Lots going on in the portfolio so I thought I would give a quick update.
At the end of Q1 I was +4% ytd, now (14/4/2020) I am c+11%. This should be compared to the index which is -c22% now, at the low I was down c5% for the year. I feel a little bad posting this as lots of this is from non-usual (for me) trades… Many of these, I put on Twitter, unfortunately, I can’t post everything as it may move prices against me, particularly where I only sell half. I know many of you are not twitter followers. If you would like an e-mail when I tweet there is a service for that here.
The biggest contributor is likely my impeccably timed S&P put purchase in late February. I probably sold it too early as the fed cut rates. The next thing I did was sell many of my Russian holdings. I was worried about the Rouble and thought they were too high – given what was going on in the world. The next main thing I did was after / during the crash was I bought a number of investment trusts trading at a discount to NAV – IHR (Healthcare REIT) / SERE (Schroder European REIT) and SUPR (Supermarket REIT). These have rallied strongly. I also bought back into my Russian shares. I sadly, sold FP. I believed it isn’t quite low enough given the changes in the world, but am in two minds.
This doesn’t quite do it justice, there was much trading in/out of existing holdings – trying to get out when things were falling but get in when they were going up/ exiting things I thought were ‘overvalued’ relatively. There were wins / losses from this. I have done more trades in the first three months of 2020 than in all 2019 and 2018 combined…
Thus far it appears to have worked out OK. I am finding this an extremely difficult market to play. I don’t want to fall into the trap of trading my P&L / Asset value rather than the markets. Equally, I need to maintain my balance so that if we hit real lows (I am talking 2000 / 1500 / 1000 on the S&P I can lever up with decent purchasing power for the rise. This will be controversial but my ‘plan’ such as it is, has always been to tick over (20%/30% PA) until the crash/crisis before levering up and making 1x/3x/4x or more in a year or two. This may sound implausible but I have done this before – if you see my performance numbers I did this to a lesser extent in 2009, 100%+ returns.
Many people won’t like the use of leverage. I have little choice. I don’t have enough capital to make really life-changing sums without it and my strengths (balance sheet heavy / take a while to work out are lower risk / lower return than many, if not most investors. I don’t like my job / being in employment, more generally so this is pretty much the only way out for me.
There is also the issue of how I am spending my time. I still have a (4 day per week) job. To put this in context. I made more in the first 2 weeks of this month than I will in the rest of the year in the job, the portfolio is 15-25 years of spending. Yet, I find it hard to push the button to quit. To a degree what was supposed to be a safety net has become a hammock. It is almost certainly costing me money in foregone profits, I don’t enjoy my job, at all. Yet I am concerned about the psychological effects of not having the steady drip drip drip of a regular income. The time will make me a better investor, but would fear make me worse, or better? Its something of a one-shot decision – I have not put too much effort into my career, despite a decent education so may well be near unemployable after a few years out. I have to take the leap sooner rather than later.
Markets are in something of a no-mans land. They are not cheap, but are not as expensive as they were. FTSE is at c2016 lows, S&P 2018/ early 2019 levels, DAX 2016 levels. Who knows what the right price is? Government will print and do you want to hold paper money knowing this fact? Will there be a treatment to make COVID less fatal? Will this re-emerge in China / places where it was thought eradicated (I think ongoing re-emergence is highly likely). Many uncertainties.
The other way to look at it is – if (say) 30%+ of people in the richest countries can’t have a couple of months off without working – are they really that rich ? Why should 3/6 months of people not paying their debts / rent / receiving money crash the economy? For me, the smartest thing would be for government to give smaller handouts but to pause interest / debt / rentals for 3/6 months until the world went back to normal. What they seem to be doing instead is giving away largely printed money. This may not matter. Many people / firms will have had the shock of their lives. Potentially no job or income, and a few weeks savings at best – it is possible they will save more, permanently, even excluding those who lose jobs / businesses. This may multiply through the economy, if people save printing need not be inflationary. China seems to have come through this relatively unscathed – I suspect due to a greater culture of saving at all levels.
For me, I think I want to be 75-85% invested in stocks, 15-25% cash and gold. Currently, I am c34% cash/gold. I have credit available (mortgage debt / loans sat in cash) worth 50% of the portfolio which itself can be margined up more, perhaps to 2x/3x value. The debt is long-term and fixed-rate, so innately acts as a bit of an inflation hedge. I don’t think now is the time to lever up. It may well be approaching though. It’s possible that after lockdown ends bad figures persist and that is a catalyst for a proper move down. Then again I also believe it possible that we are in the process of a melt-up. Investors don’t want to hold easy to print cash so use what cash they have to buy real assets.
My current position is 66% invested – ie 34% cash/gold/silver, with debt I could invest on top. This makes me look a lot less invested than I have been. A few days ago I trimmed SUPR, IHR and CMCX quite heavily, this would be worth another c25% of the portfolio.
I am hopefully selling a property worth another 17% of the portfolio. I think I can do better by investing, particularly now, though it is higher risk. I am also still struggling with the increased size of the portfolio and maintaining sensible position sizing, which a bigger pot will worsen. I need to alter my conception of what makes a worthwhile position and think in terms of portfolio weight, rather than my prior thinking of £x…
My investing isn’t really set up for times like this – many of my ideas – things that are realising (hopefully) like ASTO, ALF DUPD, DCI, PHN don’t move much. So I benefit on the way down and suffer on the way up. Until, hopefully, one day I get the piece of good news I am waiting for and up it pops. For now its a drag on the portfolio. Unusually quite a few of these have fallen. This could be viewed as an opportunity but when things that are likely to pop up more – like the supermarket REIT / IHR have fallen I will do these first. There is plenty of time for DCI to sell up….
In addition, the speed of the fall and rise have been beyond my ability to really invest well in. I am someone who mulls things over and thinks about what I am doing. When things move this fast that simply isn’t possible so you either miss out, or jump in and rethink, or both.
On to holdings.
|ASTO||Asset Co||Realization||10%||Biggest holding – has fallen due to crisis liquidation. Worth a look – court case very likely to make this worth 500p+. Highly illiquid|
|SERE||Schroders European RE||Property||6%||Cheap European Property fund, one of the few good ones that hasn’t bounced much.|
|CMCX||CMC Markets||UK Co||4%||UK spreadbet co – should do well given trading conditions. Have halved position.|
|AJOT||AssetValue Investors Japan Opportunity trust||Realization||3%||Good Trust – good assets, now even cheaper. I really should buy more.|
|HYDR||RusHydro||Russia||3%||Traded in and out of this one too, pretty successfully. Still good yield c9%. High quality asset, not likely to be affected by COVID.|
|beg||Begbies Traynor||UK Co||3%||UK insolvency Administrator – likely to be lots of work for them in the post COVID world|
|GPW||Warsaw Stock Exchange||Poland||3%||Doesn’t look to be affected. If anything higher volume is a positive for them.|
|RSTIP||Rossetti Prefs||Russia||3%||Prefs of Russian Grid / generator owner – see my main article for details. Looks to be a 5% yield but likely to increase|
|FEES||Russian Federal Grid||Russia||3%||Bought at 19, Sold at 20, bought back in at 15. Now 17.5, yield c 11% on a 12% payout ratio. PE c4.5|
|GLTR||Global Trans (Russian rolling stock)||Russia||3%||Unforgivably cheap. I bought at 9, sold at 6.5 then back in at 5.5. I have been warned of *some* fraud on these as well. I don’t believe it due to dividend and long track record. Added to this as contracts are long. PE of 5, net debt under 2 years operating profit|
|YCA||YellowCake||Uranium||3%||Uranium Investment trust. Uranium they hold is worth (at $30/Lb) £2.63 per share current price £2 but there is a shortage of Uranium due to mine closures so price will rise and a panicked buyer may come in to push up the price.|
|EOS||EOS Russia – Russian Generators||Russia||2%||This is interesting – a Swedish investment trust holding a bunch of Russian generators also dirt cheap. Also at a discount to NAV of 10%.|
|PHN||Polski Holding Neuromyski||Poland||2%||Cheap Polish property, I trimmed this quite heavily – almost at lows, to put money into things which would move. Bought back in higher. Not clever.|
|MOEX||Moscow Stock Exchange||Russia||2%||Cut weight as held up well in crisis.|
|BXP||Beximco Pharma||Bangladeshi Pharma||2%||Very cheap, PE of 5, 6% yield but what effect will uncontrolled virus spread have on Bangladesh? I added recently|
|ETLN||Etalon||Russia||2%||Russan Apartment Builder – buying as likely to return c 25% MCAP in buybacks / divi, if not cancelled. Even if it is very cheap, firm is in markets that need housing. 0.5X book PE 5 good growth. See VIC post here https://www.valueinvestorsclub.com/idea/Etalon_Group/5543028163|
|ALF||Alternative Liquidity Fund||Realization||2%||Virus will delay realizations. Price has fallen|
|FXPO||Ferrexpo||Miner||1%||Cheap Ukranian Iron pellet production|
|WCW||Walker Cripps||UK Co||1%||Still cheap, strong balance sheet, not tempted to add.|
|RSTI||Rossetti Ords||Rusia||1%||Russian Grid / Generator parent. PE of 3. Substantial assets|
|DUPD||Dragon Ukranian Property||Realization||1%||One for the patient, still trading at a substantial discount.|
|DCI||Dolphin Capital||Realization||1%||Perpetually disappointing, now even cheaper, some people tell me they are fraudulent.|
|KAP||KazatomProm||Uranium||1%||Leading Uranium producer – signs Uranium market may move out of balance into large price rises.|
|CMCL||Caledonia Mining||Miner||1%||Zimbabwe gold miner – good results – weight determined by the fact it is in Zimbabwe. PE of 5|
|DDDD||4D Pharma||Pharma||1%||Bought in to this too early and on the way down – 60%+ losses. Still convinced they are a good company with good prospect of success.|
|WEY||Wey education||Growth||1%||Growth Co Experiment|
|RMG||Royal Mail||UK Co||1%||Definitive Market position – convinced this is undervalued, need to look at again.|
|ENET||Ethernity Networks||Growth||0.4%||Growth Co Experiment|
|EML||Emmerson||Growth||0.3%||Growth Co Experiment|
|KR1||Kryptonite 1||Crypto||0.2%||In case Crypto ever takes off|
|COS||Collagen Solutions||Growth||0.1%||Growth Co Experiment|
|SAV||Savanah Minerals||Growth||0.1%||Growth Co Experiment|
|Cash inc gold and Silver||34%|
Standout for me would be GLTR – its just too cheap, it has very long term contracts so shouldn’t have fallen so much. It was driven by illiquidity….I also still think 4d can bounce hard, but have been very, very wrong on this for quite a while.
I have more holdings than is ideal, it’s very difficult to monitor this many, but investing in Russia / off piste jurisdictions means I need to diversify.
On Sales – I exited FP. – Fondul Proprietea, large long term holding, 30-50%+ profit (ex dividends) I thought as its a Romanian largecap it would be hit as index sold. This was wrong, it soon bounced back, and didn’t fall all that badly but not tempted to chase it.
Sold out of IHR – Impact Healthcare REIT c 22%+ profit on large size in under a week. I will be watching this one. As news of COVID deaths increases in care homes I expect this to fall, at which point I will likely buy in again. COVID will likely not kill enough to really damage the business and long term by severely injuring rather than killing many of the elderly it can actually create new demand.
I also sold out of SNN – nuclearelectrica in Romania. Actually wish I hadn’t, thinking of buying back in, likely higher than I sold.
Sold my holding in SUPR. This fell down to c 90p during the panic. I made a quick 16% on large size.
Next moves are to increase my natural resources weight. Ideally companies not into exploring with solid cash flow, solid book value and a dividend. Not typical natural resource co behaviour I grant you. This is mostly to inflation-proof my portfolio, having said that I want to avoid being in anything which gets hammered in any recession / slump.
I am also interested in property plays, not UK housebuilders (whole market is overvalued). Looking for 30%+ discount to NAV / minimal gearing or rock solid tenants. P/FCF of 10%+.
As ever, thoughts appreciated.