Should you take action, or do nothing? This is the fundamental dilemma for many private investors.
Looking back over my investment life, I have concluded that buying a good stock and patiently holding it through periods of uncertainty and volatility — and not trying to be too clever — is the route to investment success.
As the rather crude American adage goes: “You make your money by sitting on your ass!” This is a policy which has served me very well indeed, as I will demonstrate.
“Buy and hold” has long been my mantra. Nevertheless, there are times when family responsibilities and market uncertainties come together to necessitate action.
This combination has recently come together for me, best summed up by the acronyms Bomad — the Bank of Mum and Dad — and BudBreCo — Budget, Brexit and Corbyn.
By far, the dominant aspect has been the need to help fund both of my daughters’ housing ambitions, although BudBreCo has certainly been a factor in my recent decision.
In the past few weeks, I have made some significant sales. Out from my non-Isa portfolio have gone longstanding favourites James Fisher and another tranche of Aim-quoted photonic and laser specialist Gooch & Housego.
I started to buy Fisher in 2000 at 78p when it was just a small coastal oil tanker business based on Barrow-on-Furness. Today it is a hugely successful global marine services and underwater specialist. Sadly, I reduced my holding as it appreciated in early years, but still retained a decent tranche which went out at £18.30.
Gooch is a similar story. First bought in 2004 at 102p, it is now out at £16.88. As both these stocks were on minuscule yields their departure will only have a very limited effect on my overall dividend income. Down the line I will be hit by capital gains tax, but hopefully only at 20 per cent.
Turning to my Isa portfolio, where CGT does not apply, I have also built up some defensive liquidity. After much agonising, I sold one-sixth of my sizeable holding in Treatt. Its shares have done so well it represented too great a percentage of my Isa at approximately 40 per cent.
It is a fabulous business in flavours and fragrances which should have many years of growth ahead. I sold at 488p and the shares have drifted down to 422p at the time of writing, but I am confident these prices will be left far behind in future years.
I also finally said farewell to publisher Quarto (where I sold at 96p and 100p). Frankly, I have had enough. The company has had more boardroom coups than many South American dictatorships. I have no idea at all what the business is now worth. The shares now bump along below 70p. Overall, a disappointment rather than a disaster, but I could have deployed my resources far more profitably elsewhere.
Set against these two Isa sales were two modest purchases — Titon, a ventilation products manufacturer, and Daejan, a property company. I added to my existing holding in Titon at 168p following earlier purchases around the £1 mark. Conservatively managed, modestly-rated, cash-rich and with dividends moving steadily ahead, Titon should offer considerable future potential, particularly from its South Korean joint venture which is now the main profit earner. The company has just announced a planned move to the Aim index — let us hope it will still be as worthwhile.
Family-controlled Daejan, arguably the cheapest quality property share with a net asset value of £111, compared with a current share price of £58, is regarded by investors as somewhat quirky and not quite embracing the principles of modern corporate governance. However, it is split between residential and commercial and the UK and US, is tightly managed and has very low borrowings so looks outstandingly cheap.
Finally I couldn’t resist a little flutter on Sky TV. On the final Friday before the takeover battle had to finish, the last bid on the table from memory was £14.75, with Sky shares standing in the market about £1 higher. Both heavyweight contenders had spent some days discussing the final form of auction with the Takeover Panel, thus it seemed inconceivable to me that increased bids would not be forthcoming on the final day. I bought on Friday at £15.86, selling on Monday, after the final increased Comcast bid at £17.22. But have no fear, I have no plans to turn into a hedge fund or arbitrageur. I intend to remain a conservative long-term value investor, and my “buy and hold” mantra still stands.
John Lee is an active private investor and author of ‘How to Make a Million — Slowly’. He is a shareholder in all the companies indicated
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