| 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.
