Hoping that this topic gets some views despite not being on the main small cap bulletin board ...
I need to invest in 10 UK stocks for a Charitable Foundation, but they have to be in the FTSE 350 sadly. I'm finding some of the PE ratios challenging when there are more exciting, cheaper, growth opportunities in the small cap world.
Ideally would prefer to avoid miners, pharma and banks, but happy to research any good ideas...
Very many thanks in advance...
As my name says, I'm an absolute novice!!! Two that I've been watching/holding and adding to of late are TP Icap (LON:TCAP) and Impax Asset Management (LON:IPX) .
A highly highly speculative play I've done is United Oil & Gas (LON:UOG) too...
TP Icap would be a possibility, but sadly the other 2 aren't in the FTSE 350 ... many thanks indeed for your reply ...
Here's 20 ideas you could take a look at
WPP Group, Legal and General, Babcock, Hunting, Man Group, Foresight Group, 4Imprint, Bakkavor, Barr, Games Workshop, Marks and Spencer, Kier Group, Volution Group, ME Group, Rightmove, TP Icap, Breedon, Future, Watches of Switzerland, Persimmon,Grafton
A few more to consider:
3i (LON:III) Associated British Foods (LON:ABF) Marks and Spencer (LON:MKS) Relx (LON:REL) Alpha International (LON:ALPH) Bodycote (LON:BOY) Games Workshop (LON:GAW) Keller (LON:KLR) ME International (LON:MEGP) MONY (LON:MONY) Premier Foods (LON:PFD) SThree (LON:STEM) TP Icap (LON:TCAP) Vesuvius (LON:VSVS) XPS Pensions (LON:XPS)
Hi Cancun
To really provide any useful input we’d need a bit more information than you’ve provided. A ten stock portfolio, even from the FTSE350, is going to be a relatively high-risk approach. How would the charity’s trustees feel if the value of it dropped significantly or failed to match the wider index?
Both of those are quite likely: the dispersion in movements between stocks, even in the larger indexes, can be very high – Trustpilot and Rolls Royce have more than tripled in the last year while five FTSE 350 constituents – Burberry, Aston Martin, Close Brothers, St James Place and Entain have halved. A ten stock portfolio is likely to provide a result very different from that of the underlying index.
I’d also note that generally there seems to be a deal of complacency about the future directions of markets. The expectation of a stable government with a sizable majority and interest rate cuts seems to be creating a positive halo. However, there's plenty of room for things to go wrong – half of the world’s democracies are voting this year, and we’re likely to see a new political order, with very different priorities, at the end of it. There’s always a black swan around the corner which people are willing to ignore, even when it’s holding a large sign labelled “DANGER” and doing a tap dance in front of them.
Assuming that your charity does want to take on this risk, and aren’t satisfied with the relatively low risk approach of an index tracker there are broadly two approaches. Either you can select a portfolio of stocks or you can select a portfolio of investment trusts. The FTSE 350 is relatively well stocked with the latter and you could easily create a decently diversified portfolio by selecting from among them. You will get better advice than I can provide by asking on the Investment Trust thread.
For better advice on what individual stocks might be worth picking it would be useful to have some understanding of the goals of the exercise – income? capital appreciation? – and timeframe – a year, 5 years, 10 years? When will the capital be needed? Will dividends be reinvested? Does the portfolio need to generate a stable income stream? Will you actively manage this, or will there be periodic rebalancing?
Lots of questions, I'm afraid. But the answer depends on the context.
timarr
Many apologies Timarr... I should have included more detail and your questions are 100% valid... in fact I may get a greater number of answers and with a higher risk profile, if I provide more clarity...
Essentially it is my own personal foundation, but when managed within CAF, they as trustees require FTSE 350 or S and P 500 stocks... I will manage the holdings as entries in my own portfolio, although technically the money now sits with CAF...
I can feel Yiannos1 jumping up and down now, saying why did you only ask for FTSE 350 haha... as a relative Newbie on Stocko , I have thus far only paid for the UK and consider the small cap arena currently represents better value than the S and P on a total market basis ... perhaps now is the time to widen my horizon and start looking at individual US stocks .. the lack of a similar chat thread to SCVR has been holding me back, as I have learned so much from you guys...
As regards risk tolerance... I would view it as just a small part of my portfolio, so very happy to be adventurous and there is already sufficient diversification.... if the worst happens with 1 or 2, I will top up with fresh capital... so long term holdings, but will be constantly monitored and actively managed, total return the key... perhaps I should rename the Post toinclude the US.... I would like to think that it's possible to beat the index and avoid the investment Trust fees... dividends reinvested or paid out as charitable donations depending on the need / investment opportunities...
Many thanks indeed for your help ( and anyone else who generates research ideas ) and perhaps to phrase it better...
Any small cap / GARP type ideas that reside in the FTSE 350 or S and P 500 would be greatly appreciated..
if you believe we are in for a cyclical upturn, the logistics sector will look strong value. There’s no shortage of choice, but I just bought the daddy of them all United Parcel Service (NYQ:UPS.
Just to add to timarr’s post. Markets can fall heavily. e.g what if there’s another pandemic or China invades Taiwan with possibly devastating impact on World trade or similar shock bad news? If buying S&P shares now you’ll be buying at an all time high. The ideal time to buy is after big falls but if needing to buy now you can’t wait for that.
Single shares are riskier than pooled investments like Investment Trusts which enable us to invest all round the World. e.g you could buy a “Global” Investment Trust, a Mining Trust (Mining sector boom ahead with that renewables/green demand)? And perhaps an Asian Trust and Infrastructure and/or Renewables Trust, and single Country Trusts from the likes of India, US,Vietnam and perhaps a technology Trust, That way you are spreading the risk and getting balance too, instead of just 2 Countries.
Many thanks indeed Ken ( and I always read your posts very attentively )... I didn't want to bore everyone with the details, but CAF's broker no longer wanted to hold a specific global fund ... and as the last 18 months have been going OK thanks to this community, I thought that rather than switching into an alternative fund I would liquidate and pick some more individual stocks myself... I will never be as good as the David Hills / Yiannos1 etc etc of this world , but if one can beat the indices and avoid fees that's great.. plus I enjoy the challenge ... and as a charity, it's a tax free environment to buy and sell...
I definitely share your fears of potential black Swan events, but this mini portfolio will only be 10 % of the Foundation... perhaps I should keep it in cash, but sadly I am a perma bull and sleep badly when not fully invested haha.... with potential capital gains tax rises coming , I imagine that as the years go by, I'll be trying to avoid that and IHT by donating more capital .... so consequently I'm keen to take single stock risk , but unfortunately the best ideas have to come from the FTSE 350 or the S and P 500..
Very much appreciate your comments as ever Ken and , as with Timarr earlier, I probably should have shared more detail... many thanks as ever
Many thanks indeed BnB, Rusty2 and WOSS... hugely appreciate the suggestions for my own research this weekend... good weekend to all and best wishes
Hi Cancun
I would like to think that it's possible to beat the index ...
It is, but it somewhat dependent on the RoC (Return on Cortisol) you're prepared to tolerate - in essence, how much stess hormone can you tolerate in order to achieve a given return? Each of us is different in our tolerance for stress, and we only discover this in the pinch - when everything's gone to hell, erstwhile successful, noisy and popular posters have mysteriously stopped telling everyone about their amazing stockpicking skills and that really annoying person who sold up eight years ago in the expectation of a market crash is telling everyone they were right all along. Of course, so's a stopped clock occasionally (well, apart from my digital clock which currently reads EX:0/).
As my RoC is fairly low - significantly lower than the majority of posters on the SCVR it seems - I wouldn't want to make any recommendations, but I can tell you which FTSE350 stocks I've put some money into this year and which I would like to.
Since January I've bought or topped up: Urban Logistics Reit (LON:SHED), Spirax (LON:SPX), Abrdn (LON:ABDN), Future (LON:FUTR), Workspace (LON:WKP), Trustpilot (LON:TRST), Alpha International (LON:ALPH), TP Icap (LON:TCAP), Aviva (LON:AV.) and Diageo (LON:DGE).
The only FTSE 350 stock I've sold is Manchester And London Investment Trust (LON:MNL) which I topsliced on the back of the NVIDIA (NSQ:NVDA) price rice.
I think most of those remain good value, apart from TCAP which was a low margin business going very cheap and possibly Urban Logistics where I like the proposition, but am cognisant that it's at the mercy of interest rates. Trustpilot has tripled so is due a breather (and a fall, frankly, the price has got ahead of itself).
Amanda Blanc has done a superb job at Aviva, which finally looks like a proper business, but perhaps the easiest gains are gone (obviously if yield is your thing then along with Aviva, Legal & General (LON:LGEN), M&G (LON:MNG) or Phoenix group (LON:PHNX) are the place to go - I hold all, but I'm not expecting fireworks in terms of capital gains) .
Spirax and Diageo are fine businesses at a relative discount. Abrdn is a terrible business at a huge discount to the sum of its parts. Future, Workspace and Alpha International still look good value, are all decent companies riding tailwinds and could be even better with some luck and smart management.
Beyond those I think Pets at Home (LON:PETS) (I hold) looks extremely good value although it's likely to mark time until the result of the CMA investigation in vet practices, which probably won't report until the back end of next year. As noted by Paul on the SCVR Whitbread (LON:WTB) looks like it's cheap and it's hard to ignore 4imprint (LON:FOUR) or Games Workshop (LON:GAW) (I hold) given their extraordinary and sustained price (and earnings) rises. I also hold the recruiter SThree (LON:STEM) which has been surprisingly resilient through the recession.
Beyond those the likes of London Stock Exchange (LON:LSEG), Relx (LON:REL) and Experian (LON:EXPN) are world class businesses, but the risk adverse stockpicker should probably only look at those in the event of a market fall. I own the latter two from various market crashes and am still kicking myself for not buying the former when the kiddie analysts were having a tantrum over the Refinitiv purchase.
Plenty of choice, but short term movements are at the mercy of events beyond our control ... best of luck!
timarr
Very good post timarr. Following the paragraph on insurance companies, which are not in my field of competence, a lot of those names mentioned feature strongly amongst my UK holdings. Good companies all of them.
I'm hugely grateful Timarr... such a detailed post ... definitely some great ideas there to research... I'll revert when I've picked the list ... very many thanks indeed for replying...
