I have been investing since late 2001. This has been fitted around my life, so I haven’t been consistently in the markets. I have spent time trying various things – quantitative systems, day trading, hedged portfolios, the works. What I have ultimately settled on is a basically fundamentally based – I buy stocks where assets or cashflow are undervalued, or I think something will happen to drive the price up. I seldom use a stop, equally I seldom add much to a losing position – though I will on occasion. I then wait. I hold positions for years, not months (usually). I will exit if I think the opportunity has disappeared due to price appreciation or if the facts have changed. I take big profits and seldom big losses, as long as the losses aren’t too big, too frequent or for the wrong reasons this is OK.
In general I avoid punts – stocks with binary outcomes – for example junior oils / miners / biotech- if they strike they go up 10X if not 0. I try to stay within my circle of competency, however I will look to expand this if I smell money.
I have between 10-15 positions in my portfolio coupled with some funds. I hold some secured debt which I use as leverage, I can also lever up as many of my positions are held by spreadbetting companies (for tax reasons). This gives me the opportunity to use (say) my £1000 plus £200 debt = £1200 – levered up 5X to £6k. I have never done this. At most in 09 I levered up 2:1. Usual leverage is about 0-30%. In recent years I have been unlevered or have held cash.
My typical returns are in the region of 20% per year. Unfortunately I don’t have a great deal of capital so this isn’t enough to live on and to continue to accumulate.
The portfolio is regularly tested with an assumption of a 50% across the board fall – if I am still OK after this – ie. I have enough to avoid a margin call and to add to play the inevitable rebound then all is well, if not, then I need to make changes.
I worked in finance between 2005 and 2008 in a couple of jobs – as a futures trader at Futex, a quantitative analyst at Skandia and as an equity researcher at Putnam Investments in London. I left as I didn’t enjoy the lifestyle (though I enjoyed the job). There are/were some good people there and I learnt a fair bit. Since then I have worked mostly in the public sector – recently three days a week. I might be interested in getting back into the city – if the right opportunity came along…
Most of my investment education came from my 3 years teaching English and Economics in China. I had time to read widely, test things, see what worked and what didn’t. I read voraciously, FT, ADVFN, the Economist as well as lots of books. I built trading systems / quantitative testing systems using VBA and various datasets.
In terms of formal qualifications I hold a 2:1 from Oxford in Economics and Politics, level 2 of the CFA, the IMC and a bit of the investment advice diploma. None of them have helped me make a penny from the markets
Deep Value Investments Blog 