The Headlines
– Overall, my portfolio is up by 11.51% since the start of 2017 (including reinvested dividends)

– I currently have 32 holdings of which 22 are profitable positions and 10 are running at a loss, year-to-date (excluding dividends)

– A total of 116 trades during the quarter. However, this is a little misleading as my portfolio is spread over 7 broking accounts, so mostly, selling or buying a security involves more than a single trade (this is something I need to streamline). This said, there is still much more churn in the portfolio than I would like.

The Trades
Q1 Trading Activity (in chronological order):

Sales Purchases
VCT WTM (position now closed)
WPCT G4M (position now closed)
PHP CAKE (position now closed)
NET REC (position now closed)
SCH (topslice) PAY
G4M D4T4
TSTL (topslice) TSTL
BJU (topslice) AMO
IGG (topslice) GVC
IDEA (topslice) BXP
D4T4 (topslice) SOM
GVC (topslice) CEY
AAZ (topslice) MCGN
ZYT (topslice) DGOC
PEG (topslice)


From the table above, it becomes clear to me that my trading activity is higher and more erratic than it should be. In a few cases such as VCT, ITV and PTEC, I decided to cash in on the capital gain (lower conviction holdings) rather than wait for the dividend. In other cases, I have topped up and top sliced core holdings to a) take advantage of momentum via trading updates and results publication (mainly successfully) and b) to rebalance the portfolio. I am also pleased that I have been able to cut holdings at the whiff of bad news (e.g. profit warnings, weak outlooks, director activity). However, that still leaves a bunch of poor, non-strategic decisions which I need to eliminate from my portfolio management – things like buying and selling REC within a 24 hour period (for a loss), jumping in and out of G4M for a mere 5% profit on a high risk valuation, were just rubbish, impulse trades that I need to eliminate from my repertoire.

This said, I have felt myself becoming calmer as the quarter has unfolded. In part, I am feeling more comfortable with the overall balance of my portfolio and clearer about the strategy I am pursuing. There have been a couple of severe market down days during March and it has been interesting how some of my dividend holdings have risen to offset the falls in other areas. It is perhaps also easier to remain calm when the overall portfolio is rising (my portfolio has been up 10 out of 13 weeks this quarter, as shared weekly on Twitter).

Like everyone else, I have absolutely no idea when this bull market will end. Earlier in the quarter, I was noticing lots of folk on Twitter and Stockopedia posting bull market comments and big portfolio rises when my own portfolio was failing to ignite. “What bull market?” I was asking myself. And yet, here we are at quarter end and I have achieved my minimum portfolio aims for the year. While I’m delighted with this, it is important to remain ever vigilant. Arguably, valuations are becoming stretched, there is political and economic uncertainty across the globe, (particularly the US, the UK and the EU) and it seems to me that sentiment could change in a heartbeat at some point during the year.

With this in mind, I will be looking to rebalance my portfolio further still during Q2. While I like to run my winners as much as possible, it is also prudent to top slice along the way. I have several large winners that fall into this category and I have decided to wait until the new tax year before rebalancing as I am already over my CGT allowance for the year, although a higher proportion of holdings are now protected from taxation via SIPP and ISA wrappers. In addition, I have some significant dividend income being paid in April along with a nice tax relief bonus from transferring a number of holdings into my SIPP – feels a bit like a juicy special dividend! I anticipate that the rebalancing process will be complete around mid-quarter at which time I will update the holdings page again to reflect this.

One the biggest surprises to me is that so far this year, none of my holdings have been subject to takeover approaches. I remain utterly convinced that this outcome will be inevitable if sterling remains weak against the Euro and US Dollar. Perhaps takeover fever will take hold during the spring and summer months but for the record, this is never my reason for holding a share, merely a bi-product of owning companies with quality earnings and reasonable valuations.

My core, high conviction holdings are mainly a collection of companies with low/no debt, high quality earnings (much from overseas) that pay a sustainable and growing dividend plus, they mostly have decent momentum. Bioventix (BVXP), Zytronic (ZYT), Brainjuicer (BJU – soon to be renamed System 1 “SYS1”), Amino Technologies (AMO) and Somero (SOM) are overweight holdings that fall into this category. In the second tier of holdings, the strategy is a little more mixed – Tristel (TSTL), Impax Asset Management (IPX), D4T4 Solutions (D4T4), Ideagen (IDEA), Microgen (MCGN) and Beximco Pharma (BXP) all have high quality earnings and pay a decent dividend. Petards (PEG) has high quality earnings but doesn’t pay a dividend (yet). Of these second tier holdings, Anglo Asian Mining (AAZ) and IQE (IQE) are the odd ones out. In the case of the former, I am waiting to see what resource upgrades are forthcoming during the spring and summer months. In the case of IQE, earnings progress has been good but the real kicker is that it is rumoured their wafers (using VCSEL technology in which IQE are world leaders) will be used in the next generation of smartphones being released this year and if so, earnings could explode. Perhaps this would also explain and fully justify the increased capital expenditure IQE experienced in 2016.

I aim to work towards a better balance of the companies mentioned above (some of the overweight holdings definitely need to be top sliced) but most importantly, I want to cascade some of those profits into my income portfolio where I remain focused on adding further layers of diversification. I have at least another 10 income shares I plan to add to my portfolio during 2017, most of the current holdings are worthy of a top up and a handful of these income shares are also potential cash proxies. This is a concept I have been discussing with @rhomboid1 on Twitter. He remains fully invested at all times rather than moving funds to cash for safety during times of high volatility or uncertainty. Having spent too much of 2016 with a high cash balance and experiencing the subsequent loss of dividend flow, I have decided to explore this strategy further. I have been watching the behaviour of some high income, low volatility shares especially on market down days and it is my intention to start building these holdings up in readiness of moving further funds into these shares when I become uncomfortable with market conditions.

I have updated the Current Holdings page to reflect holdings/weightings at quarter end and I will update this page again once the Q2 rebalancing is complete. As I have moved funds between portfolios and envisage doing so throughout 2017, it has become meaningless to monitor the performance of each portfolio segment and I will now only report on overall performance while also updating the holdings for each strategy on a quarterly basis.

My overall portfolio performance for the quarter has met my minimum annual target and therefore, I have to be pleased. However, in the context of a strong bull market, I’m sure many investors are making good gains, so now is not the time for self-congratulations but rather, risk management needs to rise higher up the agenda. I already have a diversified portfolio of 32 holdings and I plan to increase this to around 40 holdings by adding further income shares (including some cash proxies). This will be funded by top slicing some of my larger holdings, reinvestment of dividends and the tax relief afforded by transferring holdings into my SIPP.

It feels like momentum is still building within my portfolio and I remain convinced that a number of my current holdings will become takeover targets during 2017. Will takeover fever take hold during the spring and summer months? That remains to be seen but in the meantime, I am happy to be owning quality and buying income. Let’s hope my portfolio continues to make hay while the sun is shining because as sure as eggs are eggs, a significant market correction will occur at some point.

Happy investing folks
Simon (Twitter: @BrilliantLeader)


Disclosure – At the time of writing, I own shares in BVXP, ZYT, BJU, AMO, SOM, TSTL, IPX, D4T4, IDEA, MCGN, BXP, AAZ, IQE, mentioned in this article