Portfolio Performance: Two years strong

Saturday, Jul 27 2013 by

July the 4th marked the two year point for the portfolio, landing (a little sadly) while I was away. This meant the portfolio update - and the birthday celebrations, with a dollar-shaped cake and novelty £50 pound note serviettes - were delayed for a while, notably until after I'd actually caught up with what was going on and rambled on about Communisis for a little bit. We're here now, though, and after the extremely tedious task of updating all the spreadsheets which keep my backend calculations in working order, I've put together the usual charts and figures Satisfying reading they make for, too! Through a combination of blind/beginner's/sheer luck and some modicum of improving stock picking analysis, its done rather well for itself over the last couple of years:

Though, I must say, the graph is flattered by two factors. Firstly; the benchmark I use, the FTSE All-Share, is quoted as an index. This means it's just the value of all the shares inside it. If you were to actually buy an All-Share tracker, you'd receive or reinvest dividends. Over the two years shown, that probably accounts for about 7% more growth than the graph above shows - so you can safely bump that line up a little. Secondly, and more intangibly, the choice of benchmark used will always alter perception of performance. The FTSE Small Cap (ex investment trusts), another perfectly reasonable benchmark for me to go against, is up 28% (pre-dividends) in the same time span - significantly more than the 12% gain the All Share is sitting on. Which is a fairer benchmark? In favour of the All Share, I don't limit myself to small caps - I've had several FTSE 250 companies in the portfolio, and currently about a quarter is invested in companies falling into that category. The majority weighting is still in small caps, though, and since my portfolio is likely to be much more volatile over the long-term as a consequence of this, there's a strong argument for using that index instead. The choice of benchmark doesn't hugely bother me - it's just a nice comparator, and since I'm up on both, I'm not hugely fussed.

I've also compiled a list of all the equities the portfolio has ever owned, along with their performance. To save my sanity, I haven't…

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3 Comments on this Article show/hide all

cig 15th Aug '13 1 of 3

Another way the index comparison will currently bias in favour of your style is that you're miners-free. The LSE has carved itself a niche as a place to list the world's miners, hence a resource overweight in all broad "UK" indices. This will flatter you when the mining sector craters, as recently, and you'll be left behind during commodity booms (miners are leveraged on commodity prices). A more accurate index would be some ex-miners variant (perhaps ex-finance as well, though long term the up and downs there might be less drastic, unlike the perennial commodity cycle).

That said you've still done very well, I would guess an ex-miners, ex-finance UK index would be in the vicinity of +40% on your time frame, so congratulations still!

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ExpectingValue 21st Aug '13 2 of 3


Nail on the head, of course. 2 years is very much the sort of timeframe whereby my results will reflect - for better or for worse - my biases and not necessarily my stock picking. I avoid both financials and miners generally, and get into all sorts of interesting questions about what it's fair to compare myself to.

I comfort myself slightly by promising not to get too excited about my performance until I've got a real peak to trough under my belt - since I started in the middle of the recession, I'd quite like to get through the boom we're likely to see for the next however long, and then through the nose dive value shares will inevitably see when a real sell off occurs; a sell off I came in after this time.

I believe empirical research is on my side with the strategies I employ, so I think I'm stacking the cards in my favour (doesn't everyone?) - the real question I want answered is whether the qualitiative judgements I make add any value or, as probability and history would suggest is more likely, I have no real predictive power.

Yours cheerfully,

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johnrosier 22nd Aug '13 3 of 3

Great performance! I don't think you should strip things out of the index to justify your performance. It was your decision to not to hold mining stocks and to focus on mid-cap stocks. I reckon the FTSE ALL Share Index is as good as any as it reflects the UK market which I am guessing is where your liabilities/costs lie. If you buy some overseas equities you are doing that either because you think you will get a better return or reduce the volatility in your portfolio compared to the All Share Index. Have you considered something like ShareScope for managing your portfolios; it will give you all the stats you need, stock returns etc at the press of a button, without having to employ loads of spreadsheets.

Website: JohnsInvestmentChronicle
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About ExpectingValue


Private investor turned hedge fund analyst, looking predominantly at global small caps. Sector agnostic.


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