I’ve been running my Portfolio since the 1980s. I took advantage of the freedom to manage my own Pension to transfer my Pension pot into a Stocks and Shares SIPP where I can make my own decisions as to what to invest in, rather than some faceless, cautious Manager that will do what everyone else is doing and take a 5% cut for the privilege.

I also have a Stocks and Shares ISA. These musings cover investments in both of those portfolios and I don’t differentiate. Investments take place in whichever one has the spare cash. As I include cash in my shareholding summary, you may see an unexpected change in % without a commensurate share purchase / sale. This is me adding or withdrawing cash, neither of which I will be reporting on as it could be for any number of personal reasons.

Here is a potted history of my investment philosophy and also my holdings as of when this Blog started – I’m not going to go into the details of each historic purchase, but going forwards I will log every transaction on here.

Investment Philosophy (mine)

Invest in what you know or can understand. For me, that is readily understandable Businesses, not esoteric Biotechs that will make millions – or go bust. Or the Crypto House of Cards.
Stick to your circle of competence. There is so much to invest in – shares, Bonds, Crypto, home, abroad, Art, wine ya da ya da. I stick to public UK Firms worth at least £10M (when I invested anyway – one managed to get to £0 afterwards and I have had a few close shaves)
It’s OK to double up / reduce. If I buy into a Business and the share price collapses, then as long as I can justify it and it’s not a Corporate strategic catastrophe causing it, I have no qualms about adding more funds. Similarly, when those additional funds make a decent profit I’ll take those off the table, leaving the original (recovered) investment. Rinse and repeat if necessary. This can be quite controversial as a method and it is not for everyone, nor for every Business, but it has made me a fair amount over the years for more cyclical Businesses.
Bet the farm if you feel it’s right. Sometimes a share will become ridiculously over- or undervalued. Occasionally these come up and I have enough courage of my convictions to load up with them. One example, now sold was Air Partner. It was clearly a well-run Business on a low valuation. I’d built up quite a large Portfolio percentage holding when COVID hit and the price collapsed from about £1 to 20p. I held my nerve. If I’d had more cash I might have added, but anyway, in 2022, another Business took a shine to it and bought it, netting me quite a nice return over the years. At the moment, whilst I don’t think a takeover is on the cards I do feel that Easyjet is considerably undervalued, hence it constitutes (currently) 18% of my Portfolio and I definitely expect to double my stake, if not more.
Pay attention to Sectors. Some Sectors are cyclic and can be worth rotating into and out of. I moved into Insurers about a year ago and Housebuilders at the end of 2022. I think they will come good, but these are examples of me not knowing which Companies will do well, so have bought a spread. If one or two get taken over, that would be very nice. Another form of betting the farm.
Don’t overtrade. I’ve been guilty of this in the past, grabbing a few % gains here and there. It costs time and trading fees. Nowadays I’m happy to hold as long as it takes. Don’t get me wrong, I’m not a ‘forever’ holder and will trade in and out, but the amount of trades I make per year has dropped considerably, to the benefit of the bottom line.
I’m a Value Investor. That means I find undervalued investments and sit on them until the Market recognises what I saw all along. Could take a week, could take years. Sometimes I Goof up. Generally I try and pick a share that is supported by a decent dividend, so have a steady stream of income in the meantime. As long as I don’t Goof up more than I Goof up, I’m happy. A Growth investor is someone that buys into an already growing Company on a punchy rating in the expectation that it will carry on growing. Apple, for instance, has always been punchy so I never invested. Missed out on a shedload of returns, but so be it. There were plenty of other punchy techs that never made it past the Tech crash and even those that did, such as Lastminute.com are a shadow of themselves.
The ‘Gift Horse’ Principle. Don’t look a Gift Horse in the mouth as they say. If I have some shares and someone else decides they would like the Business and make an Offer, I’m out. Yes, another bidder may come along, or they up their offer, but alternatively they drop the offer and the share price falls off a cliff. I’d rather take the money, thanks and not worry about what might have been. I always have a waiting list of shares to buy, so no problem redeploying the money. Don’t become emotionally attached, and don’t hang on trying to extract the last few pence out of an offer.

Opening Portfolio – a summary

I started Blogging early 2023. I’m not going to go through all the whys and wherefores of my trades, but here is a summary of the Portfolio as of the beginning of February 2023 (give or take)

ABDN (Aberdeen Asset Management). Fund manager. Merged with Standard Life (which I owned). Bought back in after merger (OK, takeover) but taking a while to come good. Nice dividends, though. Current yield 7%
ABF (Associated British Foods). Conglomerate, owns some brands including Primark. Hit by COVID, but making a good recovery. 2,2% yield. Might be time to review my return here.
ADM (Admiral Insurance). General insurer. Has had its ups and downs but I managed a decent double up / sell down so returns aren’t too bad. Current yield 3.8%
AV. (Aviva – was Norwich Union aeons ago). Done well for itself. Throws off cash and has paid out a lot in Dividends, yet still yields 6.7%
BDEV (Barratt Developments). This along with other housebuilders listed is sitting on plenty of assets in the form of properties and land banks. Yes, the Property Market is soft, but with a shortage of homes it will recover. I’m also hoping for further consolidation in the sector (my McCarthy & Stone stake got taken over in 2021) Current yield 7.7%
CRST (Crest Nicholson Homes). See Barratt. Current yield 7%
DLG (Direct Line Group). Oh dear. This was sitting on a great yield – until it wasn’t. It’s fallen by the wayside a bit but I’m still optimistic it will turn around – or get taken over. Current yield 0%
EZJ (Easyjet). My current farm bet. Devastated by COVID, raised some cash to keep afloat, but now recovering nicely, thank you. I had a punt in Summer 2020 and it raced up on news of the Vaccine. I sold and since then it has tumbled down again. I’m back in, big time. We Brits will fight tooth and nail to keep our Annual Right to a Holiday in the Sun. Looking to double this & then some.
GLE (MJ Gleeson). Housebuilder. See above. Yield 3.6%
HSBA (HSBC Bank). Had its moments and I’m not sure about this. Still, been a decent income. Yield 3.5%
LGEN (Legal and General). Decent insurer with good brands and a good return. Happy to keep for the dividends. Yields 7.3%
LLOY (Lloyds Bank), You would have thought a Bank would be safe? Well the 2008 crash proved otherwise, but I’m back in – and currently in profit thanks to dividend income. Yield 3.9%
MONY (Moneysupermarket). Everyone’s heard of them. Broker for energy, insurance, cashback (it owns Quidco) and so on. Hit by the travel shutdown and the Energy crisis (no deals on offer anywhere) but bouncing back strongly. Yield 5%
PHNX (Phoenix Group) insurance. Picked this up as a value offering and growing nicely, but with a 7% Dividend yield in the meantime. Nice. Yield 7%
PSN (Persimmon Homes). As above. Yield 7.8%
PZC (PZ Cussons), maker of hygiene products such as Dove soap. Steady, with the potential for a takeover. 3.2% yield
SMDS (Smiths DS). Paper and packaging. Decently run Firm, if a little cyclical. Online shopping should keep it profitable though and not too large to be taken over. Yield 4.5%
SN. (Smith & Nephew). Medical instrument manufacturer. COVID impacted the number of Operations happening and the current Chinese problems are hitting supply. Should do OK long term, though as normality returns. Yield 2.7%
TW. (Taylor Wimpey). Yes, another Housebuilder. I do like focusing on Sectors. Yield 7.4%
VOD (Vodafone). Mobile Network Operator. Massive, but perennial disappointment. This is an example of where doubling up has not yet worked out. One day Rodney…
VTY (Vistry Homes). Let’s finish on a Housebuilder. Not had any so far. Yield 8%

888 Holdings (888 – Buy)

February 17, 2023

Charlie Croker

Portfolio No Comments

888 has been hit hard by its high debt and a Compliance issue.

With a Market value of 4.5x earnings and solid margins it is one to tuck away.

Continue reading →

LSL Property Services, Belvoir Group and Crest Nicholson (LSL, BLV, CRST – all Buy)

February 8, 2023

Charlie Croker

Portfolio No Comments

About LSL Property Services (from its Press Release)

LSL is one of the largest providers of services to mortgage intermediaries and mortgage and protection advice to estate agency customers, completing around GBP41bn of mortgages in 2021. It represents around 10% of the total purchase and re-mortgage market with around 2,900 financial advisers. PRIMIS was named Best Network by Money Marketing in their 2021 awards and Best Network, 300+ appointed representatives at the 2022 Mortgage Strategy Awards.

LSL is one of the UK’s largest providers of surveying and valuation services, supplying seven out of the ten largest lenders in the UK, employing around 500 operational surveyors, and performing over 500,000 valuations and surveys per annum for key lender clients. It was named Best Surveying Firm at the 2022 Mortgage Finance Gazette Awards and Best Surveyor at the 2022 Equity Release Awards with Mortgage Solutions.

LSL also operates a network of 225 owned and 128 franchised estate agency branches.

“As reported in our Interim Results, LSL traded strongly in the first half of the year, with our Surveying & Valuation and Financial Services businesses achieving record revenues. The Estate Agency Division retained the substantial market share gains made in 2021, in doing so building a strong sales pipeline as significant profits were delayed by the continuing slow speed of exchanges across the market. This meant that the Group entered the second half of 2022 well placed to deliver a strong H2 profit performance, ahead of the equivalent period in 2021.

“Since that time, market conditions have been more challenging than previously expected, with the mortgage and housing markets being disrupted by political uncertainty and sharply increasing interest rates. Across the market, this has given rise to a reduction in mortgage activity and new house sales, and an increase in fall-throughs of previously agreed sales.

“This challenging background means that there is a wider range of potential outcomes for the full year than previously expected.

“I am pleased to confirm that LSL’s performance has remained resilient, and we are confident that Underlying Group Operating Profit in the second half of 2022 will at least be broadly in line with the second half of 2021, with the possibility of a stronger performance depending on the volume of valuation instructions received from lenders. This includes additional costs incurred due to discretionary payments to over 2,000 colleagues to help alleviate the impact of significant increases in living costs. Around GBP0.6m of these costs will be reflected in 2022, with a further GBP0.8m to be paid in 2023 to cover the winter months.”
Trading update 25 November 2022

I have owned LSL before. It provides ancillary services to buying a house. Whilst the Housing Market is in a downturn, I do feel that falls are overdone and LSL is in a good position to capitalise as the Market Recovers, without tying up capital in actually building the properties. As long as properties are being bought and sold to some extent there will be a demand for its services – and it is one of the bigger players. With a yield of 4% or so, it’s one to tuck away.

About Belvoir Group (from its Press Release)

Founded in 1995 and listed on AIM in 2012 (BLV.L), Belvoir operates a nationwide property franchise Group with 463 offices across seven brands specialising in residential lettings, property management, residential sales and property-related financial services. With its Central Office in Grantham, Lincolnshire, the Group manages 72,900 properties and reported record revenues of GBP29.6m in 2021 marking Belvoir’s 25(th) year of unbroken profit growth.

Like LSL, I have owned this before. It is strongly into its franchising model, which spreads risks and also incentivises local owners.

Latest pre-close update was very positive:

Group revenue increased to a record level, up 13% to GBP33.5m* (2021: GBP29.6m). The housing sector performed better in 2022 than many commentators had forecast at the start of the year, with UK residential sales transactions down 15% on 2021, but around 6% ahead of pre-pandemic levels, and rents on new tenancies increasing by 10.8% during the year. Consequently, Belvoir’s financial performance for the year, including profit before tax, is anticipated to be slightly ahead of managements’ expectations

A sustainable 5% dividend, PE of 8 and net cash works for me.

Crest Nicholson – top-up

Crest Nicholson builds homes. My existing holding was bought June 2018, since when it has lost 40% of its value – D’Oh, although this has been mitigated by dividends, reducing that to a 25% loss. Still painful, but shows the power of Dividends over time. As per my doubling up methodology I have finally got round to averaging down. This makes the overall loss figures now 19% / 13%. On a 7% yield, that will do.

Portfolio – a potted history