Richard Beddard sees potential in the publishing house behind the boy wizard, and finds that he makes better investment decisions if he takes his time to trade.
This month, I have liquidated the Share Sleuth portfolio’s small holding of 434 shares in Colefax, raising £1,747 after a £10 deduction in lieu of broker fees. The share price, quoted by a broker, was 405p.
Colefax has been a sub-par investment, but by no means a disaster. I added it to the portfolio at a share price of 250p in September 2011. Uncharacteristically, soon after, in March 2012, I added more shares at the lower price of 214p. Then, in March 2014, I reduced the portfolio’s holding by half. That, incidentally, was a well-timed trade because, at 397p, the shares were almost the same price as they are today. Sharepad, the software I use to account for the portfolio, tells me that over the past eight years Colefax has earned the Share Sleuth portfolio a cumulative return of 80% and a compound annual return of nearly 8%.
Deliberative by design
My final trade was less well-timed. I had already decided to eject Colefax when, on the day of its annual general meeting, it warned of lower anticipated revenue in the year ending April 2020. The share price fell by 12% on the day, to the level I traded it at.
I can’t take credit for good timing, nor do I castigate myself for bad timing. When I add a share to the portfolio, the intention is to hold it indefinitely and preferably forever. Even once I have decided to part company with a share, it can take me weeks or even months to get around to making the trade.
This insouciance gives me time to reflect on decisions, which is important, because our decisions define us as investors. It reflects my belief that short-term price movements are not generally predictable and that the share price might just have easily gone up while I was cogitating. By restricting myself to one trade a month, I have embedded insouciance into the process of managing the portfolio.
The profit warning did not precipitate or hasten the trade either. The decision to sell was the result of my annual review a week earlier, which as usual took place after Colefax published its annual report. I simply could not see myself holding the company for the next 10 years (see Share Watch for an explanation).
Trades and dividends have lifted the portfolio’s cash balance to £6,522, 5% of the portfolio’s total. That is more than enough to fund a new addition or add shares in an existing holding.
I am investigating two potential new additions. The Harry Potter books are proving a surprisingly durable source of profit for Bloomsbury Publishing, and heavy investment in digital products for academic libraries should add more predictability to returns that traditionally have been driven by blockbuster novels and cookbooks.
Struggling PZ Cussons, owner of Imperial Leather and Original Source soaps, is divesting diverse food and cleaning brands to focus on 10 personal care brands. The proceeds of its divestments and a sharper focus may put it back on a path to growth.
There is also the possibility of adding more shares in Victrex, Howden Joinery and Dart, which, through its subsidiary Jet2Holidays, is proving there is a future in package holidays despite the collapse of Thomas Cook. All three are among my favourite five shares (see Share Watch). Next, which sits just outside the list, is another candidate for a top-up investment. It appears to be delivering on its promise to become the Amazon of clothing. All four shares are under-represented in the portfolio, with each accounting for about 3% of the total value.
Alumasc is the share most likely to be removed. It is not performing as I anticipated, and since it recently published its annual report, it is time to have a hard look at whether it still deserves its place.
Ruminative approach proves its worth
Steady gains suggest top-up in order
|Portfolio||Cost (£)||Value (£)||Return (%)|
|Since 9 September 2009||30,000||127,539||325|
|Companies||Shares||Cost (£)||Value (£)||Return (%)|
|TFW||Thorpe (F W)||2,000||2,207||5,580||153|
Notes: No new additions. Transaction costs include £10 broker fee and 0.5% stamp duty where appropriate. Cash earns no interest. Dividends and sale proceeds are credited to the cash balance. £30,000 invested on 9 September 2009 would be worth £127,539 today. £30,000 invested in FTSE All-Share index tracker accumulation units would be worth £64,938 today. Objective: To beat the index tracker handsomely over five-year periods. Source: SharePad, as at 3 October 2019