Performance review August 2014 – Comment “Patient enough ?”
Performance August:
In August, the Benchmark (Eurostoxx50 (Perf.Ind) (25%), Eurostoxx small 200 (25), DAX (30%), MDAX (20%)) recovered from last month’s loss to a certain extent and gained +1,1%. The portfolio could not keep up with that and was almost unchanged. YTD, the score is +7,6% for the portfolio against +0,3% for the BM.
Winners were Installux (+6,9%), Van Lanschot (+5,9%) and Cranswick (+5,1%). Losers were Admiral (-8,4%), Sistema (-8,3%) and Kas Bank (-3,2%).
Current Portfolio & transactions:
In August, I added Bouvet ASA as a new position to the portfolio and increased Gronlandsbanken to a half (2,5%) position. This reduced the outright cash level to 9,0%. Together with 3 special situations (Depfa LT2, MAN AG, Sky Deutschland) which I consider “close to cash”, the portfolio is still very conservatively positioned.
The detailed portfolio can be seen as always under the portfolio page.
Comment: “Patient enough ?”
In my blog, I have often written about the virtues of patience for an investor, for example in my January 2013 comment. This is what I wrote some 19 months ago:
However another potentially big mistake should also not be underestimated: Taking profits too early. Most investors (including myself) get nervous if their stocks climb quickly 20-30%. What you then often hear is something like “It never hurts taking a profit” or “No one ever got bankrupt by taking a profit” or something similar.
The truth is: In order to generate above average returns, taking profits too early hurts badly. Statistically, the vast majority of investment ideas will be rather average, some will be bad, but some of them and usually only a small amount will be really really succesful.
So if I look at the January 2013 portfolio, I can already identify a couple of positions which I have sold far too early, among them Total Produce, WMF, Dart Group, Bouygues which I sold far too early despite my smart talks in the comment. So obviously, I am still not patient enough, especially with my winning shares. So how can I trick myself into more patience ?
In my current portfolio overview I added a column called “Holding period”. This is simply the calculated time since I bought the first part of the position. Interestingly, both for the “core value” part as well as for the special situations, the average holding period is around 1,5-1,6 years.
| Name | Weight | Perf. Incl. Div | Holding period |
|---|---|---|---|
| CORE VALUE | |||
| Hornbach Baumarkt | 4,3% | 35,7% | 3,7 |
| Miko | 3,9% | 10,7% | 1,0 |
| Tonnellerie Frere Paris | 5,7% | 117,3% | 3,7 |
| Installux | 3,5% | 82,1% | 2,3 |
| Poujoulat | 0,8% | 26,5% | 2,3 |
| Cranswick | 5,8% | 72,4% | 2,2 |
| Gronlandsbanken | 2,5% | 25,7% | 1,8 |
| G. Perrier | 4,5% | 102,5% | 1,5 |
| IGE & XAO | 2,2% | 57,3% | 1,3 |
| Thermador | 3,0% | 41,3% | 1,2 |
| Trilogiq | 1,7% | -14,5% | 0,9 |
| Van Lanschot | 2,6% | 9,7% | 0,8 |
| TGS Nopec | 4,9% | 12,3% | 0,8 |
| Koc Holding | 3,6% | 46,3% | 0,5 |
| Ashmore | 2,9% | 17,8% | 0,5 |
| Sistema | 1,1% | 4,4% | 0,5 |
| Sberbank | 1,1% | 6,7% | 0,3 |
| Admiral | 2,7% | 3,3% | 0,2 |
| Bouvet | 2,7% | -0,3% | 0,0 |
| OPPORTUNITY | |||
| KAS Bank NV | 4,3% | 49,8% | 3,7 |
| Drägerwerk Genüsse D | 4,8% | 143,5% | 2,9 |
| DEPFA LT2 2015 | 5,0% | 30,3% | 3,7 |
| HT1 Funding | 4,3% | 86,5% | 0,8 |
| MAN AG | 2,3% | 4,8% | 0,5 |
| Energiedienst | 2,6% | 10,6% | 0,3 |
| Depfa 0% 2022 TRY | 3,0% | 16,5% | 0,2 |
| NN Group | 2,6% | 2,5% | 0,1 |
| Sky Deutschland | 2,5% | -0,8% | 0,0 |
| Cash | 9,0% | ||
| Core Value | 59,5% | 1,6 | |
| Opportunity | 31,5% | 1,5 | |
| Short+ Hedges | 0,0% | ||
| Cash | 9,0% | ||
| 100,0% | 100,0% |
Most of my “core value” investments are usually meant to take 3-5 years in order to work out as planned. Of course, sometimes events out of my control impact the holding period such as buy- outs (EGIS, AIRE KGAA) or maturities in the case of bonds. But especially for the “core value”, the current 1,6 year holding period looks short on average. Clearly, there is some effect due to the fact that I started the blog 3,7 years ago and in my private portfolio some of the initial positions are there for a much longer time. Nevertheless, in the future I will focus more on the average holding period.
If i would invest consequently along my stated goals I would expect an average holding period of at least 2-3 years for my “core value” part. The “special situation” part is naturally a little bit shorter.
Now the good news: I don’t have to do anything to increase the holding period. I just have to sit around, wait and do nothing and the holding period will increase each day…..
I don’t want to give myself any “hard restrictions” on the average holding period as I strongly believe that most external restrictions on investment portfolios are negative for performance in the long run. One of the biggest advantages of any private investor is that he/she doesn’t need to have any restrictions. If you look at any institutional portfolio, it is crazy how many regulatory and other restrictions exist. Many portfolio managers spend most of their time steering through those restrictions instead of looking for good investments.
For that reason I will not create any artificial minimum but rather look at this as a continuous process and as a “qualitative factor”. In practice for instance I will check any new idea against the alternative to increase an existing position and report the holding period in my monthly updates. Of course this does not prevent too early selling, but I think it helps to implement more patience into my portfolio management process.
value and opportunity 
I took the shares once and will never do so again. I usually pay 7.9 eur when i trade but ended up paying 29.9 eur for the trade which gave me shares with a value of 24 eur. My biggest trading mistake. No wonder the bank always try to “sell” that option to me….
I have a question regarding your performance review: for Admiral Group you claim a performance of 3.3% since you purchased the shares. In your first analysis of Admiral Group you stated that you bought half a position at GBP 13.80. The last quotation of Admiral Group on Friday evening at London Stock Exchange was GBP 13.35. For me the performance is negative and not positive.
Walter. Thank for checking my performance numbers so dilligently.
Just to make things clear: I record performance in EUR including dividends.
Yes I bought at 1380 pence but as I said in the post, I bought them already in April as an “undisclosed” stock because I did not have the time to do the full write up.
End of May, Admiral paid dividends. I record dividends when they are paid. They paid in total 50,6 pence (you needed to own the stock on April 30th to recieve the dividend which I did).
Secondly the British Pound gained since I bough from 1,2169 EUR/GPB to 1,2654 EUR/GBP which is around +3,5% gain in EUR.
So in total, the dividends received and the GBP/EUR gain results in a EUR performance including dividends of around +3,3% which I think is the correct performance number.
Hi 007, thanks for clarification. One more question: as you know Admiral offers two options for their dividend: either to receive a cash dividend or to receive shares instead. What is your general opinion on the second option, invest the dividend in the shares if the price of the shares has fallen since you bought them?
if you like the share, then the second option might be a good alternative….
Here in germany you might get some difficulties recieving the dividend in form of shares. Most (Retail-)Broker simply will not offer that possibility (or only at prohibitive cost) due to settlement issues relating the taxation of the dividend. I don’t know how that is handled in other jurisdictions. (GB should be no problem of course 😉 )