Diary of a Private Investor

We are halfway there…

…let’s hope we’re not living on a prayer!

Despite a poor June, I am pleased to report a first half portfolio gain of 24.54% versus a FTSE All Share (my benchmark index) gain of 3.33% which makes for a nice graph:

From what I can make out, it seems that many other private investors have had a great first half, so while delighted with the capital appreciation, I am not claiming any super powers. Small caps in particular have had a great run in 2017 but the momentum across the whole market seems to have run out of steam during the month of June. Indeed, the FTSE All Share has given back half of its 2017 gains during the month whereas my portfolio gave back only around 10% in the same period. This gives me comfort that I’m doing something right, although we are entering a pivotal period in the annual market cycle.

Trading updates through July/August followed by results in Sep/Oct will undoubtedly be a mixed bag. We’ll get a clearer idea of which sectors/industries/companies are doing well and which ones are struggling and hopefully, some useful trends will emerge. Of course, I don’t have a crystal ball but I have tried to position my portfolio to be resilient while taking advantage of upside opportunity as I see it. As ever, I will react to what I observe happening in the market and in my portfolio but for now, these are my current holdings and below, I have provided some commentary on the changes I have made since my last update at the end of April:

Rebalancing Changes

Hurricane Energy (HUR) – Since I updated on my trading/investment strategy for this special situation holding just a week ago, they have got a £500m funding away for around 100% dilution. Private shareholders have been shafted in my view but this is a big boys’ toy now. I have decided to hitch a ride on their coat tails and see where this ends up, probably being taken over by a major. I doubled my holding yesterday at 33p (1p above the placing price) and plan to sit tight with this core holding for the long-term. Position size is 2.86%.

IQE (IQE) – As I wrote last week, I have taken an overweight position in IQE which I believe is on the verge of a major wave of success. While the high weighting is risky, the company itself should be largely immune to many of the more general market forces such as Brexit, inflation and interest rates. It’s a calculated gamble, mitigated by moving to a more conservative approach with the rest of the portfolio. While I intend to retain IQE as a core, mid/long-term growth holding, I am treating it as a special situation over the next 6-9 months until I decide to normalise the position size.

Sold Out – Amino Technologies (AMO), Liontrust Asset Management (LIO), Paypoint (PAY), Severfield (SFR), D4T4 Solutions (D4T4), Ideagen (IDEA), Iofina (IOF), GVC Holdings (GVC), Golden Prospect (GPM). AMO, LIO, D4T4 and IDEA have all gone straight back on the watch list but for now, I wanted to take some risk out of the portfolio. PAY, SFR and GVC had become lower conviction holdings that I probably won’t revisit while IOF and GPM were legacy holdings that I have now been able to dispose of and place on my bargepole list.

Top Sliced – All of these are core long-term holdings where I have top sliced to lock-in profits, reduce risk and add liquidity to the portfolio; System1 (SYS1), Somero (SOM), Zytronic (ZYT).

Added – My main top ups have been into IQE but I have also added to Central Asia Metals (CAML), Watkins Jones (WJG), Microgen (MCGN), Anglo Asian Mining (AAZ), Beximco Pharmaceuticals (BXP) and Petards (PEG). There is risk here for sure but each stock has specific reasons why I have added and hopefully, one or more of these will outperform over the next 3-6 months. I have also added to Henderson Far East Income Trust (HFEL) as a core, conservative high yielder that also provides geo diversity.

New Holdings – Manx Telecom (MANX) as a conservative/defensive, high yielder alongside larger cap yielders Aviva (AV.), Lloyds Banking (LLOY) and National Grid (NG.). Three other recent additions are Games Workshop (GAW) which is delivering strong results and a high yield, Eco Animal Health (EAH) which is an interesting growth play in a defensive sector and 3i Group (III) as an interesting value play.

Watch Lists – I have 12 companies on a conservative, high yield watch list and 12 companies on a quality, growth watch list. All are companies I would like to buy over the next 6-9 months with a view to positioning my portfolio as a low maintenance, resilient, perpetual cash generating machine. But first, I am hoping for some further growth in the second half of this year for which I am accepting the higher risk of only having 25-30 holdings.

Portfolio Structure

I have alluded above to not being as diversified as I would like to be. I will write more on this later in the year but for now, I’ll leave you with some graphs that show the portfolio structure in relation to investment strategy, risk ratings and StockRank style, respectively. I can see where I think improvements can be made which will be my focus as the second half of 2017 unfolds.

Happy investing folks!
Simon (Twitter – @BrilliantLeader)

 

Disclosure – Most of my portfolio has been mentioned in this article. I trust the Current Holdings page will suffice for disclosure purposes.        

 

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