Portfolio composition (riccie)

just popping this here. any views or comments are welcomed. Had MPAC until today which would have probably sat somewhere around 8%, but released this for cash. cash now 29%

One small punt (AMC) a few small positions like SPSY where I cannot fully fathom them but feel I need to watch and participate right now. A few solid co’s like FSTA (shareholders get a decent discount card :slight_smile: ) and IMB as the dividends I get are incredible contentious I know

Yes, $TWTR is a large position…

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I’m interested in how you got here. Do you have a “normal” size of stake, which means that a few have really appreciated while the rest have languished, or have you built up such a lop-sided portfolio by continual additions to your top stocks?

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Hi riccie,

Many thanks for the portfolio chart. Always useful to see what other investors own. Even more useful can be the feedback you receive from fresh perspectives.

I have written about HEAD, BOO, IMB, FSTA and BOTB for SharePad and can understand why investors held those shares at the time of writing.

All I know about SDG and SPSY is what is written on this forum, while I recall Leon Boros covering TWTR at a Mello event (at 3h32m). I am aware of GDWN but know nothing about BILN and AMC.

Quite a diverse collection of businesses, with a mix of large and small, ‘growth’ and ‘value’. I am not clear if there is a common theme or strategy at play here. Really successful investors typically latch onto a particular winning stock-picking approach, then define some guidelines and stick with them (think Terry Smith, Keith Ashworth-Lord etc). Can you articulate your strategy?

Position sizing is interesting. Would be useful to know the answer to:

My rule of thumb is to always consider whether owning anything under 3% is worth the bother – unless of course i) you think such sub-3% positions can multi-bag, ii) you are looking to build their weightings further, or iii) they have become 3% positions only because other holdings have grown enormously!

I would say GDWN does not seem to be the type of company that will multi-bag anytime soon, but ought to be reasonably reliable and perhaps ought to justify a larger weighting to ensure its returns make a difference to the overall portfolio.

For example, to have the same portfolio effect, SDG at 10% has to advance by only 10% while GDWN at 2% has to advance by 50%. Which is the more likely?

Developments at TWTR, HEAD and SDG, plus how you deploy the 29% cash weighting, will largely dictate your portfolio returns in the immediate future. With the cash, are you intending to introduce new shares or add to the existing positions?

Maynard

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A post was split to a new topic: Portfolio construction (Snazzytime)

Riccie

I’ll bite. What’s the investment case for Goodwin (GDWN)? It has poor metrics - ROCE 9%, CROCI 8%, EBIT 8.5%, BUT Free cash conversion of 137% - and looks as if it is in decline, and some alarm bells going off in my head at the shareholdings and directors. This was the sort of company I hated when I was an auditor back in the day.

The board is a bunch of guys called Goodwin and one of the non-Goodwins is 79.

28% of the company is owned by a dormant company called JM. Securities.

19% is owned by JM Securities no3, where another 2 Goodwins show up, but don’t seem to be on the board of GDWN.

The director Goodwins own just over 4%.

The combination of the numbers suggesting decline, sloppy control of the company shareholder register and a Dickensian number of Goodwins does not suggest value to me. It suggests internecine warfare between the family - I have audited such companies where the board were barely on speaking terms and would only appear in the same room under duress!

I’d be happy to be put right, however :grin:

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Hello,

Thanks for the comments. Last year I took the opportunity to really try and revise and stabilise my portfolio. I have put in place some self guidance which in part at least explains some of my thinking. I have copied this below.

Ensure market in uptrend.

Buy shares only in upward trend

Set first stop loss at 10% of position and move to BE, then trail

First Loss is Worst Loss

Preserve capital

Buy initial stake based on R/RW and scale in on confirmation

Set Target price to Exit

Do not average down

Buy quality and screened or approved shares

Let the price prevail over the story (sell and not hope)

I do not have a normal stake as it were. This very much depends on my view of Conviction (how convinced am I that I am right) and Time Horizon (how long am I expecting this to play out)

If you consider those as the X and Y axis on a graph and plot your shares against that. Things would very much fall somewhere within four quadrants then:
High convicion and long time horizon, high conviciton and short time frame, lower conviction and longer timeframe and lower conviction and longer timeframe.

Accordingly my higher weighted shares are those I have more conviction of (hence GDWN and SPSY for example are conversely smaller positions) and I try and ensure I am up to but would struggle to convince myself to go over 20% of portfolio on any position * this in itself is a tougher rule to maintain hence I work full time too and do pay in all and anything left over into my ISA each month after expenses,mortgage etc. So TWTR I am making a bold stance that this will be a success and the initiatives on the earnings calls will come to fruition. And it will succeed and pay off, but a longer time frame to this. A great co. this is a very long term if not lifetime hold for me. Using my rules above, this was scaled into, buying into price as the price started to go my way from entry, then I begin to get where I want to be, and equally in those first few weeks would also trim back ito a comfortable size and bide my time until I could be sure a direction in the price.

IMB is a stalwart, just sits there and the returns I get in terms of income, is just crazy really. the dividend is then reinvested the same. Why sell. (emotive co I know)

AMC$ (US) is just an out and out punt that a friend and I decided to make. To potentially ride the wave that caught GME. It may not happen and if it crashed by 50% or so it would have little impact and I would exit. But the potential of WSB style gains on this means (although I would not really go anywhere near this) I dipped in for a few, more for a laugh with a mate. Hopefully that doesn’t sound trivial or irresponsible.

BOTB is a sorry story. I held these at about £3 a year or so ago, and remember selling on the train on the way home early into the pandemic thinking people would be losing jobs and cutting discretional spend - seemed rational - Had I kept my original stake this would now be sitting as 30% of my portfolio I estimate. I mean, quite significant money. Easy come, easy go. So I have more recently bought back in on the failed FSP dip, and the post placing. Only 2% as I am less certain * less conviction * about the moat to a business like this (there are many similar style comps out there) but all metrics suggest it is pretty stable and I may again add on continued positive news. I enjoy playing the games and have several times come very close to winning. I always play for a Benz.

HEAD got to 13% as I bought in the lows last year and bought on strength. And the unrealised gains count for a significant part of that figure. This share will unlikely get sold anytime soon. It pays a dividend, is safe and steady, again with improvement initiatives afoot to improve sorryful but steady margins, and has real competitive advantage in its business model. A bit of a Terry Smith situation: buy a good co. don’t over pay, and now do nothing!

SDG I have posted on elsewhere. A good heritage company, new manageement to remove the stale. - on this note I have received an email from the FD on the matters @MaynardPaton raised, so will be good to hear back about the net other income stream noted.

I mentioned FSTA earlier. A good co, one of the better brewers having sold its brewing business. I like the pubs, I like their hotels, and I like their metrics (for their sector they struck me as one of the better run) , we always go to and enjoy their pubs, now I also have a prividge card which will be helpful with pubs reopened.

BOO is at 8%. For me this is high conviction but I am not sure how the short term time frame is likely to pay out, so I am now on the fence: do I increase or will I need to scale back a bit or even downsize come the next announcement. Well this is due soon Q4 5th May, so that will give me some guidance. I no longer have reservation about buying into strengh if announcements justify it. If the outlook improves, and the future earnings propensity improves then why quibble over paying a bit more. And to do so upon knowing the facts seems more prudent than taking the plunge before hand?

Right, that is it for now.I will add some more details another time I am sure. thank you for your time and comments.

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Thanks for your comments. As a holder of SDG at the time the board changed, I agree with your process there. I have legacy positions still from my early investing ventures. I hope your rules will not be too restrictive

hi riccie

A couple of questions from a relative novice if you don’t mind.

Regarding your rules:

What is BE? How does this work in practice?

What is R/RW? How does this work in practice?

Thanks

Snazzy

Sorry, BE is my own shorthand, for BreakEven.

Equally before I begin I should say the above are more guidelines or self principles, rather than strict rules. For example, a stop may not always be 10%. But the imperative is a stop is considered ahead of a trade, and at minimum evaluated or even triggered at the predetermined level.

So the point I am making is to work out the initial trade size, and base this on the Risk Reward calculation. In simplicity a stock trades at £2 (200p) and I decide this is the right time to buy. I work out my stop before entering the trade = £2 * 10% = 20p below entry price. My stop is now set at £1.80. And if the price crosses or closes below this point I should exit, or as outlined above, at least evaluate if I am to exit. In all fairness I do not use stops declared in my account. What I do is set an alert to notify me if the stop level is broached, then I can check and work out how to respond. Do I exit, do I reduce by a 1/3 or 1/2. It forces me to be far more objective and less wishy washy by having agreed with myself before hand the point I decide I have this wrong and need to evaluate

R/RW = Risk / Reward. Again my own shorthand. I will add a bit more on this later, what I mean and how I would approach it.

Edit, to save me some time, I went to a book and found sections on Risk Reward. So I hope you find these useful snippets.

Risk (work out your maximum loss)

Do this by basing your lotential loss on a %age or value in respct of your overall portfolio’s worth. or a percentage of the position stake you are entering. For me, I might make an initial position of say 3% of my portfolio value. I would then ensure my stop is around a level I am happy to declare myself wrong and reconsider. This might be around a 10% mark.

Reward (Predetermine minimum profit potential)


This suggests a minimm of 2:1 ratio. So if your price target should be sufficiently larger than the amount you risk, but you can work out what is right for you. Eg if you worked out your risk was a notional £300 before the stop was hit, then you should be looking for a realistic £600 gain to make this trade worthwhile, * based on your research and modelling etc, as this always has to come first.

I hope that is of some help to what I have meant, earlier.

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OK, will pen a few notes soon.

Hi

In my experience, ‘stop-losses’ can lead to ‘stop profits’ in the long term.

It’s much better to make decisions based on actual company rns, and do the research prior to having a substantial holding so you have peace of mind what-ever the market maker’s price.

If position sizes are too high, you will not sleep, whatever the stop-loss. Have more positions of a lower size, which are thoroughly drilled-down ideas.

Good luck!

Ben

yes Ben some good points there.

Firstly, if you are too concentrated or have positions too large then the sure sign is you cannot sleep for fear of the unexpected RNS or trouble the next day!

I also rarely set stop losses in the system, but do make a note in SharePad/ or set an alert so I can track once my theoretical stop is triggered. But clearly this won’t get you out on an unexpected plunge.

Hello @Diogenes . I am going to have to sort of short change you here, as it has been ages and I havn’t yet replied.

You will know there is no broker coverage of GDWN. So no forecasts in the market.

I also recognise the historical numbers here are somewhat lacking. But the key is the future opportunities and investment they ahve put in place for offering a gloabl niche in sizeable castings.

My short change is that I would offer you this PI’s research to have a read over Goodwin...unique,complex, but also exceptional as a long term compounder stepping it up a gear

Essentially, your investment at this point in time is in their ability to realise this strategy

The Group’s main OBJECTIVE is to have a sustainable long-term engineering based business with good potential for profitable growth while providing a fair return to our shareholders.
The Board’s STRATEGY to achieve this is:
· to supply a range of technically advanced products to growth markets in the mechanical engineering and refractory engineering segments in which we have built up a global reputation for engineering excellence, quality, efficiency, reliability, price and delivery;
· to manufacture advanced technical products profitably, efficiently and economically;
· to maintain an ongoing programme of investment in plant, facilities, sales and marketing, research and development with a view to increasing efficiency, reducing costs, increasing performance, delivering better products for our customers, expanding our global customer base and keeping us at the forefront of technology within our markets, whilst at all times taking appropriate steps to ensure the health and safety of our employees and customers;
· to control our working capital and investment programme to ensure a safe level of gearing;
· to maintain a strong capital base to retain investor, customer, creditor and market confidence and so help sustain future development of the business;
· to support a local presence and a local workforce in order to stay close to our customers;
· to invest in training and development of skills for the Group’s future.

For me this is a 2% position, and you can see cash is available to scale on this if the results do start to come through. And as they do and clarity of the future emerges perhaps more research will materialise.

So not a great stake at risk, but comfort in being part of a family group who have their name and reputaion on the line, who’ve re-invented before and plan to do it again. And it has to be better than a punt on $DOGE :smiley:

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Hey, I hope GDWN works out well. It’s a question of conviction, how deeply you believe the story despite the cynics. Yes, I too have tales of valuing the hype over the raw numbers. SDG has, so far, worked out well. FCCN and UAI not so well. I think I go through a cycle of investing despite the amber or red lights, and just punting on the green lights. I don’t think I have the discipline to run a process.


let’s not talk about $AMC
I sold but this would otherwise be way more than a 2% position by now.