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00:00:01
IG buys Freetrade, investing mistakes, and the Smiths News debate
1.1k Plays3 months ago
In this week’s episode, Lawrence is joined by Graham Neary and Mark Simpson to discuss:
- IG Group’s acquisition of Freetrade for £160m - as a long-term IGG shareholder, what does Graham think of the acquisition? What is IGG really buying here?
- Premier Miton’s latest results, and opportunities in asset managers.
- The investment case for Smiths News. Is it a melting ice cube, or a van full of newspapers hurtling towards a cliff-edge?
- Mark’s analysis of his own investing mistakes in 2024, as well as his and Graham’s differing approach to position sizing in their portfolios.
If you enjoyed this, you can read daily analysis on noteworthy and hard-to-research shares with Stockopedia’s Daily Stock Market Report. You’ll also unlock award-winning investing insights, tools, and education to speed up your research process and help you make more informed decisions.
Try Stockopedia free for 14 days at stk.pe/pod.
Stocks we discuss
- IG Group: https://www.stockopedia.com/share-prices/ig-group-LON:IGG/
- Plus500: https://www.stockopedia.com/share-prices/plus500-LON:PLUS/
- CMC Markets: https://www.stockopedia.com/share-prices/cmc-markets-LON:CMCX/
- Premier Miton: https://www.stockopedia.com/share-prices/premier-miton-LON:PMI/
- Impax Asset Management: https://www.stockopedia.com/share-prices/impax-asset-management-LON:IPX/
- Liontrust Asset Management: https://www.stockopedia.com/share-prices/liontrust-asset-management-LON:LIO/
- Polar Capital Holdings: https://www.stockopedia.com/share-prices/polar-capital-holdings-LON:POLR/
- Smiths News: https://www.stockopedia.com/share-prices/smiths-news-LON:SNWS/
Extra Stockopedia content we mention:
- My biggest investing mistakes of the last year (subscriber-only): https://app.stockopedia.com/content/my-biggest-investing-mistakes-of-the-last-year-1020511
- Profit or loss? How to make smarter stock selling decisions: https://www.stockopedia.com/academy/events/how-to-make-smarter-stock-selling-decisions/
Let us know what you thought of this episode - email lawrence@stockopedia.com or tweet us @Stockopedia.
Disclosures: At the time of recording, Graham owns shares in IG and Impax Asset Management. Lawrence owns shares in CMC Markets.
Disclaimer: We do not provide personalised financial advice. None of our content constitutes or should be understood as constituting a recommendation to enter in any securities transactions or to engage in any investment strategies discussed in our content. We do not provide personalised recommendations or views as to whether a stock or investment approach is suited to the financial needs of a specific individual. It is very important to do your own analysis before making any investment based on your own personal circumstances.
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Transcript
00:00:05
Speaker
Hello, and welcome to this week's episode of Companies and Markets Weekly by Stockopedia. I'm joined this week by Graham Neary and Mark Simpson from Stockopedia's daily stock market report. How are you both? Good. Thank you, good. Very well. Thank you.
00:00:22
Speaker
ah We've got a fun episode planned for today. and We're going to spend a little bit of time running through ah some of the key news that Graham and Mark have been looking at this week, along with other writers on the Daily Stock Market Report, Roland Head and Megan Boxall. We're going to touch on broadly trading platforms and fund managers. um There's been some interesting news this week about IG Group and Premier Miten, I think we're going to dig into. We're also going to potentially have a bit of a debate about the investment case for Smith's and News. and then Mark has written this week about his investing mistakes from 2024 that he would like to leave behind in 2025.
00:01:07
Speaker
This might be a bit of a therapy session for Mark, but hopefully we'll leave you with some insights and some lessons that you can apply to your own investing. Graham, do you want to do you want to lead off with the news about IG Group? Because I know you hold that. Yeah, sure. ah so IG has acquired free trade for 160 million pounds.
00:01:30
Speaker
and and i I'm an IG shareholder, and whenever IG makes an acquisition, I get very nervous. They spent a billion dollars on tasty trade, which was this kind of kind of quirky options trading platform for retail investors. and They did that a few years ago, which I thought was overpriced.
00:01:54
Speaker
Fortunately, the free trade deal is ah is a lot smaller, 160 million pounds. so Even if they have overpaid, um you know in the grand scheme of things, IG is worth the best part of 4 billion pounds. so ah It may not make a huge difference to IG's fortunes ah ultimately, but it's an interesting move because they have their own ah commission-free stockbroking or share dealing platform, and they've gone and bought basically one of their competitors. ah Now, they say free trade will continue as a standalone business.
00:02:38
Speaker
which I find a little bit surprising. It seems sort of hands-off, but IG say they'll be investing in it. um From free trade's perspective, ah you know the mainstream media ah taking the point of view of free trade's existing shareholders ah say that it's a very cheap price, that free trade had been valued at up up to £700 million pounds in the crowdstarter campaigns, or crowdfunding campaigns, I should say. and But you know when I look at the numbers today, and bear in mind, I'm a bit of a crusty old value investor. the The free trade numbers are not that big, really. Free trades revenue in Q4 was £8 million. pounds
00:03:30
Speaker
It's not a huge number there in terms of quarterly revenue. It just about made a full year positive EBITDA. so It seems to me that 160 million pounds is ah a fair enough price, maybe a maybe even a full price. Of course, I am speaking as an IT shareholder, so I would say that, but they're paying five-time sales for a company that's barely scraping a profit. um Granted, it does have you know a large number of customers, but those customers may not be dealing in very large amounts in general. so
00:04:10
Speaker
Yeah, I'm going to give this deal the thumbs up. There's a reason there's a it's ah a crowdfund evaluation, isn't it? is It's usually because they can't access money at the same price from professional investors, which makes it. um Yeah, so you have to wonder about those those sort of private company valuations based on a crowdfund on the basis. um I wonder whether they're getting they're more interested in the customer list than anything else.
00:04:39
Speaker
yeah this This is one of the the things I wanted to to dig into. is like what are they What are they actually buying here? Are they buying the customer base? Are they buying the assets under management? Are they just simply paying a low, multiple, low-ish, multiple to take a competitor off the market, as it were? I'm curious about that. Especially and since they they said they were going to let free trade run kind of as is, they're not really immediately going to make any major changes to it.
00:05:04
Speaker
yeah so free trade has 720,000 customers, and which sounds like it's it's quite a lot. and However, in the appendix to today's announcement, today being but you know the date the the whole thing was was published, ah customers with assets of greater than 10,000, there's only 41,000 of them.
00:05:34
Speaker
out of the 720,000 customers. so Essentially, 680,000 of those customers have less than 10,000 pounds on the platform. ah so Those accounts you know sub £10,000, the profitability on them may be fairly limited. ah But I suppose, from IG's perspective, they do get that list. you know if these are If these are young customers with the potential to grow their accounts over time, ah you know that can improve. Have either of you got a free trade account?
00:06:11
Speaker
interesting No, no, I've not. no then so So I have, but there's 200 quid in there, you know, and I just play around with it and, you know, got got my free share, whatever. It can't necessarily, for free, I can't necessarily buy you the typical type of UK small caps I might want. So I just have a bit of a play with mid cap stocks. and um you know its it it's i It's actually beaten my yeah my main portfolio over the last 12 months, but just obviously on an absolutely miniscule amount of money. So um yeah, I think there's probably quite a few um people like me who have bigger portfolios elsewhere, but have just opened one of these for fun. And I think that's
00:06:56
Speaker
ah It might be a positive thing, it might be able to, IG might be able to move some of these people into their be yeah their kind of higher value um proposition, but equally you might find that people have got this for a reason. It's the same as a Skybet account for them, it's not a ah serious investing platform. In terms of IG's fundamentals, as it stands, it's got a quality rank of 96 on Stockopedia, a value rank of 59 momentum 82 and an overall stock rank of 95. How do you see this um impacting its fundamentals over the long term? i mean For IG, I don't think this deal really changes that much. As I said, it's £160 million. IG is worth £3.6 billion. IG can pay for this deal with six months of profits, effectively.
00:07:52
Speaker
And and i I don't know if for if free trade has an amazing future. Maybe it does. ah Probably under IG's ownership, its prospects have improved, I would say, because as as As I've said, IG has deep pockets. IG can fund it. IG has a lot of other things going on. It's ah you know it's a very large company. It's got a billion pounds of revenues. um and I'm very positive on it. I'm a broken record on that front because I've owned the shares for for many years, but I'm pleased to see it's been breaking into new highs recently. and I think that's fair enough because
00:08:30
Speaker
It's only trading at 10 times earnings. It's got ah perfect fundamentals, as you pointed out, the quality rank. you know The stock ranks tell a story themselves on Stockipedia. It's at 95 in terms of its overall stock rank with quality of 96. So yeah, a fabulous company. And they have ah they have a CEO now who has a background with ah Hadi Power, Betfair, which I think makes makes good sense.
00:09:00
Speaker
Mark, do you hold any shares in this sector? Not spread betting companies at the moment. I've held um cmcx CMC markets in the past. um Obviously, within this sector, you've got sort of plus 500, which is um closer to the wild west of of um spread betting, and you've got IG, which is the the very stage. They hedge everything. there's There's almost no market risk in there. And then CMC market sort of sits somewhere in between the two with a ah dynamic hedging strategy. um But I think
00:09:39
Speaker
for For me, so CMC markets is the one that goes through the the most wild the wild differences in valuation, um so I tend to um invest in that one when it looks ridiculously cheap and hopefully sell when it um everybody's excited about it, but I've not um i've not held the other the other two.
00:10:03
Speaker
Sticking with the financial services theme, should we have a bit of a chat about fund managers? Mark, you covered Premier Myton, who reported this week.
00:10:14
Speaker
Yeah, this is one I hold. um I was relatively pleased with the update. They they had kind of a small amount of um ah outflows. I think it was $33 million for the quarter. um But um all almost all of that was in October in response to the um that the budget fears. um And there, November, December seemed to be ah reasonable.
00:10:38
Speaker
um and as a As an overall assets and under management, 33 million versus 10.8 billion assets under management isn't actually particularly big. The reaction today is a bit confused by the fact that the share also went ex-dividend for a three-pence share dividend. It's probably roughly flat, I think, if you if you include that.
00:11:05
Speaker
and But but i I thought this was a reasonable performance, particularly compared to something like impacts that I think um maybe had was it about 2.4 billion outflows. Lion Trust had 1.6 billion outflows in the last um quarter. um So these were sizeable numbers, all those they incrementally, they had higher assets under management than Premier Myton. I was relatively pleased and felt that this was a ah stock where we as individual investors often think of Premier Myton as being the some of the microcap funds, some of the managers that we
00:11:45
Speaker
you know meet at melo events or or chat to but actually it's quite a bit wider than that i i can't case only maybe kind of 17 percent of its assets were kind of yeah uk focused and yeah the uk has been performing badly but the the rest hasn't so um yeah i i came away um fairly positive out of this this update I wanted to dig a little bit into that so the product mix that you you highlighted there. so Only 17% of its so products are invested in UK equities. Does that differ from other companies in the sector, other asset managers in the same sector? and ah Do you think that's had an impact on them reporting flat versus others having these outflows?
00:12:31
Speaker
um to To some extent, I think Lion Trust really is quite UK focused, and that's been one of the ones that's performed worst in terms of outflows. ah Impacts off the top of my head, I don't know the they kind of breakdown, but my feeling is that's been a much more global, but has also faced some specific headwinds. They're losing or they've lost part of a St. James place mandate, and they have a further loss of that impacting them sort of coming up, um which might also kind of affect the confidence of other investors. If they see a particular big mandate going, they might feel that that's, you know, for specific reasons, people might feel that
00:13:21
Speaker
um ah a lower focus on ethical investing or um environmental investing might be, yeah ah yeah the trends might be reversing um against that. um But I don't know, personally, I think that that's probably still a good strategy. Investors are looking um at their wider impact on the world and changes of government or um yeah know This doesn't necessarily change um change things as much as we might we might think. What about you, Graham? Are you um invested in this sector? Yeah, I've added impacts to my portfolio now. and a Stock guy was very critical of, or I should say, I thought the valuation was was really crazy during the ESG boom.
00:14:14
Speaker
and i was I was definitely not willing to invest in it ah back back then, but yeah, I think impacts is interesting now. and li trust is and I don't want to be too critical, but it it definitely it wouldn't be one of the first would be one of the last fund managers I would add to my portfolio because you know the outflows there are so extreme. I don't see much light at the end of the tunnel there, but I am still moderately positive on the stock because
00:14:49
Speaker
the valuation is so is is so extreme, 260 million pounds for a company with said nearly 25 billion pounds of AUM. So I feel kind of like I have to be moderately positive on that, even if um you know the the progression there has been really grim.
00:15:14
Speaker
and you know And I think if you want to if you know if people want to buy ESG, I think they go to impacts type funds. I think Lion Trust is sort of a You know, it's done a lot of work in that area, but to me, it's more sort of piggybacking. Polar is still one of my favorites. And, um, uh, but, you know, even polar has has suffered, uh, recently, um, with, without flows. The, the contrarian me in me likes, uh, the U actually likes the UK exposure, um, which would be sort of lion trust that the fact that it feels like the, the, the U S.
00:15:57
Speaker
or seven stocks in the US can't can't dominate you know the world. they're they're not yeah They're not going to be a significant part of global GDP, even though they're often great businesses. And I do wonder whether that's a risk with um Polar is that um it's now had some outflows. And if the US tech sector Actually started reversing that they would be in one of the worst sort of places so i i guess the momentum at the momentum investors says bipolar and the contrarian investor says by lion trust and the um yeah the the the worried person in the in between by his impacts or um or a premium item.
00:16:41
Speaker
but I was just going to say, I think with Lion Trust, there's always the risk that management and does something weird. you know They spent ages pursuing GAM, and that never worked out, and that was very expensive, that whole thing. so i'm I would just be worried that you know When push comes to shove, LionTrust might try and make a whole bunch of weird acquisitions instead of probably what it should do is let itself be acquired. ah so I just think there's there's there's management teams out there where they're going to go for simplicity and with LionTrust, I'm afraid they're going to go for complexity and come up with some crazy solution to their current predicament.
00:17:31
Speaker
Yeah, I don't find the land trust accounts the easiest to read compared to some of the others as well, which just again, ah ah backs up your view that they they're going for complexity over a simplicity. um I think it's interesting point that we could see certainly consolidation or even US interest in in some of these, um these fund managers because of the if you know On a simple basis, if you're if you just after growing assets under management, then buying you know these are historically very cheap ratios of market cap to assets under management, even with the outflows, seems ah seems a good strategy to me. So I do wonder whether 2025 could be see some consolidation in this this area.
00:18:21
Speaker
Moving on to Smith's News. I know we framed this in the introduction as a debate. I'm not sure how fiery a debate is going to be. I'm going to try and and um play devil's advocate and maybe maybe poke a little bit. Graham, do you want to give just a brief overview of what Smith's News does, maybe chat through its fundamentals, just to give a bit of context to people?
00:18:45
Speaker
Yeah, well, ah Smith's News is the UK's largest wholesaler of newspapers and magazines ah serving tens of thousands of reit of retailers. and In a stock market context, I've referred to it as a melting ice cube and because circulations are are declining every year.
00:19:09
Speaker
ah know If you look at you know the newspaper stocks themselves like Reach, for example, and you know these these are these are heavily discounted shares because people expect the whole thing to wind up at some point in the next few you know it could be in a few years. It could be could be a further out. um I took a green stance on Smith's News in November.
00:19:40
Speaker
I think the stock was trading at about five times earnings or six times earnings. and It has a stock rank of 97. Quantitatively, it looks amazing, but it has this basic problem that circulations are going down. and you know When I looked into you know specific sort of newspaper circulations.
00:20:08
Speaker
um We've got stuff like 20% down for Sunday people, a lot of stuff falling by 10% to 20% year on year in terms of newspaper circulation. um so it's ah It's a fundamental problem for the company, um but I suppose at five times earnings,
00:20:31
Speaker
And with the company saying that 90% of revenues were going to renew until 2029, I thought, well, maybe there's a few puffs left in the cigar, but Mark disagrees. yeah i i ah The way I describe it is I've been continuously impressed with how well management have done of taking out costs. so They've been battling this 6% to 10% headwind of declining revenue for for years, and they've
00:21:04
Speaker
mostly managed to hold EPS flat, which is a pretty impressive um ah happening. They've paid down debt. They are now being able to pay higher dividends because they've removed those covenants. So there's a lot to like here, um but I've been consistently um unimpressed with their diversification efforts.
00:21:25
Speaker
um And I think you you described it as ah a melting ice cube. I think I'd describe it as a um a van full of newspapers hurtling towards a cliff. um Because I don't see this as something that sort of has just a steady decline, 10% a year down to zero in you know kind of 10 or 15 years. I think at some point,
00:21:50
Speaker
newspaper physical newspaper for distribution for one or two of the major um companies just becomes uneconomic. you know the the The decline of the circulation means they've got to put the prices up, prices don't cover the um you know that the printing costs and you know and and I can really see ah almost like a cliff edge. Now, I don't know when that is. That could be 2030, could be 2035. There's a lot of uncertainty there. um So what I think Smiths News need to do is they've been quite good at diversification. So they've been um recycling. So they've been sending back. So they've got ah a van that goes out to a news agent and it comes back partially empty or at the say the end of the round, it comes back empty.
00:22:36
Speaker
So they've been bringing back recycling from the newsagent. So again, a nice little earner. They've been sending, I think it's Caravo Sports drinks out with um ah the newspapers again, a nice little earner.
00:22:53
Speaker
You have to be careful. They can't send anything that's too valuable out because ah literally they just dump them outside the news agents. They don't, you know, they're not delivering in quite the same way as as other companies. But um what they really need is something that doesn't involve tagging onto the back of newspaper distribution.
00:23:12
Speaker
Because the newspaper distribution at some point will go, and I think it will go quite quickly because once one newspaper on yeah can't afford it or it's not economic, then it adds extra costs to the newsagent and to the distribution chain and suddenly the next one becomes economic and I think you could see quite a rapid decline.
00:23:32
Speaker
So i i'd love yeah I'd love for them to survive. I'd love them to find something good that can um can deliver this diversification. But i I haven't seen it yet. Have have you seen any signs that management can do this? I think the question is whether there really is going to be a cliff edge, because newspapers and magazines you know have been declining for so long is it Is it possible that that that it's more of a whimper rather than a bang? but Could we just you know gradually lose a few newspapers you know with the younger audiences, keep some of the newspapers with the older ah audiences for for a bit longer? And you know the magazines are another element, aren't they? you know Maybe you have a magazine published weekly or monthly.
00:24:31
Speaker
you know Maybe the business can survive so with them as well to some extent. to To sum up, it sounds like, basically, Mark, you're saying that, and I'm looking at Smith's News Stock Report at the moment, particularly at the dividend. Currently, the the forward yield is like 9%. They're paying a chunky dividend. I guess, from what I'm hearing, you're saying that you think that that that money could be better used to try and diversify and try and stay alive longer than the end of the newspaper market.
00:25:00
Speaker
i I guess, honestly, I'm not convinced it could. I think they're probably doing the right thing. I think there just doesn't exist a diversification for this business um and that, you know, it will pay this nice dividend until one day it will stop.
00:25:17
Speaker
don't think any of us know what that day is. gra Graham's saying it's going to be a declining multi-ice cube. I'm saying it's going to be a definite day in you know sometime in the 2030s. Then you have to work out the net present value of what those dividends you're getting in that time are because I think it probably can keep paying this this dividend for but for a number of years and probably will.
00:25:41
Speaker
so Yeah, um it it I might well be over concerned about um kind of what's going to happen here and yeah many investors will just be happy to lap up that 9% yield and you know keep keep taking it in the hope that something comes along. The dividend is is arguably covered you know well by earnings and and you know people can take that dividend and they can you know buy Nasdaq shares or you know something else that's more interesting and do quite well.
00:26:14
Speaker
To wrap up today's episode, ah Mark, you wrote about some of the investing mistakes you made in 2024 that you'd like to to leave behind in 2025. Yeah, I find this quite a sort of cathartic process. It's not always a as a nice process when you have to sit down and write about, well, what what are the things I got wrong and what mistakes did I make? But um yeah, as a I find as a learning exercise, it's probably one of the things I i get the most out of.
00:26:46
Speaker
um and I think there's a couple of ways that investors can find find their mistakes and and try and learn from them. um One of the hard things is not every losing investment is a mistake because you have this ah You have this aspect of luck that goes in there. um yeah know Any short-term investment, you know you can invest in a fraud and somebody takes it over. you um yeah There's lots of ways that you can be wrong in the short term, but I find that the two key ways to do this is first is, well, look at what were those biggest losers in my portfolio of last year and what did I learn from that?
00:27:27
Speaker
um And then the other one is to look at well what did I sell that then went up. um And I think that's the um that's the sort of key bits of information that um investors you know kind of really want to record if they want to learn from their mistakes.
00:27:46
Speaker
And finally, something that kind of all investors can do is that they can screen for, well, what were the best performing stocks of last year? And why didn't you own them? Now, a lot of these will be um speculative things that you know don't fit your portfolio style. um yeah A lot of them, again, will have been high performers due to luck or things you never could have spotted. But I think there's often things you find ah where you think, well, actually, ah I probably could have owned that. That was well within my wheelhouse you know my understanding and ah why didn't I own those stocks? Casting your mind back, was there a moment in time or an event that made you sit down and think, huh, I really need to start reflecting on these?
00:28:33
Speaker
Well, probably 2008 actually. ah you know the the That time where um you know the naive me thought that if I bought banks on a P of six, then I'd i'd make money and you know that there was nothing that could possibly kind of go wrong or that I could have a load of commodity stocks that were super cheaply rated on earnings and kind of nothing could go wrong. And 2008, 2009 came along and sort of um ah paul pulled the rug out from under me. And it definitely um opened my eyes to a number of of kind of weak spots in my understanding and my investing process. So yeah, it was probably way back then I decided, well,
00:29:19
Speaker
I wasn't going to focus on you know writing up my best ideas or or yeah how amazing I've done. I'm going to focus on, well, where am I going to learn and what have I got wrong? You listed four mistakes in the article you wrote. I will link it in the show notes for people to go and read it. You said that the first one was ignoring your own rules, which led to you being overweight in some risky positions that then didn't pay off.
00:29:46
Speaker
You also underestimated how poor the UK market sentiment could get, just how low the lows were going to get. ah Selling too early, you already mentioned ah selling things and then then went up. You said made tech surged 90% after you sold it, which sounds painful. um And then kind of the opportunity cost of of having that capital invested in the stocks that you had invested in meant that you ah you didn't invest in gold producers and some of the the undervalued companies that experienced it. We saw a huge amount of takeovers in in the last year, certainly in the UK.
00:30:24
Speaker
I guess on the first one, what cri and this goes to both of you, what criteria do you use in going forward to determine what the appropriate weighting is for a stock in your portfolio, especially if it's a slightly riskier position? so for For myself, you know the embarrassing thing is I've written a book about this.
00:30:41
Speaker
Like, you know, by my book is, um you know, effectively how to weight stocks in your portfolio. And, you know, and I think that the mistake I made this year being overweight, something was risky, is the classic thing that I try to get investors to avoid as part of my book. And it's it totally is that that kind of risk reward, having an idea of, well, um I increase my weighting where I think something has the most upside, and I increase my weighting when I think there is a um ah lower risk. Now, since I've written the book, I've slightly adapted my process and I've added in one other factor, which is how I perceive the short-term
00:31:29
Speaker
outlook for that stock and that just comes from I guess conversations with other successful investors and seeing um people's processes is I often find that and ah or I found that I was overweight stocks where the The value, the value looks amazing. So the upside looked brilliant. It was relatively low risk. You know, it was something that maybe had half its market cap in cash or was a very resilient business model. But then um there was a profit warning.
00:32:05
Speaker
And I sort of knew the chances were high that this was going to have a profit warning. And of course, yeah the market reacts badly to the profit warning. it Very rarely does it does it does the market look through those short-term issues and say, oh, but there's ah a lot of cash on the balance sheet. So I've now adapted and added in that as ah an additional factor. um But in general, that's that's the process I follow. risk Risk reward, what is the best risk reward ratio that I can get?
00:32:32
Speaker
How does that compare with you, Graham, and your approach to position sizing? When I ah when i managed to some funds at ah at ah and an institution I was a big believer in having a high um active share, you know having ah you know having as much of a difference between the portfolio and the index as I reasonably could, um because I feel like that's what the customer was paying for. ah you know They're paying for active management.
00:33:05
Speaker
and So if there were 20 sort of active ideas, I will, I will push them, you know, as much as I reasonably could. Um, in that context, as an individual where there's no real rules on me, I just let things go to wherever wherever the share prices take them because i don't need you know i dont I don't need to sell anything except when I do. And you know if I have to sell something, I'll sell something. But otherwise, I just let things go. So like I have over 50% of my portfolio in two stocks. I have the nearly 90% of my portfolio in five stocks. And then I just add to the other ones
00:33:52
Speaker
as i ah as I study them and it's sort of, ah I suppose I'm not really a role model for anybody in this regard because I just i just let things go. um as offer try not to wince is great yes this sort of like I I consider myself concentrated, but I'm not that concentrated. In the formative time of my investing life, I had about 50% of my portfolio in a stock that lost 90% plus percent of its value. and okay I didn't have a lot of money at the time, but it was still pretty painful. and i think
00:34:32
Speaker
And one of the interesting things that I also wrote about um over Christmas was just the nature of risk. And I think this the fact that I ignored my own rule and had something that, you know, reasonable position in something that took a bath this year.
00:34:50
Speaker
And also, um the article was about the death of um this guy, Dr. Michael Mosley. I think we followed it on the news. He went for a walk in very hot conditions on a holiday, got lost, and it appears died from heat exhaustion a couple hundred meters from a resort where he would have got help. And this story kind of stayed with me during the year. um And I think part of the part of the the reality is that that the difference between success and failure can actually be very, very narrow. um you know the the in In his case, it was maybe a couple hundred meters
00:35:32
Speaker
Further, if he'd lasted, he it would have been a holiday anecdote rather than the sad death of ah of of a great communicator and a great man. um And that really made me reflect on, well, how much risk am I not seeing? you know How much risk in my portfolio am I um putting down to um but a holiday anecdote when actually this this could have proved fatal you know if something else had gone gone the other way. I could have had ah ah some fairly big losses. um So yeah yeah, I don't know. I'm not going to counsel Graham on this thing. But for me, it's definitely, um I think, if anything, I've become more cautious over the last year.
00:36:18
Speaker
yeah But it really depends on yeah on everybody's individual circumstances. and you know We're not just humans walking around within you know with a single stock portfolio. you know We've got houses and other they things. you know so it's not like you know i you know To be honest, i don't even I don't even check these share prices you know on ah on a daily basis because ah you know and In a lot of cases, the reason i something is a big part of my portfolio is because it's it's gone up a lot. ah and I don't really believe in selling because I think it's just impossible to know when to sell something ah unless you know unless you've got a very specific reason. I don't believe in sort of massaging a position in the portfolio.
00:37:05
Speaker
Yeah, everyone everyone's just got to do do what works for them. This works for me. ah have you Have you analyzed whether your top positions actually outperform the other ones? Well, they have because otherwise they wouldn't be the top positions. ah the The reason I say is there's a very interesting study that a guy called Meb Faber did into ah replicating hedge fund positions. So these are the idea that you can look what Warren Buffett owns, you can look what you know, um any of the top, you know, hedge funds that have to publish their figures own and you can replicate them. And he found that if you if you replicated what they owned, and this is even with a ah sort of three month lag on reporting, you would outperform the market with a one caveat, which is you don't buy the biggest holding.
00:37:55
Speaker
um i And we don't know why that is, but the the so my suggestion is that that's become their biggest holding because it's gone up rather than because it's their best idea. um And that the the reality is that that um what happens to have been the biggest point in the biggest holding at point in time actually then mean reverts. So I'd be really interested to see if you ever a study, well,
00:38:23
Speaker
did you Did that top holding outperform? Because but maybe it does. Maybe that works for you. um but i yeah But I think there's a lot of evidence that even professional investors run their winners too far rather than fail to top slice.
00:38:41
Speaker
I will take a brief moment to casually plug the fact that we did a full webinar on well when to sell at some point last year. Again, we'll link that in the show notes. I found it fascinating to watch. Mark, to to finish this up, I'd love it if you could summarize the key take-home points from the the mistakes article that you wrote for people. Oh, um I would say um Yeah, learn where your weaknesses are and put in place areas to over to overcome those. So that's that's been my investing process really has been, and I like rules. I like the the fact that i put in a I calculate a percentage that I think should be my target percentage. And I you i aim for to to have that percentage. And that's my rule. i Another one is I don't see the monetary value
00:39:34
Speaker
in my portfolio because um that that doesn't matter to me, it's the percentage of the portfolio. um So I'd say probably one thing, which is, you know, like, look, you know, review your own mistakes, review where you are weak, where you've got stuff wrong and think carefully, well, how can I avoid this? How can I put in place a rule or a um a strategy to overcome this. and it doesn't you know like And it doesn't always work out. I'm sure I sell stuff that goes up, as my article says. um you know But on average on average, this works for me. My rules on average give me a better or more consistent performance.
00:40:18
Speaker
and That just about brings us to the end of today's episode. Thank you so much for listening. If you enjoyed the analysis in today's episode, I think you will really enjoy our daily stock market report on Stockopedia. It's called and published every weekday that the markets are open. ah Graham Mark and the rest of our analyst team that give in-depth analysis of the latest news from noteworthy or hard to research shares. If you're interested you can access that for free for 14 days using the link in the show notes. You will also unlock the rest of Stockopedia's insights, tools and education to help you speed up your research process and help you make informed investment decisions.
00:40:59
Speaker
Also, let us know what you thought of this show in this format. and There's an email address in the show notes. I would love for you to email in and let me know your thoughts or questions, or you can get on in touch with us on Twitter or X as it is now called. We are at Stockopedia on there. ah That's it for this week. I will see you next week at the same time for the next episode. Bye for now.