Category Archives: Portfolio

Portfolio Update – 2017 Mid-Year

I have been considering quarterly updates, but given the lack of activity in my portfolio over the last six months (and a lack of time on my part), I have decided to provide a bi-yearly update instead.

2017 mid-end performance: 4.7%

With regard to activity over the past 6 months, I sold nothing, but did use some new money to initiate three new positions. Two of those positions I discussed on the blog (Admiral Group and M Winkworth), and the other was an exercise in bottom-fishing that I haven’t had the time to write up yet (Tasty Plc).

  • Barclays, my largest position, delivered results for 2016 end-year as I would have hoped for, maybe even exceeding my expectations slightly. However, given the rapid turnaround that has taken place, I was still a little disappointed in other respects. In particular, the surprise “exceptional” write-down of the Barclays Africa operation indicated business as usual for bank that has had a string of these “exceptional” write-down’s for the best part of a decade. I still think that Barclays own a collection of high quality businesses, but with most of the restructuring now complete, there should be no excuses in 2017 to not see vastly better results.
  • Admiral Group is a position I initiated at the start of the year and knowing my luck, the share price tumbled a few weeks after I bought it when the government announced measures that would require the company to increase the cost of claims paid out. Thanks to excellent year-end results (notwithstanding government measures) and dividends paid out, my position on this is already in the black. I feel comfortable with my position in this company.
  • M Winkworth is a new position I opened up over the past 6 months. I have to say, this is a company that has given me some concern, despite it generating a 15% return on my cost basis. Up and coming competitors in the estate agent business have been taking significant market share from established bricks and mortar operations like M Winkworth. I do not know how houses will be bought and sold in the future, but if results here continue to slide, then I am minded to just cut this position entirely.
  • Vienna Insurance Group has just been a pleasure to own. I bought this at significantly below tangible book value when it reported problems (critically, not with underwriting). While low interest rates have impaired returns on their investment portfolio, underwriting has remained strong with the business continuing to report a combined ratio well under 100%. This business still has exposure to Eastern European markets which I am wary of, but overall my expectations have been exceeded and the company has given guidance of superior profits to come in 2017.
  • Wells Fargo was a share I was lucky enough to buy at close to a multi-year low after the fallout of the “fake accounts” crisis that it was dealing with at the time. 2016 year-end results were a little weaker than I hoped for, also a gradual decline in ROE and rising costs have given me minor cause for concern. This is a company I will be keeping an eye on in case it displays any further weakness.
  • Tasty is still a very new share in the portfolio, hopefully I will get time to write it up in further detail.

Up to date information on my portfolio can be found here.

Portfolio Update – 2016 Year-End


With the year now over, I thought I would do a quick re-cap of my performance in 2016 and how my portfolio is now positioned going into the new year. Firstly, let me give you the end-year return.

2016 year-end performance: 39.52%

The year 2016 was a roller-coaster to say the least. In Q2, Brexit saw my portfolio sustaining an eye-watering one day decline as financials across the board were dumped by nervous investors. Q3 provided some relief, before the sector took off like a rocket in the aftermath of the election of Donald Trump and fall in long-term treasury yields. Throughout the tumultuous period, I stuck to my conviction that financials were under-priced and bought more Barclays after prices collapsed in the aftermath of Brexit. Wanting to get more diversification in the portfolio, I then opportunistically took advantage of weakness in the share price of both Vienna Insurance Group and Wells Fargo (not covered on here, but covered extensively elsewhere).

Current Portfolio Weighting

  • Barclays PLC: 74.5%
  • Vienna Insurance Group: 11.9%
  • Wells Fargo: 13.6%

2016 Position Performance

  • Barclays PLC: 45.52%
  • Vienna Insurance Group: 26.56%
  • Wells Fargo: 22.76%


During 2016, I made 4 separate purchases of shares, the first two were for Barclays (pre and post-Brexit decision) and the other two were for positions in Vienna Insurance Group and Wells Fargo. No positions were sold at any point during the 2016 period.

Going Forward

Barclays: For my small portfolio this is an over-sized position. Having said that, when I compare it to competitors in the sector, it’s still cheap. It trades at about 75% of tangible book value, owns some very valuable businesses that are offset by other money losing, non-core operations that are being sold, and has what I regard as good management who are trying to take the correct long-term decisions for the business. I think that given the progress made that it’s worth at very least tangible book value, implying a 20-25% gain from the current price.

Vienna Insurance Group: My original conviction in buying this company was that it was a decent business that had operational/macro difficulties, but traded at considerably below fair value. Since then a new CEO has been appointed, we’ve seen some kitchen sinking of the bad news, and subsequent write-downs on both earnings and the balance sheet. Thankfully, things have settled with forward guidance suggesting that this is currently available at less than 10x earnings. With that said, having my portfolio engaged in an insurance company that has operations in Bucharest and Belgrade doesn’t comfort me. If I get anything close to fair value, I am more than happy to take advantage of liquidity on the way out of this one.

Wells Fargo: If there was ever proof that sometimes good things come to people who wait, it was Wells Fargo in Q3 of 2016. Seeing this company trade at as little as 11x earnings when the overall PE for the S&P was over twice that number was something that beat me over the head and until I sat up and bought some shares. The Trump rally has resulted in a re-rating of these shares. However, in comparison to the market, Wells Fargo still trades at a considerable discount, so for now I am content to hold these in my portfolio.


2016 offered me one fantastic company where to put money to work and two other decent opportunities to invest in. As of the start of 2017, I do not see the same opportunities present themselves. While I don’t like playing the macro game, or market timing, I do feel that certain equity markets are overpriced (US for example). I have no pre-cognition towards the future direction of equities, but I will always want to fish in a market where value is more readily available. With that said, the UK and Europe is the place where I would be expecting to make further purchases going into 2017.

Portfolio Update – Q3 2016

Q3 performance: 6.12%

Q3 was a good quarter for my fledgling portfolio with the Q2 losses reversed and the portfolio now showing a decent profit for the period. The portfolio was supplemented with two new companies, both of which I shall be writing up (one is almost ready to go out).

The first company I added was the Austrian insurer, Vienna Insurance Group. I will discuss this company more in my next blog entry, so I will be brief here. This is a decent insurer that formerly attached a high valuation due to consistent profitable under-writing, history of premium growth, and prudent use of float. In the last year and a half though, they have hit some issues, the write-off of an IT system, the restatement of 2015 accounts due to account rules, a slowdown in premium growth, and a decline of investment income due to ECB quantitative easing. This has led to a collapse in the share price from over €40 in early 2015 to €18.50 today, leaving the company trading at just 8 times expected earnings for 2016 and below tangible book value of €20.31.

The second company is yet another bank that will be familiar to readers (for all the wrong reasons today) called Wells Fargo. I wasn’t too eager to add another bank, but I simply could resist the chance to buy a high quality business at a discount to intrinsic value. I will go into more detail on this very recent purchase over the next few weeks.

Portfolio Update – Q2 2016

Q2 performance: -7.15%

What a difference a week can make in investing. Just one week before the quarter end, my fledgling portfolio was ready to celebrate an inaugural gain of about 15.5% as Barclays surged on the expectation that the UK would Remain in the EU. On June 24th however, we woke up to the news that the UK had voted Leave, sending markets into a tailspin. My portfolio, which consists only of Barclays got flattened the next trading day, going from 186.75p down to as low as 121p, before recovering slightly to 153p. The next few days, the shares drifted downwards, eventually finishing Q2 at 140p.

Given the market carnage in financial stocks, I was naturally forced to reappraise the situation. As John Maynard Keynes once said, “When the facts change, I change my mind”. When investing, it’s extremely important to re-evaluate a company on significant news or results.

The fall-out from Brexit has been felt sharply in the UK, and to a lesser extent abroad. Sterling has plunged, especially against the Dollar, where it now trades at a low not since the 80’s. We have seen a flight from risk assets (European banks, in particular Deutsche Bank and Italian banks) to treasuries which in many countries are hitting all-time lows. The fact that both Chancellor George Osborne and Bank of England Governor Mark Carney have directly intervened to try and stabilise things is indicative of the concern felt. In the short-term, GDP will grow less than expected, lending will fall slightly, bad debts will go up slightly, investment banking income will continue to lag. The consolation is that the heavy work of transformation is mostly complete, so I still have hope that the improved operating results will more than balance out the short-term economic shock of Brexit.

In the long-term, I am more optimistic. The expected cut in interest rates and injection of liquidity by the Bank of England will provide a gentle tailwind. Indeed, I think Osborne’s measure to cut Corporation Tax will also help. It’s the Sterling devaluation however that could really put the wind in the sails of the British economy. We know from when George Soros pushed the UK out of the ERM in 1992, the UK took a short-term hit. In the long-term however, the British economy went on an 8 year tear. I am pessimistic we will see that same sort of growth, but I certainly wouldn’t be surprised if the economy surprises on the upside with Barclays benefiting. Indeed, as one old research note I read stated, Barclays is not a typical buy and hold stock, rather something you dip into during the 5-7 year periodic market panics as it always recovers. We are clearly in that environment now. I topped up my holding at the 132p mark late last week. Q2 results later this month are eagerly awaited.