Most investors will have been glad to see the back of 2018 as very few will have made money. I am no exception.
In capital terms, my portfolio was down 12.6 per cent at the end of last year, losing over half my 2017 gain of 20 per cent. It is little consolation that I saw it coming, as I wrote here last March: “I will be pleased just to maintain my values at the end of 2017, as the coming year looks to be very uncertain.”
Indeed, had I not realised 20 per cent of my main portfolio — all my shares in James Fisher and UDG Healthcare, and a further tranche of Gooch & Housego, all longstanding holdings at excellent profits, and within my Isa portfolio cleared out disappointing Quarto, PZ Cussons, and one-sixth of my very large Treatt holding at 488p per share — my overall 2018 result would have been even worse.
My selling was primarily driven by a need to help family housing upgrades, but was also influenced by the US China trading dispute, Brexit uncertainty, and concerns that the Autumn Budget could threaten both the relatively low rate of capital gains tax and/or the inheritance tax relief available on Aim shares.
I should emphasise that the Treatt reduction in no way reflects any lack of confidence in the company’s potential — it remains by far my largest holding.
Although I missed out on buying shares in Fevertree, another Aim star performer, I was very encouraged to read its sparkling trading statement last week. “Drinking habits are changing,” said chief executive Tim Warrillow. “The rise of premium spirits and the advent of premium mixers has reinvigorated and re-established the quality and enjoyment of the long-mixed drink, the gin and tonic, vodka and ginger beer, or whisky and ginger ale, to name but a few, broadening the appeal of the spirits category, drawing in new consumers and with it providing a genuine alternative to the beer and wine occasion.”
I am hoping that this trend should be of real benefit to the Treatts of this world in terms of demand for new flavours and fragrances. So my glass is half full, rather than half empty.
Though 2018 was disappointing in one sense, a falling market obviously presents buying opportunities.
Looking back, the secondary banking crisis of the early 1970s and the financial crisis of 2008 were great buying opportunities. What we have seen so far in 2019 is minor by comparison, but nevertheless, UK yields look increasingly attractive. The market has probably discounted all but a “crash-out” Brexit, although international worries still remain.
Thus, I have gradually re-invested a goodly portion of my Isa realisations, predominantly in existing holdings that I like and monitor closely. As Warren Buffett once said: “If you have a harem of 40 women you never get to know any of them very well.” So I maintain larger focused holdings rather than over-diversifying.
Modest purchases were made of property investment group Daejan at near half asset value, and ventilation products manufacturer Titon, with its South Korean joint venture performing so well. I have added to my holdings in Air Partner and Charles Taylor, the insurance services group, and more recently, Christie Group, the business and leisure services group. Finally, I have made eight further purchases of shares in events and exhibitions specialist Tarsus at prices between 302p and 256p per shares having seen them come down from a 335p peak.
Since 2015, I have bought Tarsus on no less than 37 occasions — which I think is a personal record — and my holding is probably now second only in size to Treatt. Nobody can accuse me of being anything other than a loyal investor!
For me, Tarsus ticks so many boxes. Although it is listed in the UK, its 150 events and exhibitions take place right across the globe — the Americas, China, south-east Asia, north Africa and the Middle East, with its large Dubai Air Show coming up this year. The company has been steadily increasing profits and dividends, has a very experienced management team, who were optimistic in their last market update, and a 4 per cent dividend yield.
Ideally, I would like to see substantial liquidity, but the group has understandably had to borrow to finance acquisitions and joint ventures. Additionally, the events sector is steadily consolidating. Last month, Relx, the FTSE 100 media group, acquired St Albans-based Mack Brooks Exhibitions, the organiser of more than 30 business-to-business events in 14 countries, for a rumoured price of £200m. At some stage in the future, I feel Tarsus will inevitably come under the predatory spotlight — but hopefully it still has many years of healthy independent growth ahead.
Following re-investment, I now remain only 3 per cent liquid in my Isa, but I am expecting this to augment steadily during the year from a significant and much appreciated flow of dividends.
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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