Paul Scott

2nd Jan '22 by Paul Scott

82 comments 13077 reads

I normally type up lengthy year end reviews, but have decided this year to make a video instead.

It's a warts & all review of how 2021 unfolded for me, and what I've learned from my mistakes this year. I'll aim to do this every year from now on.

I hope you find this interesting! The slides are also copied below, if you don't have time to watch the video.

(I've just set up a vimeo channel, which is vimeo.com/paulypilot for my shares videos)

EDIT:

Something I forgot to mention in the video, was that my hedging strategy (shorting US indices when I'm nervous about the market overall) was a complete disaster in Q4 2021. It's worked really well in the past, especially in early 2020. However, this time, in Q4 2021, the nightmare scenario unfolded - my geared longs (UK small-mid caps) plummeted, generating heavy losses. At the same time, the US market soared to new highs, thus incurring heavy losses on my "hedges" (short positions on US indices).

Going forwards, I think the better idea is to just de-gear, rather than faffing around with so-called hedges, especially ones which don't have a direct correlation to UK small caps.

End of edit.

Boohoo

Disastrous share price performance, but I remain of the view this is likely to be a much larger business in 5-years.
Sector sell-off: Asos has fallen similar %, and other eCommerce businesses also de-rated (e.g. AO.com). Upside for sector in 2022-23 (possibly)?
1, or 2-year growth rates?
Problems in 2021 look fixable - supply chain related, especially outbound freight cost. Overseas markets declined, due to long delays in delivery (7-10 days)
Increased competition
Overshot on downside in my view

QUIZ

Strong turnaround underway - stores now trading at/near pre-pandemic sales, but with greatly reduced costs (on turnover rents after pre-pack administration)
Last man standing with retail stores
Sees 2-year boom in special occasionwear
Experienced mgt, and long-standing online operations
Strong balance sheet with net cash
Overseas expansion via franchisees
Tiny market cap
Family still hold c.50%, and motivated to turn it around

Redde Northgate (REDD)

Superb recent results
Strong balance sheet
Sector tailwinds
Low PER & big dividend yield

Revolution Bars (RBG)

Turbulent during pandemic (2 placings at 20p =…

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Doug2b

4th Jan '22

Avoid Inland. You may notice that their price to book appears compelling. Considering how light some builder’s land banks are out there, it might appear a mystery that they have not been snapped up by a larger builder.

Alas, nobody in the know takes their price to book claims seriously. The value of a house builder’s land bank is supposed to remain on the books at cost until it is sold or built on and then sold.
But not Inland. There is an accounting rule which allows real estate type assets that are rented out to be revalued at the market rate. So Inland like build plots with the odd old property on site, odd being the operative word, which they can rent out and then they revalue the asset as creatively as they dare on the rented real estate type basis. Simon T of IC thought that this was oh so clever of Inland, but it just left me cold! Not technically illegal of course, but this practice is frowned upon by the sector for good reason.

I know them quite well, back in 2013 to 2014 I was a shareholder - naiver days!
There was a planning dispute over a site with locals. Wicks lost his cool threatened to turn the site into a ‘traveller camp’. He did so by email. The email was forwarded to the DT, who wrote it up, all very damaging at the time.

The build pipeline dropped away dramatically in 2014, with no warning, we were told the opposite in fact, they were not upfront.
I did nearly double my money on Inland, rode my luck I feel. I would not go back.

ForAFewDollarsMore

Thanks for the insight.

The numbers and the sector were ticking the boxes and this one only recently came on my radar.

The history lesson is very useful as there are many companies to research and this helps me maximise my limited time.

Thanks again.

Paul Scott

If you're a trader, then yes I would agree with you about not adding to a losing trade.

I'm not a trader. I've taken a 5-year view with BOO, and think it's very likely to be a much bigger business in that timescale.

Hi unbelievablejeff,

Yes, I use daily rolling spread bets for my geared stuff, mainly because it's a tax-free wrapper, and it means not having to keep any records. Even though they're a bit more expensive, the daily rolling bets are more transparent in terms of cost. I never liked the notional quarterly basis of conventional spread bets, whereas my daily "bets" roll automatically, and some of them date back 3+ years. So there's no time limit, although funding costs mount up.

Of course the gearing is optional. I don't have to gear up. So could for example put £10k in a spread bet account, and then open a bet for £10k underlying position value.

In the past, I found that a spread bet account with a self-imposed limit of 1.5x maximum proved very resilient in market downturns. i.e. limiting myself to positions totalling £15k underlying value, for each £10k cash in the account.

Anyone thinking of using spread bets, I would say don't! Unless you have absolutely iron self control, and will stick to your rules on limiting gearing.

Over time, I want to reduce my spread bet exposure, and increase my full ownership of more shares, and properties.

Regards, Paul.

Hi Ken,

Thanks Paul for being so open, not usual with people who have an image to protect.

Oh my image was shattered a long time ago! ;-)

Hi ambrosia,

Paul, you share the same voice as Josh Widdicombe :-)

Really? I'll take that as a compliment!

It's a lot better than Dale Winton, which is what has been said before LOL!

Thanks Neville!

That sounds a good idea to me. Can't remember which book it was, but one of my 2021 reads recommended splitting purchases into 3 chunks, as your conviction builds, and the shares do well. then not adding to positions that go down, as something might be wrong that we've not spotted.

That's not a million miles away from what I try to do - i.e. starter size position to begin with, the double or triple to a medium sized position once I'm more confident of the upside, and newsflow has been positive.

Best wishes to your Dad too, I've not replied to his kind email yet, so pls pass on my apologies!

Happy New Year BSV!

Let me explain, it's very simple.

SCVRs - I write about company results & trading updates, and give a personal view on each share.

My portfolio - it's my money, so I'll do what the hell I want with it, using any strategy I like.

I agree with you that each reader needs to work out their own personal investing approach that suits them.

Clear now?

TB117

I tend to use Stockopedia for some of it's other functions and don't generally read commentary (lack of time...until recently), but I very much enjoyed the excellent (and candid) personal portfolio review.

I sympathise with you on the Boohoo debacle. As a stockbroker of 40 years, now recently retired, and very much a proactive momentum investor exclusively focused on small caps both here and in the US, I held both Boohoo and, long ago (in at the beginning), ASOS, and the one thing I think is absolutely essential in these phenomenally successful situations is some form of mechanical sell signal - so designed to keep you on the 'bucking bronco' as long as possible, but ultimately to force you out (when you really, really, really don't want to) when momentum is clearly turning negative.

As you said, you can always buy them back (and should - sometimes lower, sometimes higher - it's swings and roundabouts and irrelevant) if and when it turns again.

Thanks again....and I hope you were able to get the tea stain out of your pullover!

lewisbabbage

Paul, no need to apologies for Boohoo, I lost money, but my decisions are my own. You're kind of like my local weatherman, you know your stuff, present the facts well and try to predict the weather. But I am definitely not going out without my coat before checking a few other forecasts and looking out the window myself for black clouds.

MattH

out of interest, what do you use as a mechanical sell signal?

MichaelFBS

Now halfway through the video (it is excellent and gives real food for thought) and strangely I had almost the same pension experience as you. I started a pension mortgage in 87 and paid in contributions for about four years though mine was for only about £35 a month and also my contracted out NIC. Then when I started my own business I forgot about them and only asked for a valuation in 2015, expecting charges to have eaten their heads off. But no the funds stood at £69,000. I was astonished.

It says a lot for buy, hold and let compounding do its thing.

Regards

Michael.

Bluesky Ventura

Happy New year Paul

Hope 2022 turns out well for you.

BSV

dhannaway58156

If the weatherman says there is a 90% probability it's going to rain and it doesn't, was he wrong?

Well the main objective is to stay IN the aggressive growth situation for as long as possible and not be bucked off by savage short term spikes, so the mechanical sale signal is really basic and really slow, so as to be rarely triggered on a long term upward-trending growth stock - a sort of fail-safe measure of last resort.

It is simply when the 40 day moving average crosses through the 100 day moving average - BUT with the proviso that the signal is NOT acted upon if by then the share price has already started to recover and is standing above the lowest point reached in this current downtrend. The signal is only acted upon in these cases when the share price flops over again and touches a new low.

When it does properly trigger I almost never want to follow the signal, because by then I have become so attached to this situation which has perhaps already given me a 3 to 5-fold gain, and is still a minnow, and I am convinced it is going to go on to be a 10 bagger at least….but I stick to my guns and do it. Again, about 70% of the time it’s proved to be the right thing.

Boohoo, for example, triggered the 40/100 MA on the downside on a number of occasions over the past year, but only gave a confirmed sell signal for me around 7/5/2021 when the 40/100 was breached and the share price was still hitting new recent lows. The share price was 310p at that time and I reluctantly sold.

If I remain convinced of the company’s long term merits I will then place it on a ‘watch to rebuy’ list. For that I will use a much faster trigger - normally when the 10 day moving average pushes up above the 40 day. Also, because 10/40 is still a lagging indicator, I will only think of acting on it if the share price is now clearly trending up at the point of the signal, and has not already flopped over - a sort of reversal of the 40/100 sell signal proviso.

Although it's tempting at these levels, Boohoo hasn't triggered a repurchase for me yet, and I have to stick to my self-disciplines! After all, I was equally tempted when the price fell to 210p....and now they're 120p....

Needless to say, none of these things are perfect, and one almost never gets out at the top or back in at the bottom. I just keep slowly loping after the share price like a pack of Cape Hunting Dogs!

I would say that the signal is ignored about 70% of the time for that reason and successfully keeps you in the long term upward trending minnow which is hopefully en route to turning into a Microsoft. And it is not triggered by short term downward spikes, no matter how savage. When it does properly trigger I almost never want to follow the signal, because by then I have become so attached to this situation which, by then, has perhaps already given me a 3 to 5-fold gain, and is still a minnow, and I am convinced it is going to go on to be a 10 bagger at least….but I stick to my guns and do it. Again, about 70% of the time it’s proved to be the right thing.

Boohoo, for example, triggered the 40/100 MA on the downside on a number of occasions over the past year, but only gave a confirmed sell signal for me around 7/5/2021 when the 40/100 was breached and the share price was still hitting new 3 month lows. The share price was 310p when I reluctantly sold.

Although very tempting at 120p, Boohoo hasn't triggered a repurchase for me yet on this basis, and I have to stick to my self-disciplines! After all, I was equally tempted at 210p!

Needless to say, none of these things are perfect, and one almost never gets out at the top or back in at the bottom. I just keep loping after the share price like a pack of Cape Hunting Dogs!

Tommy H

Hi Warrant Star

I have 6 portfolios under management, for myself and 5 family members now. Currently there are two approaches, noting I am a full time dad, full time employee, husband, son and all that as well:

For my mum (79 years young) it is primarily about income to fund her lifestyle as she (only) has her state pension. So is approximately 50:50 growth/income stocks. This has a fairly defined set of rules for buy/sell, so for example I exited Warehouse Reit (LON:WHR) which was bought for income, when the growth side had provided >12 years equivalent income and it had gone well beyond the target price, so sold on % drop from peak. Purchases typically are done in two/three stages, so initial stake ~1-2% of portfolio, increase to ~5% and increase to ~10% on set parameters (includes capital protection) and confidence and level of research. To date (I finally got her to take the money off the money manager a couple of years back) I have sold the whole position, either take profits or cut loss. I am debating about a staged sell, e.g. top slice but not there yet.

Three (mine, my wife's (newest as she thinks anything other than a building society account is equivalent of going to the Casino and playing roulette blindfolded) and my sisters) are growth. Holdings are typically similar to each other, though allowance for personal preference to ethics e.g. no gambling shares in my wife's account though only one purchase to date. The main approach I am trying to do is ongoing research when I have time and then update monthly. So do month end accounts, what money do we have to deposit (wife and I) and buy/sell/do nothing across the three accounts.

My daughters are both JISA through Fundsmith, they are a monthly deposit with occasional lump sum, so not big value to most people but probably more than the average 6 or 8 year old. I am happy at the moment but starting to also look at diversification and alternates.

There are obviously FOMO and emotional buys and sells within this and I am far from perfect, and obviously risk profile is different for all of us. My girls have a long time until they can touch their money, my wife and sister have NHS pensions so this is about early retirement/better retirement, I have DC pensions with the two of the big companies and a rental property, so my active portfolio is ~10% of net worth (excluding the house we live in). My mum is a lot more conservative and focused on income with capital protection.

Cheers

Tommy

unbelievablejeff

Thanks Paul for the reply. Interesting to hear you tend to use spreadbet for your buy and holds and not utilise the £20k ISA allowance at all. I have done a lot of reading around spreadbet and leverage but just stuck to buying in my ISAs thus far as I am still in my infancy of investing in stocks and don’t want to try and run before I can walk!

Thank you for that comprehensive answer. Much appreciated.

HI jeff,

Interesting to hear you tend to use spreadbet for your buy and holds and not utilise the £20k ISA allowance at all

Wires crossed! I am using my £20k p.a. ISA allowance these days. In addition to the spread bets & all the other bits & bobs. It's not either or.

Paul Scott - my personal portfolio performance in 2021

Boohoo

QUIZ

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Revolution Bars (RBG)

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