Why I said goodbye to one share, and doubled my investment in another

Our Share Sleuth Richard Beddard sells an old holding and doubles his investment in an existing one.

This month, I stopped sitting on my hands, jolted into action by an email from a reader wondering why, since I had deemed some shares good long-term investments, I had not added them to the Share Sleuth portfolio. He wanted to know whether I believed share prices would fall again – whether I was waiting to pounce on bargains.

Falling prices are an occupational hazard, and if I worried about them I would probably never trade at all. Perhaps the simplest reason for my trading reticence on this occasion is that I am not afraid of rising prices either. Less than 5% of the portfolio was in cash, so, even if the stock market takes off, Share Sleuth will not be harshly penalised by a large cash allocation earning nothing.

Cliff-hanger

When I am investigating a company, I always have in mind the next one or two. Last month, this column finished on a cliff-hanger. Animal feed additive manufacturer Anpario was the pick of the shares available, but Share Sleuth already held a small holding. A larger holding requires more commitment and since 4Imprint and Quartix were coming down the pipe (see Share Watch), I played for time. Other shares, at an earlier stage of research, might tempt me too. Top of the list is D4T4, a company that sells software that captures data about our behaviour as we use websites. When your next trade is likely to be your last one for a while, it is quite precious.

I have also been a reluctant relinquisher of shares, and here Alumasc must hold the record. It was an orphaned holding in Share Sleuth, too small to be significant. The portfolio acquired it over 11 years ago in November 2009 and I never had the confidence to add to it. In last December’s Money Observer, I questioned whether Alumasc would ever turn its high returns on capital into growth, but I have clung on to it regardless, always wanting to give the underdog one more chance, and not wanting to write off the sunk cost of 10 years of research.

On 1 June, I finally ejected all 938 Alumasc shares. The actual price quoted by a broker was just under 77p per share, and after a £10 charge in lieu of broker fees the portfolio gained about £708 in cash. Although Share Sleuth made a loss compared to the purchase cost of nearly £1,000, thanks to dividends the holding made us a profit overall. The annualised total return was just under 3%. When I think of the time wasted analysing Alumasc, and the opportunity cost of better investments foregone, I recognise that it was a failed trade.

Doubling up

Deciding whether to add a share was easy. I went with the Decision Engine, my scoring system. The top three shares are unavailable to Share Sleuth because it already has sizeable holdings in them. But, as we know, the portfolio had a relatively modest 2.5% holding in the fourth, Anpario, which I’ve doubled to 5%, adding 937 Anpario shares at a price of just under 365p. Including a £10 charge in lieu of broker fees, the transaction cost about £3,425.

Share Sleuth has one less member now, with 26 constituents. It also has little more than £2,000 in cash, insufficient for a purchase of meaningful size. Further funds will come slowly from dividends (very slowly in the current climate of cancellations and deferrals) and when I reject or reduce holdings as a consequence of reviewing them annually.

Thanks for the nudge, Fred.

Anpario boosted by Alumasc sale

Portfolio     Cost (£) Value (£) Return (%)
Cash       2,175  
Shares       137,249  
Since 9 September 2009     30,000 139,424 365
           
Companies   Shares Cost (£) Value (£) Return (%)
ANP Anpario 1,874 6,593 6,840 4
AVON Avon Rubber 192 2,510 6,355 153
BMY Bloomsbury 1,256 3,274 2,826 -14
BOWL Hollywood Bowl 1,615 3,628 2,826 -22
CGS Castings 1,109 3,110 3,859 24
CHH Churchill China 341 3,751 4,177 11
CHRT Cohort 1,600 3,747 8,912 138
DTG Dart 456 250 4,086 1,534
DWHT Dewhurst 735 2,244 6,248 178
GAW Games Workshop 113 324 8,882 2,640
GDWN Goodwin 266 6,646 6,025 -9
HWDN Howden Joinery 748 3,228 4,370 35
JDG Judges Scientific 159 3,825 8,681 127
NXT Next 45 2,199 2,431 11
PMP Portmeirion 349 3,212 1,466 -54
PZC PZ Cussons 1,870 3,878 3,336 -14
QTX Quartix 1,085 2,798 4,069 45
RM. RM 1,275 3,038 2,894 -5
RSW Renishaw 92 1,739 3,676 111
SOLI Solid State 1,546 4,523 7,885 74
TET Treatt 1,222 1,734 6,599 281
TFW Thorpe (F W) 2,000 2,207 6,740 205
TRI Trifast 2,261 3,357 2,578 -23
TSTL Tristel 750 268 3,900 1,354
VCT Victrex 323 6,254 6,538 5
XPP XP Power 339 6,287 11,051 76

Notes: Augmented existing holding. 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 £139,424 today; £30,000 invested in FTSE All-Share index tracker accumulation units would be worth £57,053 today. Objective: To beat the index tracker handsomely over five-year periods. Source: SharePad, 2 June 2020.

Low cash allocation captures upside

Share Sleuth July 2020 graph

 

 

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