Watchlist review: Jan 2018

What goes on the watchlist is a key part of my investing process, as it is where I screen possible investment candidates for quality (which I define as the likely extent, certainty and consistency of future growth in profits). I only ever want to invest in the highest quality shares, as I believe this is the key driver of excess returns in the long run. You can read about how I try to identify quality here.

I’ve recently opened up my watchlist to US and EU listed shares and allowed it to grow from 60 to 100 members. The shares have been selected using my standard quantitative screens followed by a lot of thought about which have the best competitive advantages and growth prospects. This has been an iterative process over a few months, gradually replacing the incumbents with better candidates as I find and research them. Continue reading

PMP bought

Another so-so slightly disappointing week for my portfolio. As I had hoped, there was a positive trading update from one of my largest positions, JD Sports, but the reaction to it has been pretty muted. My portfolio hasn’t progressed much for the past three months or so and I’ve been trading quite a bit more than I would like as momentum has often been faltering.  This is making me more bearish about the markets in general. I’m going to do a bit of thinking about how to anticipate and react to a market correction and will write about it in a later post. In the meantime I’m going to try to let my cash balance drift up a bit and restrain myself from over-trading. Continue reading

If only…

…the market always reacted to news in the way you would expect. Well I guess that would take some of the fun out of it but sometimes quite a bit of patience is required.

It was a very busy week full of results and trading updates for the shares in my portfolio. There was news from Craneware, Games Workshop, Superdry, Jupiter Fund Management (also, Somero and Liontrust which I added to the portfolio during the week).

None of the updates were bad and some of them excellent. On the other hand, the market’s reactions to them were a bit all over the place. Continue reading

Good start to 2018

I had a very good year in 2017, with my portfolio up around 50%, including dividends. From the looks of things this was largely due to my strategy focusing on quality and momentum factors. Others who did this seem to have done very well as well. My strategy developed significantly over 2017, so while I think the markets are unlikely to be quite as favourable this year, I am optimistic. I’m feeling more decisive and confident that I can run a portfolio more heavily concentrated into my best ideas, while also being more agile in selling on signs of danger. Continue reading

Selling into strength

For a little while I’ve been meaning to write a post on selling into strength i.e. selling when a share is rising in price. A couple of things have prompted me to consider whether I should sell into strength more often. The first is some of my experience last year, where I gave back most of the gains on a few profitable positions, when the market became a bit choppy. The second is reading a couple of books published by momentum investors (O’Neill and Minervini) who seem to swear by it. Continue reading

Games Workshop – just another product cycle?

I’ve discussed and developed various aspects of my strategy a lot since I started writing this blog in February. There are diminishing returns to tinkering with my strategy and at some point too much attention becomes a negative. I am relatively happy with it now and think I need to give it some time to do its thing.

So next year I plan to write relatively fewer strategy posts, but instead take some deeper looks at some of the shares in my portfolio and watchlist. I’m going to try and focus on the more high level, qualitative and idiosyncratic issues rather than simply what can be seen from the numbers.

The first issue I’m going to explore is Games Workshop: is the current growth sustainable or just another product cycle? Continue reading

Christmas shopping

There seem to be some signs of danger in the market at the moment. I’ve seen some reports of very high levels of optimism and low investor cash balances (mostly relating to the US). While markets are still near all time highs, quite a bit of sector rotation has been happening away from growth and technology stocks towards value. These are possible signs that a correction is imminent. I’ve read quite a few predictions that 2018 will be the year for a correction after the long bull run we’ve had.

Continue reading