The BBB Fund Monthly Retro - July 2021 [ISA +8.2%, SIPP +1.9%, FTSE benchmark -0.8%]
Like many of you, I have been a Stocko subscriber for a while, private investor for longer, and been slaving 9-to-5 for even longer. This year, I have decided to take a more rigorous approach to investing, and one tip I have received is to make sure you do regular portfolio reflections. I work in Agile, so the concept of doing a "retrospective" every so often appeals; you not only discover what went well and should be repeated, but also what went badly and take actions to stop it from happening again.
Do send me comments or messages - would love a good chat or debate on my or your investments.
Introduction
What's the BBB Fund?
My name is Boon, and this is my Beer & Boat fund. Ideally, every year it should make enough to pay for my beers. And if it does well, maybe a boat!
What's my investment strategy?
Is it fair to say I don't really have one, or I'm not knowledgeable enough to know what strategies I'm deploying. Maybe one of you can tell me after reading ! All I know is that I do both small caps and large caps, I go across sectors, I stick to only UK listed shares, I like both dividends and also growth. I'm skeptical of blue sky, but am holding one currently. I balk at chasing high PE multiples. I avoid IPOs for at least a year after listing. But I'm a realist that as long as you buy at a share price that is lower than where it goes in the future, then there's no difference in how that pound is earned, when it comes to investing.
What's my setup?
I do all my share investing via a SIPP and an ISA. So you will see performance graphs and stats from both below. The SIPP is mainly used to hold larger and more liquid shares; this is because I use YouInvest, and often I find they are terrible in pricing for small caps, both buy and sell. The ISA is mainly for small cap shares, and I hold via IG.
What is my sizing?
I won't divulge how much money I have in each, nor the exact sizes of positions, but in both SIPP and ISA I have 6-figures. I will state Small (0-4% of portfolio) , Medium (5-9% of portfolio), or Large (10%+ of portfolio). My maximum limit of holdings is 15; I am doing this part time with a 9-to-5 job after all!
Why am I doing this?
Two reasons. The first is that by forcing myself to do a public Retro, I hope to be honest with myself, and have you clever peeps hold me accountable. I want to get feedback on whether you agree, disagree, or outright think I'm crazy. Feedback is key to improving. The second reason is that I've gotten so much from all of your contributions on Stocko, and would like to give back something. I hope you find some inspiration in my ramblings, for your own investment portfolio.
Performance
The BBB ISA
| Jul-21 | CY21 YTD | |
| ISA Performance | +8.2% | +39.1% |
| FTSE All-Share Performance (Benchmark) | -0.8% | +9.7% |
| % Portfolio in cash (end-month readings) | 54% | 52% |
The BBB SIPP
| Jul-21 | CY21 YTD | |
| SIPP Performance | +1.9% | +12.9% |
| FTSE 100 Performance (Benchmark) | -1.3% | +7.0% |
| % Portfolio in cash (end-month readings) | 35% | 41% |
Summary
Overall, I am quite pleased with the performance in July. Both portfolios beat their benchmark, and several of my ISA holdings powered some outstanding returns. The gains are especially pleasing despite holding almost 50% cash, waiting for the big corrections or (worse case) a crash, to ensure I have dry powder for the bargains. I strongly subscribe to the mantra that a few opportunities that will drive the majority of your returns, and you have to be prepared with cash to take advantage when those opportunities arise.
End Month Holdings & Commentary
I won't give commentary on every single holding, just on the ones that are occupying my thoughts.
| ISA - Changes | Name | Size ↓ | Comments |
| No Change | Begbies Traynor (LON:BEG) | L | |
| No Change | Sosandar (LON:SOS) | M | One of my key performers this month, and its latest results were very impressive. PE valuation is high, but I'd be surprised if they can't deliver better than broker forecasts. Raised money for the right reasons (more stock = more sales) and the recent surveys show that online sales are holding steady and not reversing to pre-COVID levels. Demographic (35-50, middle class) are the ones flush with savings right now to spend. |
| No Change | French Connection (LON:FCCN) | S | SP slipped because of the typical small-cap affliction: lack of news. I think the next update will be strong; summer dresses flying off the shelves, which is one of their staples. They were on the verge of getting to break-even on retail stores. COVID helped them close more and renegotiate rents. I think we could see a surprising profit for stores since the re-opening. Potential of a bid too. |
| Partial Sale | System1 (LON:SYS1) | S | Another share that had a good update. But check out their PPT results. Their new TV Ad Testing SaaS product is taking off like a hockey-stick. I wouldn't be surprised with a revenue upgrade for this FY. TV ad spending has been booming Apr-Aug this year, as reported by ITV, which would have helped their sales. I top-sliced a bit here as I'm up about 40%, and think in a market pull-back this will suffer quite a bit, as illiquid and still a bit blue-sky. |
| Partial Sale | Ethernity Networks (LON:ENET) | S | Most worried about this in my portfolio. Cash burning, blue sky. But the right sector (5G investments happening now by Telcos), right product (fits into OpenRAN architecture). However, financially unstable, a good chance they need to raise more cash this year IMO. The key is whether they can secure another few £m contracts for FY22, from now till December. |
| SIPP - Changes | Name | Size ↓ | Comments |
| No Change | Rio Tinto (LON:RIO) | L | Outstanding HY results. Interim dividend of more than 6%! But markets can't seem to decide whether its a screaming value, or commodity prices are all going to come crashing down. They also have lots of fires to put out; but for me those are all fixable and not life threatening. Maybe a few hundred £m exceptional costs. I am holding because I believe commodity prices will stay high, their copper mine expansion potential, and holding partly as an inflation hedge. Plus will be paid a 12%+ dividend a year for holding! |
| New | National Express (LON:NEX) | M | Added NEX during the "dip" in mid-July, and it has rebounded strongly since then. Think domestic travel will recover strongly, both in the USA and UK. In any case, the vast majority of their revenues are contracted (school buses, city transit, etc) so good visibility. They also can now pick off distressed smaller players on the cheap, as well as less competition for new contract bidding. Debt is a worry though - don't think they'll survive another economic shock, so the moment that comes I'm out of here as soon as possible. |
| No Change | Saga (LON:SAGA) | M | I'm with Paul on this one...! Read his commentary, it'll be so much better than anything I could write. |
| New | Revolution Bars (LON:RBG) | M | |
| No Change | Spectra Systems (LON:SPSY) | M | Waiting for the next trading update... share price afflicted by lack of news. Would have topped up if I didn't already have a Medium sized holding. |
| Partial Sale | Empiric Student Property (LON:ESP) | M | I decided to top slice a bit as sitting on a 40% gain. Can see this going to 100p+ in August on (1) updated NAV will be out, and should see progression of 5-10% from Dec20 NAV. (2) GCP Student Living, another student accommodation REIT, got bought out for 9% premium to NAV. ESP is currently trading at a 10% discount to NAV (Dec20). Therefore there's still a big chance of another 20% potential gain after their results on 12th Aug. Its never traded better than 8% discount to NAV in the past, hence my being a bit sceptical and locking in some gains. |
| Sale | Medica (LON:MGP) | - | I somewhat regret selling, but at the time it was a good decision. This was when cases were rising past 50k/day, around Freedom Day. Medica will be hit hard if hospitals need to cancel elective procedures again. Their share price and forecasts are priced for a full elective recovery for the second half of this year. And my own analysis of hospital admissions calculated there was a moderate risk. Luckily, it hasn't passed. But I sold at 165p, now its back up to the 170p+. Still, I think there's a risk this winter of overwhelming hospitalisations, especially if vaccine efficacy wanes and the third jab rollout doesn't go quick. Plus, always the risk of new variants... is still on the watchlist for either a good entry price, or post-winter when the risks are better known. |
What's on my mind going into August
August will be a key month. Clearly the markets now no longer view recovery as V-shaped. I expect there to be huge volatility, as we get buffeted by news of slow recoveries, COVID rising, inflation. No one knows if transitionary or not, but I think there will be some good 5-10% dips at least once or twice.
Several small cap shares are on my mind - I won't mention them as I'd kick myself if my writing them caused others to buy and for the prices to go higher before I buy! But this is the first time so far this year that I've had this many small caps near my buy prices, which makes me think that small caps could be good value at the moment. One theme I am going to explore is around Energy Storage Systems; this will be a growing area in the UK and worldwide to come, and at the very least I want to learn more about this technology. And hopefully find a good investment too.
In the mid and large caps, I'm exploring Drax (LON:DRX) as a potential play, but it is a complex analysis due to huge transformation in the past year plus regulatory threats. Boohoo (LON:BOO) is also one I've tracked, and think August is a bit of inflection point whether it goes up or crashes. I've got my eye on Itv (LON:ITV) as I work in marketing, and know there's a huge surge of ad spending right now. Just look at Google's and FB's earnings; large companies are spending ad money like crazy, and that extends to TV ads too. I am also going to explore adding some Gold exposure to my portfolio, to hedge further against inflation. £RMAP and £SGLN will be ones I look at, but also producers like Centamin (LON:CEY) although I'm loath to take exposure to Egyptian politics and financial stability. Any listed gold miners out there, with operations in stable geopolitical environments?
Disclaimer
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9 comments
Hi dahokolomoki,
Great thread and performance, well done.
I was trying to understand the performance returns, but could not understand if this includes cash or not. If it includes the cash the performances returns for your investments are twice as good?
Good luck for the rest of the year.
BSV
My performance does include cash! So yes, on the invested part is probably more like 30% better (I haven't done the maths but I think you can't just double the return date?)
My portfolios have definitely exceeded my expectations for the first seven months, but I do see lean times ahead. There were many massively mispriced shares earlier this year that delivered 50%+ returns in just a few months. But when I look through my watchlist now I struggle to see many that will deliver 50%+ in 6 months.
Where I'm hunting now is looking for takeover opportunities in the large cap space, as I believe as we enter the euphoric stage of the bull market, there's going to be loads of M&A deals at 30-50% premiums. Sumo was one, Meggitt the other recently. Itv (LON:ITV) is a strong candidate, see my discussion with Abtan below!
I've enjoyed the post and the returns are really tremendous.
Itv (LON:ITV) does look interesting and will take a deeper look.
BSV
Hi Boon
Thanks very much for writing this, I found it very insightful.
You asked for feedback, but if I'm honest, I don't feel capable of offering any. There are so many different investing styles and so many different reasons that an individual makes for buying or selling that it's hard to critique or praise anyone else's choices.
Taking today as an example, I am gobsmacked by what looks like a successful outcome for Thinksmart (LON:TSL) . Every time I looked at it I just couldn't understand what was so special about it, but those who bought have clearly seen something that I didn't and fair play to them.
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I do hold a few that you have mentioned, but one that I thought worth sharing my thoughts on was Itv (LON:ITV) .
I hold because of the potential of Britbox.
I must admit to being slightly baffled about why anyone would pay for this service, but the numbers don't lie.
There were 2.6m subscribers as of July 2021 (not all of them are paying), up from 2.1m back in January 2021.
If momentum keeps going and they can hit 10m subscribers, I estimate that ITV's revenues (i.e. excluding BBC's JV share) would be between £200m-£250m per year.
If most productions are being made for TV anyway, I imagine that much of this revenue will convert to profit. By way of reference Britbox US was already profitable after passing 1.6m subscribers.
Can it get to 10m subscribers? Honestly, I'm amazed it got to 2.6m subscribers, so a part of me thinks it will, especially as expansion into new territories continues.
In the meantime, the advertising side of the business should tick along nicely, supporting operating expenditure and growth in the Studios business.
The diversification in my opinion, provides sufficient avenues for future growth.
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Thanks again for posting and I hope that you get the time to continue in the future.
Cheers
A
As you saw Itv (LON:ITV) also intrigues me! Thank you for sharing your thoughts, especially around Britbox. That is interesting, I kinda glossed over that part because it was so tiny in the bigger ITV business.
I'm now thinking of it as potentially a sum of parts play. Especially the value of ITV Studios, as content producers and rights owners are getting bought out at ridiculous valuations. Just look at this week's acquisition of Hello Sunshine. £650m! Doesn't have the huge back catalogue of content that ITV Studio does, and by all measures is 5-10x smaller in revenues, productions in progress, etc. I can easily see ITV Studios maybe commanding £2bn, £3bn which is a big chunk of the current EV.
Great post. Your investing ideas seem very reasonable. There are so many ways to make and lose money investing. Explaining your thought processes is key. I'm not sure about holding so much cash, but each to their own.
Thank you! I am trying to get it invested but am finding a lack of opportunity, as well as wanting to removing timing risk (ie I try to space out purchases and sells).
I also do think markets are a bit toppy and want to hold some dry powder for a correction or bigger drop. I find that often, there will be no shares that meet my buying prices. And then when the markets dip, suddenly 3 or 4 do, so you need enough cash then to buy.
Great article @dahokolomoki - I enjoy reading your posts as well.
Thank you! :)