Going to Cash

The portfolio finished the week up 0.95% on the week and 62.89% on the year.

XPP continued to perform well up 16.7% on the week and sits at about 10% of the portfolio.  Any significant pull back from these levels and I will certainly increase my position size.

The portfolio was helped along by ACSO up 7.87%, SOM up 4.91% and IQE up 4.89%.  The only real lagard was TET which was off 3.70%.

I have been listening to Howard Marks – The Most Important Thing and Nicholas Nassim Taleb – Fooled by Randomness, while driving or at the gym (much better for making the time pass that techno music!). Both of these have prompted me to put a little caution into my portfolio and I liquidated a small part of BOO, FEVR and BVXP on Friday afternoon.  This brings cash up to being my largest holding at 16.6% of my portfolio. This may just be a case of fixating on the latest piece of information but I think few would argue that the market might be getting ahead of itself. Of course the market (as someone more clever than me said) can stay irrational for a very long time, so it is a question whether I have liquidated to early or whether I should continue to liquidate further tranches of the portfolio.

It was a hard decision to sell even a small part of these holdings but as they represent nearly 50% of the portfolio selling part of these was the only option.

As for the future my inclination is to push this percentage up to 25%. That said I have fresh funds to deploy in the form of my wife’s SIPP, which is currently half in cash and is slowly being deployed with a strong valuation bias (with the exception of BVXP).



As many of you will know (though not if you read the FT, it is not even mentioned) by now AVS was on the end of an agreed takeover yesterday from NEP Group Inc at 125% (2.25 times) the closing price on 16th November 2016. 

Reading the RNS was surreal and I expect not to be repeated experience. 

It was Paul Scott over at Stockopedia who lit the spark and I would like to say that then my razor sharp investing skills kicked in and I analysed the stock to death and then decided to take a position. However things were slightly different to that, as I wrote yesterday in comment to Paul’s column:

I bought in June, September and early October. Unfortunately (or fortunately!) I don’t have the time to analyse the s@&t out of stocks and looking back at my notes I was simply attracted by the ROA etc figures, the divi growth and the fact that it, on Stockopedia figures, was trading below book. That was enough for me.”

I still have a business that takes a huge amount of my time and I simply don’t have the time to spend analysing a stock to death before I invest (I am comforted by the fact that there is some research that indicates that you can over analyse and that beyond half dozen metrics you don’t increase your advantage. Somebody wrote yesterday that he was held back from buying because of the spread but if you think you are going to see say 100% over 3 to 5 years is a spread of 5% that important?) but I do some analyst and like to see:

  • Little, ideally no debt.  (Thanks to Robbie Burns for that one)
  • Substantial management stake.  (Thanks to Lord Lee for that one)
  • Honest management so no VLK for me.  (Thanks to Warren Buffett for that one.)
  • Good ROE, ROA, ROCE and operating margin figures
  • Dividends (preferably rising)
  • Low PE (nice but not essential. I own FEVR and BOO after all!)
What I now have to do is work out what I can learn from the AVS investment and whether this might translate across to other investments. 
Anyway back to AVS. Before yesterday’s rise it was my 7 largest holding and about 7.15% of my ex cash portfolio. It is now my second largest holding (BOO still has the top spot). 
My ex-cash portfolio was up 7.5% on the day. 
My average purchase price was 266p
My gain on the stock is £20,313. 
I have not sold as to do so would be to give up £1,000 by not waiting for the sale to complete though may be makes sense to lock in half now and give the market makers their turn!  But it does seem a lot of money to me!