Portfolio Review - Winners, Losers And Spinoffs

14th Apr '15 by Mark Carter

6 comments 13138 reads

With another tax year under our belt, it's time to pause for reflection, assess what we've learnt about investing, and hopefully boast about how our smarts led us to bag some big winners.

Unfortunately, I have nothing to boast about this year. My portfolio was down 6.2% during the (tax) year, compared to a positive return of 2.8% for the ASX (FTSE All-Share). I therefore lagged the the index by around 9%, a truly pitiful performance. I haven't underperformed that bad since the 90's.

What went badly?

Story stocks – specifically, an investment in Plethora, a pharma company aimed at tackling premature ejaculation. I was convinced it was onto something big (no pun intended!), and in late stage development. Alas, so far it has turned out to be a typical AIM serial disappointer. The only saving grace is that it was only a small part of my portfolio, and I am hoping it will still come good. Try not to read too many double entendres into that. I should have followed Lynch's advice: wait until a company turns a profit before investing
Catching falling knives. “It can't possibly get any cheaper" has been the siren call that has lured me onto the rocks. Buying into miners was the main culprit. Buying companies that are of only mediocre cheapness was not a good idea. I bought Netplay and SpaceandPeople before their big fall.

I think, if you're going to buy value stocks, you really need to buy them in deep discount territory. Buying them when they're “merely OK" does not seem a particularly good strategy.

I am underwater in miner KAZ Minerals, having bought in at 303p in June 2014. Price declines followed, and I bought again in January 2015 at 180p. The price has recovered to 220p at the time of writing. So buying cheap might work, or it might not.

Lonmin has been another disappointing buy on my part. I'm down 31% on that one. It's now on a PBV of 0.37, and I'm holding on because I think it represents good value. It's loss-making, and the PBV is the lowest it's been for a decade. The pain is possibly not yet over. Glencore has a big stake in LMI, which it plans to distribute to its shareholders later this year. There is therefore a major overhang on this stock, and I…

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MGerard

16th Apr '15

Hi. In respect of Netplay do you now see it in "deep discount territory"?

When you strip cash out of the market cap I see a very low p/e. Presumably the market has priced point of consumption tax so from these levels this looks a good potential play?

Ramridge

Hi Mark -
Great piece, thank you. Like you, both story stocks and catching falling knifes cost me dearly in 2014. There is a fine line between being confident and hubris, and I crossed it too often to my detriment. This calendar year I have been more disciplined with the result that I am up 11% on year to date. Nothing to boast about really since FTSE100 is up 8.5%. But the more satisfying change is that I sleep better at night!
Regards, Ram

Mark Carter

18th Apr '15

I don't know. I kept it in my fantasy fund because I can see the argument for it being cheap. I don't own it myself, though.

There have been a couple of directors buys lately, but they were so small that they look like they were for show. So I'd actually read that as a negative. According to my calcs, the stock dropped 4.5% when it released its results, so presumably the results were worse than the market expected.

NPT has a Value score of 63, which doesn't put it in the super-cheap camp.

Other people may have a completely different take on the situation. I don't want to influence anyone's decision, as I really don't know how to read the situation.

lightningtiger

26th May '15

Hi Mark,

Sorry to hear you have been struggling last year.Have you got a system plan in place? By that I mean, written down as a plan of action. You mention "It might work, it might not".

Taking the graph of PLE above for example, it is clearly declining consistently over the year.The 50 day moving average line in green is above the the share price.instead of below it. The sector is Pharmaceutical. Compare it with PVG also in the same sector. The 50 day moving average is below and the share price is increasing.

If you use that as a point of a number one rule, it works. There is no "it might, it might not. Although it is not 100% all of the time it is a rule that has served me well over the years.

Falling knives are to be avoided at all costs and story stocks can be checked easily by the 50 day moving average.

Another check I use is a sort of stocks that have gone up at least 30% in a month (usually about 70 or 80 stocks). Put them in a watchlist. The final check is a sort of at least 100% growth in a year and still going up.(about the same number)

If you look in that sector, click momentum & then %age in 1 month and %age 1 year, Does anything stand out to qualify on both counts? Is the moving average OK?

In sector of Biotech & Medical Research DDDD,VER &VRP all qualify. Good hunting Mark,

I got this "spin off from Alex"

Hope this helps

Rusty2

27th May '15

Thats interesting. I notice DDDD,VER &VRP all have low SR.

Daniel Neale

If you liked Prezzo, the restaurant company £TAST is run by the some of the same management I think. Maynard Paton makes a good case for Tasty in his blog, so maybe worth a read? The actual product they offer is great, and i'm contemplating buying, but haven't just yet.

http://maynardpaton.com/category/my-shares/tasty/

Portfolio review - winners, losers and spinoffs

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Mark Carter

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