Portfolio review: August

It’s time for another quarterly portfolio review. Overall, volatility seems to have picked up a little bit recently but the portfolio continues to progress onwards and upwards.

For ease of reference, here is a link to my portfolio so you can see what’s in it at the moment. It’s actually a fantasy portfolio set up on Stockopedia to track my actual portfolio. The overall value is different (mine is worth £211k now) but I try to keep the proportions of each holding as accurate as possible so it can track my actual performance.

Performance

Benchmarks

The performance of my portfolio (QSS) is shown against its benchmarks in the table below (all the figures below exclude dividends).

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To recap, my benchmarks are:

  • The FTSE100
  • The top ranking decile of stocks according to Stockranks
  • A ‘buy and hold’ portfolio of all the shares on my portfolio and watchlist combined
  • A mechanical portfolio which selects the best 25 shares from this list using my watchlist spreadsheet
  • A more concentrated mechanical portfolio with the best 10 shares
  • [newly added] a ‘megacap‘ portfolio with my 10 favourite FTSE100 shares to buy and hold forever.

It’s been another good quarter, with my portfolio 14% up on the FTSE100 and 72% up over the past year. This belies a bit of volatility recently – June was not such a good month but t July and August so far have more than made up for it.

My benchmark portfolios are also doing pretty well with ‘buy and hold’ and the two mechanical portfolios well ahead of the FTSE100 and top decile of Stockranks. The concentrated mechanical portfolio is ahead of my actual portfolio though this outperformance is over too short a time to mean much. If it were to persist it would suggest I could improve something about my strategy, but I’ll wait and see.

Trading stats

The table below shows my trading statistics. The key things to note are the win/loss ratio, which shows the proportion of profitable trades, and the gain/pain ratio which shows the  size of an average win relative to an average loss. What I am aiming for in my momentum based strategy is to have a win loss ratio above 40% but to ensure the gain/pain ratio is as high as possible. I do this by cutting losers before they are more than 10% down and by holding and adding to winners.

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The trading stats show that things are progressing well. The gain/pain ratio in particular has improved quite a bit since I have taken profits on some big winning positions, including Boohoo in particular. There is a bit of a time lag in interpreting these statistics ie they are mostly a reflection of trades I initiated some time ago. The 13 positions in my current portfolio are up 25% on average so I should be able to close plenty more profitable trades in the coming months.

Individual shares

The biggest positions in my portfolio have made some large gains over the last three months, all up following great trading updates: Fevertree (up 43%), Burford (up 37%), Games Workshop (up 69%), Keywords (up 44%), Tristel (up 35%).

I’ve had a few smaller trades not pay off, so it’s worth looking at them to see if there is anything I might be getting systematically wrong or lessons to learn:

  • Best of the Best: this share fell by over 10% just days after I bought it so I sold fairly quickly. It since fell further so glad I sold but maybe shouldn’t have bought in the first place? It has a very small market cap and a correspondingly large spread. I thought my timing had been pretty good with it having recently issued good results so I think this was mostly just bad luck. I guess the lesson here if anything is to be more careful when identifying a buying opportunity with these sort of illiquid stocks, as it doesn’t take much for them to fall substantially. It might have been better to time a purchase on a dip (or bounce after a dip) or when the valuation was more obviously cheap.
  • Focusrite: another illiquid share that I sold fairly quickly on volatility. It has since continued to oscillate around the same price. I bought because the price was breaking out but looking back this probably wasn’t a good enough reason on its own (and the volume was not that high). Again, I think I need to pick my battles more carefully with less liquid shares like these.
  • Accesso Technologies: a slightly more liquid share but still pretty illiquid with a largish spread. This was a somewhat unusual purchase in that I bought after a big fall when I believed it to be sitting ‘on support’ just above the price at which a recent placing had taken place. It didn’t work out. Probably not going to do that again in a hurry.
  • NMC Health: I’ve bought and sold this twice, both times selling because momentum seemed to be flagging and both times the price recovered swiftly afterwards. Frustrating, though I don’t think I have a great deal to learn from this.
  • Boohoo: after a very strong run, I held on to Boohoo until it had fallen a good 20% from its peak. I should have sold quicker. This cost me quite a bit as it was a large position but the psychological pain was minimised as it had already multi-bagged from my original purchase. I think the lesson here is that even my winners need to be sold at some point and not to be blinded by past success.

Looking forward, I reckon I can see some dark clouds forming ahead. High valuations, likely interest rate rises and increased volatility in the US markets don’t bode well. I’m ready to quickly start selling out of weaker positions and moving to cash if things start going south. As ever, I’m guided by the moves of individual stocks rather than the wider market. On a brighter note, I’m still excited about a trading update from Bioventix and ready to add to my position here if they are ahead of expectations. Should be soon now, judging by the timing of last year’s update…

 

 

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