September Portfolio Update

Portfolio as at end of September
Asset	Bloomberg Ticker
Rolls Royce	RR/	11%
Leucadia	LUK	11%
FIAT	FCAU	10%
FLYBE	FLYB	10%
PETS AT HOME	PETS	10%
Novo Nordisk	NOVO-B	8%
AIG	AIG US	8%
COTY	COTY	8%
Next PLC	NXT LN	7%
IG Group	IGG	5%
Card Factory	CARD	3%
Seritage	SRG	3%
Emergent	EMGC	2%
Plaza Centers	PLAZ LN	1%
Dolphin Capital	DCI LN	0%
GBP Cash		3%
Quarterly Return	Quarterly Benchmark Return
10.77%	1.90%
Return Since Inception	Benchmark Return since Inception
45.20%	96.37%
Annualised Return since Inception	Annualised Benchmark Return since Inception
8.17%	15.27%
Quarterly Leveraged Return	Annualised Leveraged Return
9.58%	14.65%
Leverage
19%

Q2 Results

Portfolio as at end of June
Asset	Bloomberg Ticker
Leucadia	LUK	13%
Rolls Royce	RR/	12%
Novo Nordisk	NOVO-B	11%
COTY	COTY	10%
AIG	AIG US	9%
FLYBE	FLYB	8%
PETS AT HOME	PETS	8%
FIAT	FCAU	7%
Next PLC	NXT LN	6%
IG Group	IGG	5%
Card Factory	CARD	4%
Seritage	SRG	3%
Emergent	EMGC	2%
GBP Cash		2%
Plaza Centers	PLAZ LN	1%
Dolphin Capital	DCI LN	0%
Quarterly Return	Quarterly Benchmark Return
2.20%	-0.03%
Return Since Inception	Benchmark Return since Inception
31.08%	92.70%
Annualised Return since Inception	Annualised Benchmark Return since Inception
6.20%	15.69%
Quarterly Leveraged Return	Annualised Leveraged Return
-2.25%	12.06%
Leverage
44%

Q1 Results

Asset	Bloomberg Ticker
Leucadia	LUK	14%
Rolls Royce	RR/	11%
AIG	AIG US	10%
FLYBE	FLYB	9%
Glaxo Smithkline	GSK	8%
Next PLC	NXT LN	6%
IG Group	IGG	4%
Seritage	SRG	4%
Card Factory	CARD	4%
Emergent	EMGC	2%
Plaza Centers	PLAZ LN	1%
Dolphin Capital	DCI LN	0%
GBP Cash		28%
Quarterly Return	Quarterly Benchmark Return
3.32%	5.78%
Return Since Inception	Benchmark Return since Inception
28.26%	92.77%
Annualised Return since Inception	Annualised Benchmark Return since Inception
6.03%	16.70%
Quarterly Leveraged Return	Annualised Leveraged Return
4.17%	14.63%
Leverage
30%

Year End Results and Thoughts

Portfolio as at end of December
Asset	Bloomberg Ticker
Exova PLC	EXO LN	19%
Leucadia	LUK	13%
AIG	AIG US	11%
FLYBE	FLYB	8%
Glaxo Smithkline	GSK	8%
Tessenderlo	TESB	10%
Next PLC	NXT LN	8%
Dolphin Capital	DCI LN	3%
Alternative Asset Opportunities	TLI LN	3%
Plaza Centers	PLAZ LN	1%
GBP Cash		16%
Quarterly Return	Quarterly Benchmark Return
6.94%	6.66%
Return Since Inception	Benchmark Return since Inception
24.13%	82.24%
Annualised Return since Inception	Annualised Benchmark Return since Inception
5.55%	16.19%
Quarterly Leveraged Return	Annualised Leveraged Return
6.27%	14.25%
Leverage
37%

2016 was quite a year in so many ways. 

Some of my favourite musicians died.  Prince was the first person I ever saw in concert – at some ice hockey arena somewhere in Holland.  I don’t remember much of it except “Kiss” and the feeling that this guy knew what he was doing.  David Bowie was someone that really entered my consciousness after Nirvana did The Man Who Sold the World on their Unplugged album.  It’s my favourite song on a great album – I might put it on now -  and it led me to discover so many other favourites – Sorrow, Absolute Beginners, Heroes.  And finally there was Leonard Cohen.  I think I saw him three times in concert.  Once at Glastonbury, when he was returning from his time out of the public eye, and I have magical memories of listening to Hallelujah as the sun went down.  Luckily there is some fantastic live concert footage to remember him by.

As well as remembering the beautiful moments created by those and others, we have had to put up with the grubbiness of the Brexit and Trump debates.  There’s not much that can be said about those processes that hasn’t been said already but I note that the world has kept turning, most people are still living the same daily lives as previously, and Trump isn’t mad, I don’t think.   Maybe politics needed a shake up, although this isn’t the type I would have chosen.

Onto my portfolio, and it was a year of two halves.  Portfolio performance was terrible to start with as Exova and DNOW fell with the rest of the oil sector.  Tessenderlo and Flybe added to the pain and I had no real winners to balance things out.  I’m proud of myself for not selling out near the lows and holding on to see the first three recover – I’m hoping Flybe is a story for 2017!  Looking back, H1 was really a perfect storm so if nothing else, the fact that I didn’t panic reinforces that I have the temperament, at least, of a value investor.  I had a shock in May, when TLI fell around 30% after it announced it was writing down the value of some of its assets.  I’m proud of myself of holding on then, as well, and I was vindicated when it was announced that the portfolio was being sold at NAV.  This has been the main driver of my returns in 2016, along with Leucadia.  I start 2017 feeling pretty optimistic about the assets I own and with plenty of new leads to research.  There will be lots of activity in my portfolio and hopefully lots of blog posts as I try and reorganise it.  As a reminder, I was holding a lot of TLI as “leverage” collateral against the rest of the portfolio that I own within a spread betting account for tax efficiency, and I’m currently considering whether to continue this leveraged strategy.  A lot will depend on whether I can buy “money good” assets with a clear path to realisation in the near to medium term.

I can’t let the review of the year finish without mentioning Avesco.  I thought I was clever when I sold it for around 220p.  Mid way through November a US company put in a bid at c650p!  Apart from ruing my sale – why couldn’t I just have left it! – I don’t think there’s much that can be said on the matter.  The acquiring company must be seeing a hell of a lot of synergies because I thought the company was fairly valued when I sold it, and I don’t think many without inside information could have anticipated what happened.

Onto the current state of the markets and it feels like sentiment is particularly buoyant right now.  The FTSE has hit new highs and the Dow is on the verge of the same.  Trump’s election seems to have triggered a general belief that a wave of “business friendly” regulatory rollback and spending is on the way, with consequent benefits for pretty much everything.  This ignores the fact that Trump’s protectionism is not good for economies, overall, and also that any spending has to be funded by something.  As an aspirational value investor I will adopt even my caution as market rise, thinking about the multiple contraction that will surely come one day, and try and buy cheap securities which are generally uncorrelated to each other or the macro environment.