03 October 2024 Happy Thursday! I trust your shares have been keeping up with this year\u2019s rising FTSE.<\/p>\n A summary of my portfolio\u2019s progress:<\/p>\n (*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees, paid dividends and cash interest)<\/em><\/p>\n Famous last words, but my portfolio seems on course for its best annual performance since I commenced this blog at the beginning of 2015.<\/p>\n As I predicted within my 2023 review<\/a>, System1<\/strong> has dominated my returns and what was a very large weighting has become even larger. July\u2019s positive results from the ad-testing specialist helped push my portfolio to a record high and the question now is how far do I run this winner?<\/p>\n Away from System1<\/strong>, my portfolio\u2019s Q3 newsflow was not perfect and some profit setbacks have started to influence my dividends.<\/p>\n In particular, Mincon <\/strong>published a terrible H1 that could not even confess its payout had been paused. As I noted in my last write-up<\/a>, I can only hope the group\u2019s family directors quickly take decisive action to revive the drill manufacturer now their \u20ac2.5m annual dividend income has ceased.<\/p>\n Elsewhere, S & U<\/strong> has admitted to further bad loans following new FCA \u2018forbearance\u2019 rules. I suspect the lender\u2019s 17% final-dividend cut earlier this year will be followed by a similar reduction within its forthcoming H1.<\/p>\n Other shares not improving my income during 2024 are Andrews Sykes<\/strong> and City of London Investment<\/strong>, both of which held their latest payouts following unchanged earnings. I have also enjoyed 5%-or-less dividend increases from Mountview Estates<\/strong>, FW Thorpe<\/strong> and M Winkworth<\/strong>.<\/p>\n Only Bioventix<\/strong> (+10%), Tristel<\/strong> (+100%) and System1<\/strong> (payout reintroduced) have supplied very positive dividend news during the first nine months of the year. My end-of-year returns<\/a> could therefore reveal a disappointing total income.<\/p>\n <\/p>\n I have summarised below what happened to my portfolio during July, August and September. (Please click here to read all of my previous quarterly round-ups<\/a>). I will then discuss running multi-baggers to 40% (or more!) of your portfolio.<\/p>\n Disclosure: Maynard owns shares in Andrews Sykes, Bioventix, City of London Investment, Mincon, Mountview Estates, S & U, System1, FW Thorpe, Tristel and M Winkworth.<\/em><\/p>\n None.<\/p>\n As usual I have kept watch on all of my holdings. The Q3 developments are summarised below:<\/p>\n The chart below compares my portfolio\u2019s monthly progress to that of the FTSE 100 total return index:<\/p>\n The next chart shows the total return (that is, the capital gain\/loss plus dividends received) each holding has produced for me so far this year:<\/p>\n This chart shows each holding\u2019s contribution towards my 29.4% YTD gain:<\/p>\n And this chart confirms my portfolio\u2019s holdings and their weightings at the end of Q3:<\/p>\n Oh dear \u2014 I am once again tempting fate with my blog.<\/p>\n I have invested for 30 years, and my portfolio always seems to fall apart whenever I mention I own a spectacular performer.<\/p>\n My comeuppance is probably due to investment success quickly leading to overconfidence, complacency and bad decisions. Or perhaps the market gods just dislike investors showing off.<\/p>\n I now trust I will not upset the market gods by mentioning my portfolio\u2019s big 2024 winner. System1 <\/strong>is up 143% so far this year and currently represents a mighty 40% of my portfolio \u2014 a proportion that deserves further discussion.<\/p>\n I last topped up System1<\/strong> during May 2021<\/a> and, such was my conviction at the time, the position then represented 17% of my portfolio:<\/p>\n By the end of last year, System1<\/strong> was by some distance my largest holding at 22% of my portfolio:\u00a0<\/p>\n And with the shares surging higher, I am well ahead of the market this year\u2026<\/p>\n \u2026and System1<\/strong> is now more than four times larger than my second-largest holding:<\/p>\n The investment theory is therefore quite simple: build a large holding + wait for a super share price = enjoy an outperforming portfolio.<\/p>\n If you build a large position and the share price then starts to motor, how far should you \u2018run your winner\u2019?<\/p>\n You will only know for certain with hindsight. But if you are anything like me, then you should probably run it further than you might imagine. In fact, running a big winner to a System1<\/strong>-like 40% may just be the start of an incredible portfolio journey.\u00a0<\/p>\n I now look back at \u2018what could have been\u2019 because I have sadly trimmed large holdings with super share prices far too early.<\/p>\n Take Tristel<\/strong> for example. I last bought these shares during April 2014 and six months later the position had reached almost 15% of my portfolio:<\/p>\n Back then I preferred a more diversified approach and I therefore decided to trim my holding. I had bought Tristel at a 46p average and had started selling at only 79p.<\/p>\n Today Tristel shares are 400p having traded as high as 680p. I could have easily run Tristel to well beyond 15% of my portfolio and probably well beyond 40% before cutting back. Instead I sold more at 100p, 123p and 289p during 2015, 2016 and 2017.<\/p>\n Then there\u2019s Record<\/strong>, which I started buying during 2010 at 36p and stopped buying during April 2012 at 10p when the position became 21% of my portfolio. By October 2012, Record<\/strong> supported 31% of my portfolio after rebounding to 18p:<\/p>\n I decided to sell 75% of my Record<\/strong> shares during the remainder of 2012 at prices between 18p and 31p. That selling reduced my position down to approximately 10% and I exited completely<\/a> during 2018.\u00a0<\/p>\n Today Record<\/strong> trades at 60p having reached as high as 100p. With hindsight I should have run Record<\/strong> to well beyond 31% (and 40%) of my portfolio.<\/p>\n Revisiting Tristel<\/strong> and Record<\/strong> is frustrating, but my worst \u2018what could have been\u2019 is London Stock Exchange<\/strong>. I started purchasing these shares during 2002 and, by October 2004, was still buying at approximately 320p when the position reached 29% of my portfolio.<\/p>\n By December 2006 the LSE\u2019s<\/strong> shares had rallied to \u00a313 to represent 43% of my portfolio:<\/p>\n I then started selling, and exited the position completely at \u00a317 during 2007.<\/p>\n Had I decided to stay invested through the 2008 crash and kept all my LSE<\/strong> shares, I would be writing this blog from Monte Carlo. LSE<\/strong> currently trades above \u00a3100 and with hindsight I should have just put 100% into the share in 2004 at 320p and then taken up another career.<\/p>\n [Note: Eagle-eyed readers will see I also owned <\/em>Games Workshop<\/em><\/strong> (up 25x since) and <\/em>Halma<\/em><\/strong> (up 13x since) back in December 2006. I sold both of those, too :-(]<\/em><\/p>\n Blog posts such as this can make investing sound easy. Just invest a lot in a great multi-bagger and then watch your portfolio trounce the market.\u00a0<\/p>\n But an inherent problem with investing is survivorship bias; we all tend to focus on the market\u2019s best shares and best stock-pickers. So, a few points to consider before you let an investment run to 40% or more of your portfolio.<\/p>\n 1) Exceptional winners<\/strong>:<\/p>\n System1\u2019s<\/strong> 2024 performance is not normal. SharePad<\/a> shows the share to be the 20th best performer this year among 1,859 London-traded equities:\u00a0<\/p>\n SharePad also shows System1<\/strong> to be the 16th best performer since my last purchase during May 2021:<\/p>\n Shares generally do not go up so far and so fast as System1<\/strong>.\u00a0<\/p>\n 2) Investment flukes<\/strong>:<\/p>\n My portfolio has always been stuffed with investments that flat-line or eventually sink without trace.<\/p>\n That earlier portfolio chart for this year\u2026<\/p>\n \u2026shows my portfolio would be down 1%<\/strong> YTD without System1<\/strong>. So let\u2019s just say major multi-baggers are very unusual for me.<\/p>\n Indeed, go back to October 2014 and Tristel<\/strong> reaching 15% of my portfolio\u2026<\/p>\n \u2026and future disasters I then owned included SeaEnergy<\/strong>, Tasty<\/strong>, French Connection,<\/strong> Getech<\/strong> and Soco International <\/strong>that represented a combined 38% of my portfolio. I must have believed those five names all possessed great potential\u2026 before each lost 90%-plus of their value.<\/p>\n Even during my \u2018quality investing\u2019 days of 2006, future disasters such as Johnston Press<\/strong> and Nokia<\/strong> sat like time-bombs in my portfolio.\u00a0<\/p>\n
By Maynard Paton<\/strong><\/p>\n\n
Contents<\/strong><\/h2>\n
Q3 share trades<\/strong><\/h2>\n
Q3 portfolio news<\/strong><\/h2>\n
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Q3 portfolio returns<\/strong><\/h2>\n
![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart01.png\")
<\/figure>\n![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart02.png\")
<\/figure>\n![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart04.png\")
<\/figure>\n![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart03.png\")
<\/figure>\nRunning multi-baggers to 40% (or more!) of your portfolio<\/strong><\/h2>\n
Conviction<\/strong><\/h3>\n
![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart06.png\")
<\/figure>\n![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2023\/12\/Q4-2023-spreadsheet-chart03.png\")
<\/figure>\n![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart05.png\")
<\/figure>\n<\/figure>\nHow far should you run your multi-baggers?<\/strong><\/h3>\n
Tristel<\/strong><\/h3>\n
![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart07.png\")
<\/figure>\nRecord<\/strong><\/h3>\n
![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart08.png\")
<\/figure>\nLondon Stock Exchange<\/strong><\/h3>\n
![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-portfolio-chart09.png\")
<\/figure>\nSurvivorship bias<\/strong><\/h3>\n
![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-sharepad-2024-ytd.png\")
<\/a>![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/10\/2024-Q3-sharepad-may21-sep24.png\")
<\/a><\/figure>\n<\/figure>\n
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<\/figure>\n![\"\"](\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2022\/12\/2022-Q4-spreadsheet-chart02.png\")
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