Boring purchase

I've interrupted a long period of inactivity with a very dull purchase.  Ho hum.  I wouldn't normally bother writing about it, but so far I've tracked every single buy and sell in this blog, so I may as well continue.

I'd been sitting on a load of cash in my investment account for two reasons:

• We're planning to build a kitchen extension, and I thought I might need the money for that.
• I didn't want to be fully invested in shares, because the market didn't look particularly cheap.

The first of these reasons is no longer relevant - I have enough savings elsewhere to cover the extension.  The second still applies, but I can park the money in short term bonds and earn a small return, rather than leaving it as cash and earning nothing.

So I've increased my holding of the iShares UK Corporate Bond 1-5 Year ETF (IS15) up to 25% of my portfolio.  It's now my second-biggest holding behind Berkshire Hathaway:

• BRK-B: 35.3%
• IS15.L: 25.1%
• TSCO.L: 18.4%
• NWBD.L: 14.2%
• BP.L:  7.0%

Review of 2012

Rather than summarizing, I think it's simplest to list my transactions in 2012:

• January.  Bought some more Game Group, on the premise that they were either going to 10-bag or were going bankrupt.  Sold all Maxima and Bond shares, to realise tax losses.
• March.  Sold all my Game Group shares, upon realising (correctly) that bankruptcy was overwhelmingly likely.
• April.  Bought some more Tesco shares, because they were too cheap.

That's it.  So I finish the year with a mere 5 shareholdings: Berkshire Hathaway, Tesco, Natwest perpetual 9% preference shares, BP, IS15 (Short-dated corporate bond ETF).  

NWBD was the outstanding performer over the year with a return of 47% (including dividends).  Berkshire Hathaway and IS15 delivered an acceptable return of 12% and 10% respectively, while BP and Tesco let the side down with falls of 3% and 5%.

I've just enhanced my portfolio tracker to report annual performance figures.  These differ a fair bit to those I've previously reported, but I think they're more accurate (and now I can report consistent numbers each year):

• 2008:  Down 70.2%.  Portfolio was small.
• 2009:  Up 62.6%.  Portfolio was medium.
• 2010:  Up 17.6%.  Portfolio was large.
• 2011:  Down 14.8%.  Portfolio was small.
• 2012: Up 10.1%.  Portfolio was medium.

My annual return over the 5 years has been 14.7%, but that's only because my bad years have come when I've had a small portfolio and the good years have come with a medium or large portfolio (if small=1 then medium=2 and large=4).  If I'd been fully invested throughout then my return would have been minus 11%.

So far in 2013 (yes, all 9 days of it) I'm up 3.5%.

Update:
Reworked performance report after enhancing my portfolio tracker to report accurate numbers.  The previous report was not 1st January to 1st January, but something like 6th January to 4th January - turns out that makes a massive difference to my return over the year - first week of 2012 was a disaster and first week of 2013 has been stellar.

More Tesco

I bought some more Tesco shares today at 321p.  They're on a P/E ratio of less than 9 and a yield of 4.6%, despite:

• Having a dominant position in the UK market.  Economies of scale give them an advantage over their competitors and make it hard for them to assault Tesco's position.
• Having a trusted brand which they can leverage in banking, insurance, etc...
• Being in a cautious economic environment which means their non-food profits are currently depressed.
• Having a very high-growth international business with excellent potential.
• Being in a non-risky business that requires little in the way of capital investment, R&D, etc..
• Being in a business that is largely inflation-proof (with the exception of banking).

When the factors are all this favourable, and given the absence of other obvious investment candidates, I'm happy having a large proportion of my portfolio in Tesco shares.  They are now 26% of my portfolio (up from 17%).

I still have cash available, but I have no immediate plans to invest it.  I want to make sure I have some available in the event of an even better opportunity arising.

Giving up on Game

Game Group are struggling to pay their rent, and their suppliers are starting to pull the plug.  The news is looking rather bleak.  So I've given up on them and sold my shares at 3.368p. 

The only ray of sunshine seems to be this:
http://www.investegate.co.uk/Article.aspx?id=201203141734253773Z

"The Board of GAME confirm that a third party has shown interest in providing additional funding for the company"

This does not sound like good news to me.  This sounds like someone wants to be first in line once Game go into administration, by buying their debt from the banks.  So I'm not interested in hanging on for the ride.  I run the risk that they'll stage a storming recovery and I'll miss out on a multi-bagger, but I'm OK with that.

Portfolio tweaking & 4-year performance review

Tweaks
I've done some fiddling around the edges of my portfolio.  Nothing major, just tidying stuff up.

In summary:

• Sold my paltry holding of Game Group shares (on which I had an ENORMOUS capital loss).
• Bought it again immediately in a different account (in fact, about 3 times as many shares - still a paltry holding though!).
• Sold Bond International Software, crystallising another capital loss.
• Sold Maxima, for another capital loss.

The latest snapshot of my portfolio is here:

http://www.danieltebbutt.com/portfolio.html

I've now rated Rok shares as zero and put them in the "sold" category.  I'm not entirely sure if they're officially worthless yet, but my sharedealing account no longer shows them as a holidng, so...

Now everything is much tidier: only 6 shares in my portfolio: Berkshire, Tesco, NWBD, IS15, BP, GMG.  And only one real tiddler: GMG.

Review

While I'm here I may as well post some performance figures for my portfolio in 2011.  Bit misleading since my trading was almost entirely driven by external factors rather than trying to beat the market, but anyway...  lets compare with previous years.  I can't remember how I've worked this out before, but attempting a new and fairly simple method I get:

2008:   Down 53%

2009:   Up 42%

2010:   Up 19%

2011:   Down 3%

i.e. if I'd been a fully-invested closed investment trust then £100 at the start of 2008 would now be worth £77.  Boo.  Luckily my funds under management were very approximately:

2008: X

2009: 2X

2010: 4X

2011: X

Meaning I have an overall profit of 60%, or an annual return of 12%.  Hurrah!

I don't have data to compare with the FTSE, but staring at a graph and making up some dividend yields I come up with:

2008: Me -53%.  FTSE all-share -30%

2009: Me +42%.  FTSE +28%.

2010: Me +19%.  FTSE +14%

2011: Me -3%.  FTSE -4%.

So if I'd invested exclusively in a tracker then I would have made 39% overall, or about 8.5% per year.  

Fully invested in a tracker throughout the period I would have been down 2%.

And finally just for fun: so far in 2012 I'm down 2.6% while the wider market is up 3.3%.  Ouch - a 6% disparity already, and it's not even February...

Portfolio now up-to-date

It's been a while, but I've finally updated the portfolio page on my website:
http://www.danieltebbutt.com/portfolio.html

Key things of interest:

• My current portfolio is about a third of its peak size (because I sold almost everything when buying a house in Norway and started reinvesting when I sold my house in the UK).
• I have some big losers in my portfolio.  I kept all my losers for the tax benefits (which are worth more in Norway than in the UK) but it turned out that the losers kept on getting worse, so overall this has proved a bit stupid.
• I got lucky with the timing of some of my new purchases, and as a result BP is up 15% and Tesco 12%.
• 2 shares make up 55% of my portfolio and 5 shares make up 94%.

I have no immediate plans to make further changes to my portfolio.  I have some cash available to invest, but I don't fancy it at current prices.  If prices fall then I'll probably put it into shares, otherwise I may stick it into bonds (e.g. more IS15).  Or just hold onto cash.

Portfolio update

I haven't unpacked my desktop computer yet (!) so the portfolio page on my website is woefully out of date.  Here's the current situation, with the dates and prices of my recent purchases):

• Cash 50%
• Berkshire Hathaway 17% (bought 20/10/11 at $74.25)
• Tesco 10% (bought 27/9/11 at £3.53)
• NWBD 9% (bought 27/9/11at 93p)
• BP 5% (bought 28/9/11 at £3.79)
• GBP 1-5yr corporate bond ETF 5%
• Bond International Software 2%
• Game Group 1%
• Maxima Holdings 1%

The last 3 I'm only holding for the tax losses - Once I'm well-ensconced in the Norwegian tax system I will sell and reap the rewards.  For Game Group in particular the tax losses are worth almost as much as the shares themselves :-)

For now I'm taking a bit of a breather. I'm ready to invest about a third of my cash.  I'm still not sure whether to spend or invest the rest.