Thanks for sharing your analysis on your holdings. I assume that this covers all so your portfolio is a fairly concentrated 20 or so conviction picks. I am looking to achieve same by trimming my current list.
Unless it's on an earlier review you don't talk much about your selection strategy. Do you select your stocks using a tightly drawn screen? How big a role do Stocko scores play in your selection. What is your typical hold period?
Thanks again and keep up the great work.

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Damian Cannon 4th Apr '18 10 of 10

In reply to post #349363

Thanks Ssearby. This update doesn't cover all of my holdings - just the ones which put out results or a trading update last month (which was quite a few). I did an annual review for 2017 which covered every single holding a few months back though:

All told I have 30-40 shares which I'm looking to trim back to around 30. It's tricky as I don't want to sell just because I'm bored with a company - especially as that seems to be when their share price takes off! This ties in with my desire to hold good shares for a long time (years) as they continue to do well.

I haven't written up my selection process yet but it revolves around 3 different screens which look at quality, momentum and value separately. I take the output from these screens and apply some more qualitative criteria around sector, future prospects, management and suchlike. The Stockopedia ranks certainly play a role here as I don't select below certain thresholds but they aren't my main criteria.


Blog: Ambling Randomly
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