Once again there’s a lot to worry about for UK investors. On top of a cost of living crisis, inflation, interest rate rises, there’s now a war on Europe’s eastern flank. Yet after a very challenging start to the year and indeed to March, reflected in the underwhelming performance of my portfolio, the second half of March has been brighter.
As Danni Hewson, AJ Bell financial analyst, commented at the end of the first quarter: “The first quarter of 2022 has been a rough one for investors to navigate. Volatility has been the name of the game as levers were pulled to curb rising prices, and war undermined many of those efforts. Of the ten main global indices only London’s blue-chip FTSE 100 has emerged from the last three months in better shape than it went in, boosted by miners and energy giants cashing in on runaway commodity prices.”
Thankfully, the FTSE 100 has bounced back, although is still slightly below its one year high. Maybe there’s further to go? I don’t know the answer to that. Indeed, no one really does. But the volatility hasn’t stopped me from adding to some of my holdings, as well as trimming some shares that haven’t been pulling their weight – and which I don’t expect will do so, at least for a while.
Buys and sells and one little mistake
During March, I added to my holdings in Brunner, Sureserve, CMC Markets – twice, Legal & General, Artemis SmartGARP Global Equity, Polar Capital Holdings, Staffline, CQS New City High Yield Fund and Somero Enterprises. Positions in Flutter Entertainment, AssetCo and IXICO were reduced as the shares floundered. The latter in particular has really disappointed, pretty much ever since I bought in with the P/E falling dramatically, along with the share price. The only upside now is it’s a pretty negligible position. The loss can sit there as a reminder to me of the dangers of investing in small caps and in reality not fully appreciating how much the business model relied on client clinical trial success.
A mistake I made during the month was trying to trade the Knights Group share price when it fell dramatically (I think about 30%+) on revised guidance. That short term “opportunity” cost me £200 + commission in just twenty four hours. I often find it hard to resist these punt opportunities, yet they often don’t work out, so there’s a lesson there going forward.
The portfolio
I came into this year with a high conviction that CMC Markets was oversold last year. I vividly remember being surprised to see it doing as badly share price wise as companies like Trainwise and Deliveroo, which face much bigger, and in my opinion, fundamental business model challenges. So far the shares are doing well this year, no doubt helped by some of the market volatility we’ve been seeing. Polar Capital has moved in the opposite direction. It has had a really bad run so far this year after being a positive contributor to my portfolio. Recent falls have largely been as a result of the tech sell off I believe, but directors have been buying the shares in decent quantities and I’m tempted to follow them in and add to my position.
Future plans
So as well as adding more Polar Capital, looking at my portfolio it seems now that Diageo and Sureserve have fallen behind weighting-wise, so I’ll increase their size within the portfolio to balance out some of the spending I’ve been doing increasing my CMC Markets position. Eventually, I’ll up my position in FTSE 100 housebuilder, Persimmon, to lock in an amazingly high yield and hopefully a recovery in the beleaguered share price; although I’m holding off for now as further interest rate rises are surely likely to knock confidence in the sector – even if they are expected and much needed.
I’m as always researching some other shares to add to the portfolio. These will be very selective however and phased in. Mainly I’m looking to add to the shares I already have, especially those in which I have the highest conviction. I don’t anticipate exiting any positions based on what I know currently – probably only bad results or a “transformational” acquisition (nearly always a red flag in my view!) by one of my holdings would see me selling anything.
Some shares to watch
I have quite a long list of shares I’m liking the look of – I just need to spend a good few hours, really analysing and thinking about them. These shares span different categories and could complement each other well and help the portfolio weather whatever storms may be brewing. I’d say there are quite a few speculative shares I’m looking to add to try and add moonshot style growth to the portfolio, but also as Warren Buffett says his first rule is not to lose money. That seems smart! Therefore, these speculative investments will be limited and thoroughly researched. Most of my watchlist comprises what I categorise as growth and income, growth, turnaround and quality shares – and I’ll look to invest across all of these styles in the coming year or so.
If anyone has thoughts on Finncap, Norcros, Boohoo, Sosandar or B&M European Value Retail, these shares have really caught my eye.
Overall I remain cautious, and cash is my largest position. 23.1% of my portfolio is either in cash or in a global tracker, which in theory I think should protect my downside risk. The difficulties, particularly among smaller cap shares, which I have moved into over recent months, could well continue and that’s why I’m holding off adding to my small cap fund. To combat the weakness of UK shares, I will drip feed my investments to benefit from any dollar cost averaging, either up or down.
Thanks very much for reading this. Please do share this article if you’ve enjoyed reading it, as it would really help and you can follow me on Twitter @InvestingAndy. If you are new to investing please do follow this blog, if you already invest in shares I wish you all the best and hope your investments are doing well.
The Income Investor 
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