Earlier this week I sold my holdings in Gamma Communications (for an 8% profit) and RWS for break-even. I used the proceeds to buy back into Burford. I’ve been quite busy lately so there’s a bit of a delay before noting trades.
The main reason for selling Gamma was to buy back into Burford and concentrate my portfolio further into my most confident ideas. Gamma just happened to be my weakest holding at the time. It’s hard to put a finger on exactly what makes Gamma my weakest holding. I just feel a bit more ignorant about it relative to my other holdings and less confident as a result. I am mildly concerned about certain risks: I hear anecdotes of service issues (though these don’t seem common); it requires quite a high level of capex and so free cash flow conversion is not so great; and I’m a little uncertain of the technological risks. I still think there are a lot of positives but it goes back on the watchlist for now.
Similarly the main reason for selling RWS Group is to buy Burford. In the case of RWS I still see a lot of positives but the issue of the European common patent and the impact this may have on revenues has stayed at the front of my mind and just seems like a risk I shouldn’t be taking in a more concentrated portfolio.
I’ve bought a 4.2% holding in Burford with the proceeds. This is only a week or so after I sold my previous holding because the price was drifting down and hit my notional ‘stop loss’ so I would have done better to hold on a bit longer. I bought back as the price started surging up again on heavy volume at the time of the AGM which seemed to good an opportunity to miss. Buying back requires me to admit selling was a mistake but fine – this churn has cost me but it shouldn’t put me off buying back if it’s the right thing to do. I’ll try to pick up on whether selling too early is a systematic error I make at a later date – my previous review suggested sell decisions had been pretty good overall.
Anyway, I previously set out my reasons for holding Burford here. Burford seems to go from strength to strength and has raced ahead of its rivals in a market with really quite exciting growth potential. The valuation still seems quite reasonable all told. I’m happy to hold it again and may look to increase the holding further.