David & all
Attached is a note on REITS which I have uploaded to the Upload folder together
with my ‘shares sold’ spreadsheet.
Best regards
Richard
From: Richard Soar
Sent: Monday, August 10, 2020 11:46 AM
To: wvic@xxxxxxxxxxxxx
Subject: Re: [wvic] Re: WVIC Losses & Lessons
As part of the discussion on strategy for the future I have looked at some of
the major sales we have made in 2019/20 – please see the attached sheet.
My personal concern is that stop losses have rarely worked for us and that we
pick good shares and then sell them rather than holding on and believing in our
analysis and convictions. Not always the case, but some of the most successful
investors in the world follow one of Warren Buffet’s mantras which is ‘ buy
good companies, don’t overpay, do nothing’ !
The attached spreadsheet shows that we would have made 78% on these shares to
date had we not sold when we did. I did to be honest leave out Lloyds which
works against the argument, but we did take a conscious decision to sell for
good reason which worked in our favour.
Best regards
Richard
From: David Hutchison
Sent: Friday, July 24, 2020 11:21 AM
To: wvic@xxxxxxxxxxxxx
Subject: [wvic] Re: WVIC Losses & Lessons
It has certainly been the case that we have wanted to know exactly what we are
buying, rather than delegate to a fund manager. But there is nothing in our
Rules to prevent it.
I for one want to reduce our risk by spreading it wider. Right now boring
sounds very attractive! A century from Stokes will be more attractive than one
from Sibley, but we desperately need a Sibley!
Best wishes
David
Sent from my iPhone
On 24 Jul 2020, at 10:23, Peter Dixon <pcsdixon@xxxxxxxxxxx> wrote:
David. I thought there was a general consensus that we didn’t invest in funds
as they are boring...
Gamma have certainly taken off.
Peter D
Sent from my iPhone
On 24 Jul 2020, at 10:03, David Hutchison <davidhutch321@xxxxxxxxx> wrote:
Thanks Peter. Do I take it that you would be happy to propose Lindsell
Trust at the next meeting?
Best wishes
David
Sent from my iPhone
On 23 Jul 2020, at 14:04, Peter Dixon <pcsdixon@xxxxxxxxxxx> wrote:
Thank you David. A welcome review. I bought Gamma when the group sold
them and my holding went up by 17% and have settled at 13%.
My holding in Lindsell Train have increased by Just oVer 5% in 6 months
and remains steady.
Diageo are steady having shown us a small increase but as we know things
could take off soon as I have been told there are some more major companies due
to come on board Pulpex.
Pulpex have ask if we will allow them to use our patents to make other
packaging apart from bottles and we are giving our approval. This will open up
the market enormously. This is of course confidential.
Peter D
Sent from my iPhone
On 23 Jul 2020, at 13:38, David Hutchison <davidhutch321@xxxxxxxxx>
wrote:
Dear everyone,
Given the reasonable concern expressed about our performance following
the audit, I thought it might be helpful to look at our last year’s decisions
in detail and see whether lessons can be learned. Whilst making good gains
with Alphabet, Apple, Ashtead and Shopify we lost money elsewhere.
The background for the last 18 months has of course been particularly
challenging with uncertainty arising from Trump/China, Brexit, Iran sanctions
to name but 3. To quote MacMillan, “Events, dear boy, events”. Furthermore,
the end of the audit period coincided with the steep drop in values due
to Covid, and many prices have since recovered.
We have to accept that with only 10 holdings we are taking far greater
risk than a conventional portfolio. It would be unusual for a conventional
portfolio to have more than 6% (ie 1/16th) invested in one stock. I confess I
was surprised when Neil showed us the Risk classification used by the
professionals. I have inverted his list and offered a value whereby 1 is the
lowest risk and 11 the highest:
Cryptocurrencies
11
Commodities (including gold)
10
Emerging Market shares
9
Tech shares
8
Small Corporate shares
7
Large Corporate shares
6
Utility Company shares
5
AAA Corporate fixed rate bonds
4
Government long term fixed rate bonds
3
Government short term fixed rate bonds 2
Government issued Index Linked (Inflation proof) Bonds 1
As a club we have never invested in the bottom 4 risk categories, and
currently have no utilities (which the fear of Corbynism made unattractive).
Our traditional safe haven has been Gold, which the above classification shows
is more risky than I for one had realised!
Given the choppy waters ahead (Covid, Brexit, China, US election) that
we identified at our last meeting, surely we should consider reducing our risk?
Holding cash may not be wise since Brexit may reduce the value of the pound in
the short term. So perhaps we should reduce our risk by considering Trusts
(which spread the risk across over a hundred plus different shares in a certain
area) as well as Utilities? It is salutary that when we decided to buy Accesso
we dismissed buying Polar Capital North America, which after several downturns
aligned with the market is now trading at much the same price. In the meantime
I enclose some thoughts on our losses and possible lessons to learn. I offer
this merely as a think piece or first draft to focus our thoughts before next
meeting, and would welcome comments and alternative views.
I realise that for some “Strategy” is a dirty word. However, I would
suggest that - perhaps without realising it - we have adopted a strategy of
investing heavily in small, high risk companies, which can bring great returns
in good times, but must now be questioned.
I spoke last week to a broker I have known for over 20 years and whose
record speaks for itself. During Lockdown he has switched portfolios which
would usually have 40% invested in UK equities to 24% and boosted US holdings
(especially FANGs). His UK holdings are mainly companies with international
reach, rather than small UK based companies. He has invested in DS Smith
(packaging), supermarkets, Real Estate Investment Trusts (REITs), JB Sports but
mainly in Trusts. He has cut down available cash to 5% in case Brexit reduces
the value of Stirling.
Until I enlightened by the views of others I am suggesting re-shaping
our portfolio as follows:
- Hang onto current US stocks.
- Hang onto our 2 crypto stocks as high risk/reward.
- Hang onto Diageo & BP as large corporates.
- Sell Tekmar, Horizon Discovery and Simec Atlantis.
- Re-invest the proceeds and the rest of our current cash into
Trusts, Utilites or other areas we think will come through unscathed.
To which end I wonder whether:
- Richard S would advocate National Grid again? Or perhaps a
Water company, given Peter C’s recent article?
- We should look at diversifying through Trusts? If so: would
Peter D still advocate Lindsell Trust? Nick G has been advocating Draper
Esprit, and I’m prepared to offer Polar Capital North America again.
- We should look at REITs. Richard S mentioned REITs at our last
meeting and there is a Supermarket REIT offering 5% return.
I look forward to hearing your views.
Best wishes
David
Apologies for the bullets being badly spaced in the final column; I
have never got the hang of converting Pages /Numbers to Word/Excel!
<Losses & Lessons sheet.xlsx>
Attachment:
Real Estate Investment Trusts.pdf
Description: Adobe PDF document
