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Monday, 8 July 2019

Q2 Portfolio Returns and Book Recommendation

First – can I recommend to you “The Joys of Compounding” by Gautam Baid.

It’s a fantastic summary of all the aspects of the philosophies of Buffett and Munger – from the power of long term mindset and compounding, to where to find interesting investments (eg spinoffs), to some of the broader philosophies – reading, self-education, stoicism and giving. 

You could give this book to anyone who wanted to understand why you are such a devotee of two old men from the mid west and what a “Value Investor” really is and this book would explain probably better than you could.

It brilliantly summarises all the various resources – books, transcripts, twitter – that you have probably followed over time, into one book that you could really use as a first port of call for Value Investing Resources – check it out.

I also really enjoyed watching the Markel meeting at Omaha recently – a great refresher on that company:

Onto my portfolio returns this month.  I am feeling a lot better after my disaster with Flybe, because I was lucky enough to own Leaf Clean Energy in my “leverage portfolio”, which won it’s US state supreme court appeal and went up c500%.  I got the idea through looking at the Crystal Amber (UK mid cap activist) portfolio, and seeing a risk/reward that seemed to make little sense.  that Co incidentally I read in the book I mention above that markets tend to underestimate litigation assets and this is what I experienced in this case. 

Leaf Clean has reversed out the losses from Flybe and, additionally, most of my holding was in my tax-free ISA account, whereas Flybe was not.

I’m trying to transition the portfolio to reflect my decision to be a lot more conservative in my investing, looking for a lower return, and targeting higher quality assets – the quality of Howden Joinery is well known, and I expect to hold it for a long time.  If it can successfully roll out it’s model in France, then there is a long runway.

I am also selling Coty and accepting a permanent loss of capital.  In hindsight, I got into a “Story”, where I thought that I was buying a high quality equity stub that could cost cut it’s way to a great return, having acquired a portfolio of cosmetic and beauty businesses.  The owner (JAB) had a big name Chairman (Bart Becht from Reckitt Benckiser) and I wanted to believe they could be like another 3G in a long term stable business.  However, I didn’t do any further diligence and deserve the pain of losing a big chunk of my investment.  What prompted the decision was the realisation that even if they execute on their newly published turnaround plan, then they will still be an extremely levered business.  So I’m out.

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