Strategy review. Focus on risk. Oct + 3.9%. YTD 36.9%

End of October YTD:  38.9%.

17th Nov YTD: 36.9%

This post is going to take a slightly different approach to the usual ones. At this time of the year I like to reflect on the past year. I’ll cover the highlights and lowlights of the year. I’ll also run through my plan of attack to put me in a good position to benefit going forward.

Like I said in my About Me section. The stock market is the biggest and best game in the world and I want to have the best strategy there can possibly be.

As of 17th November my account is up 36.9% YTD. This is above what I am looking to achieve yearly with the FTSE All-Share at a lowly <5% YTD. But reflecting on the year it’s not been great in terms of the decisions I have made during it. Without some mistakes I believe I would have been over 50% by now.

Coming into the year my approach was to buy rapidly growing companies which are in a solid uptrend. My Trading Rules cover my main criteria. Anyway at the start of the year I was holding the following TRD, G4M, BILN, PRSM, KWS, SOM, PEL, MYSL, SPE. My aim was to concentrate in 5-7 holdings.

Only BILN was held due to its valuation. The other all broadly met my trading rules criteria.

Closed positions

I will run over where I exited my positions (the final sell) and give them a rating of how good a decision they were. On positions entered during the year I will list the first entry date as well.

January 

SPE. Sold on 26th @ 336.5p. 8.4% loss. Sold to reduce # of positions held. On technicals it was bouncing nicely on the 50MA. Badly timed as results were on 30th. Shot up after results. Should have held into results. Decision score: 3/10.

February

PRSM. Exit 6th @ 391p. 4.9% loss. Loss making company. I decided to have a stop below 400p. Unfortunately it took me out. Maybe I should have had a wider stop. Score: 8/10

TRD. Exit 17th @ 65.2p. 29.6% gain. Fell below 50MA and I sold to keep the gains. On reflection I should have sliced some at 78p. Score: 5/10

March

Nothing exited

April

SPE. Entry 24th March @ 501p. Exit 6th @ 447p. 11% loss. Bought the breakout above 500p after results. That quickly failed. Decided to keep the stop along 50MA. Sold out on breakdown of 50MA. Could have waited for break of significant number 500p. Stop also could have been higher. Score:7/10

CAPD. Entry 16th Feb @ 59p. Exit 6th @ 53p. 8.6% loss. Missed any breakout and was looking for a chance to get in cheap. Bought into the story that this would be flowing in cash. Terrible idea as price continued to drift. Cut loss around 150MA. Disaster from start to finish. Score: 0/10

May

MYSL. Exit 31st @ 107.5p. 7.4% loss. Didn’t seem to be going anywhere so cut it as better opportunities elsewhere. At one point it has spiked to 130p and I even added at these lofty heights. Should have turned a profit on this but my poor add points meant ended up with a loss. Score: 3/10

June

Nothing exited

July

SQZ. Entry 6th Feb @ 26p. Exit 24th @ 26.5p. 1.5% gain. Like CAPD I bought into the story. Took position when extended. Should have cut the position quicker. Lucky to get a positive exit. Score: 3/10

SDX. Entry 6th April @ 54.2p. Exit 24th @ 44p. 19.3% loss. Entry was ok. I should have been out closer to the 50p level. Score: 5/10

August

TRD. Entry 6th April @ 72p. Exit 17th @ 58.5p. 20% loss. A favourite of mine after my previous position. Believed it was back on track and got sucked into the story. Not a good buy point and compounded by adding before it dropped back again. Had plenty of chances to get out. 200MA even was up at 66p when it crossed it. Score: 0/10.

SPE. Entry 7th June @ 360p. Exit 24th @ 366p. 1.2% gain. Another I tried to pick up on the cheap after believing the story. Lucky spike on results allowed me to exit with a small gain. Score: 4/10

September

FUTR. Entry 31st August @ 320p. Exit 8th @ 312.5p. 3% loss. Tried to time a breakout above 320. Didn’t happen and sold out quick with a view to rebuying. Gapped on results so no chance. Score: 7/10.

PRSM. Entry 7th June @ 811p. Exit 12th @ 1086p. 27% gain. Original purchase poor entry. Added on breakout. Sold too early. Score: 5/10

SOM. Exit 26th @ 276p. 20% gain. I sold this once it was clear it couldn’t hold the 200MA. Funnily my small sell triggered a bunch more and it plunged on the day. Perhaps I could have taken some off the table around 300p. Unfortunately the chart broke down so it didn’t become a big winner. Score: 8/10

October

BOO. Entry 11th @ 191.5. Exit 12th @ 203 p. 5.9% gain. Though I had got the bottom but next day price reversed intraday so I decided to exit. Score: 8/10

I also traded 2 stocks on what I called the Twitterati Stock Challenge. They both made considerable % gains but I stopped the challenge as following all the rampers is annoying and I also lacked the time to do it properly. But if you know how to get in before the main herd you can make a good living that way. Not a style I approve of though and a lot more effort to do. It also does have risks as the companies are complete garbage so will fall huge amount very swiftly.

Summary of exited positions

14 in total. 6 gains and 8 losses. 9 of the 14 were entered and closed this year so far. The other 5 were positions held from last year.

Including the positions held from last year all these 14 positions account for about 3% of the portfolio net worth in total. So a pretty negligible effect from the 14.

The only noticable >1% of portfolio loss was the position in TRD from April – August. The noticeable gains mostly came from SOM and TRD which were held from the previous year. In fact most of their gain was in 2016 so they didn’t actually contribute this year. The PRSM position June-September contributed >1%.

Of the 9 from this year almost all have a terrible entry point. They are either bought on an extended run or on a significant pullback after a run. The exits on the trades are no better with very few being anywhere near where I would call a good exit point.

Additionally my dabble into oil sector in CAPD, SQZ and SDX proved to be bad timing. They were all between Feb and July. Looking at the AIM sector over that point doesn’t present a good picture as I basically got in at the top and out at the bottom. Luckily I was in some of the stronger ones and the positions were small so they didn’t impact the bottom line.

FTSE-EOD-AXX0500-GBP.png

My main issue was that I had decided to ignore the sector as most of the stuff is garbage. But then it turned into the biggest winner of all the sectors in 2016 and I had gained nothing from it. So this decision was probably mostly based on the fear of missing out incase this continued for another year. Which is never a good place to be.

Current Holdings

Obviously all the 14 exited positions above haven’t been where I made my money this year. So the real gains are in the positions I am still holding.

Some people have the strange view that it doesn’t count until it’s banked. But that is just nonsense. If you are worried about banking your profits you don’t have the mentality to let the winners run and make the really big gains. Paper profits are not magically going to disappear.

So lets start with the best and then work our way through them.

KWS +150% average gain

Entry: 18th Nov 2016 @ 500p. Adds 550p, 600p, 800p

Top sliced: 1150p as >30% portfolio. Sells around 500p to derisk as I went in heavy.

LSE-KWS-Nov16-Nov17

(Green boxes = buys. Red = sells)

Not a good entry place as chart was extended. But it was such a great looking chart and I had see the acquisition strategy pay off incredibly well before in VCP (Would now have returned over 1000% from where I bought if I held my original VCP position from 2015). So I knew their strategy could pay off with some big gains. And I liked the industry as I was a software developer and had outsourced work in the places I had worked at. So I bought a large position over a few days.

It’s blown past all predictions and shown no signs of slowing. I haven’t even had to make any difficult decisions as it’s only tested the 50MA so it’s probably the easiest to hold big winner I have ever had. Hopefully it’ll keep going for a few more years.

G4M +100% average gain

Entry: 14 Oct 2016 @ 325p. Adds ~420p, 555p

Sliced: 800p, 770p to derisk

LSE-G4MNov17

Another extended chart which I bought into. Incredible growth with global expansion plans. It’s had some rough patches below the 50MA. But stayed well clear of the 150 & 200 so far. However as the latest results failed to set off the next run I have taken half off the table. I will add on the next breakout if it happens and look to be out if it breaks down below the 200MA.

IQE +40%

Entry: 24th July @105p. Adds: 118p, 125p, 135p

Trim: 137p

LSE-IQENov17.png

I did actually hold this @ 36.5p in Nov 2016. But closed it as I preferred the other companies that I was in as I understood them more than this one.When I did buy it  @ 105p was after some big news and everyone else had started to notice it so it wasn’t ideal. But it was so strong that I added a few more times. I sold a few after getting a few too many. All signs point to it carrying on up.

BILN +27%

Entry: 15th Nov 16 @ 225p

Sliced: 26 Sep 2017 @ 280p

LSE-BILNNov17

This was a valuation play. The employee benefit trust were a forced seller. The theory was once they were out then the rerating could begin back to over 300p. Instead other sellers have come around so it’s taking a long time. Also pays out a good dividend so I don’t mind waiting too much but did take half off at 280p after it spent a few days stuck there. I will cut the rest if 280p isn’t breached on the next update.

RFX +8.5%

Entry: 1st Sep @ 165p. Add: 171p

LSE-RFXNov17

Bought on the gap on results. Added on continued strength. Should have added again on recent breakout but missed the chance. Will look to add on strong results. Potential to be a decent size winner.

FDEV +8.5%

Entry: 30 Aug @ 1040p. Adds: 1010p, 1310p, 1050p, 930p

LSE-FDEVNov17

Was waiting for a pullback on the huge run up. Never came so then I started buying. After results pushed it up again I bought near the top. Finally a pullback happened and I added even more. High risk but the margins on games are huge and Jurassic World is something that has a huge market. Add in the 10% stake by Tencent who are the world largest game publisher in the world along with doubling the rate of releases and it’s a great setup ready to deliver some incredible titles and some massive profits. This has real potential to deliver some huge gains despite it’s huge rise already.

PLUS +3%

Entry: 26 Sept @ 840p. Adds: 895p, 930p, 1000p, 990p,

Sliced: 905p, 1030p

LSE-PLUSNov17

Originally a valuation play for me. I was just going to stay in till £10 but it hit that very swiftly. So after more analysis I can see this continuing to grow for a while. it’s also the best way to play cryptos that I have come across. PLUS have high customer growth with falling cost per acquisition and rising revenue per customer. Most of this is driven by the crypto boom over the past year and the boom has just kept growing. Broker forecasts can’t keep up with the growth. Could soon overtake IG Index in profitability. No idea why the current chart weakness is about but PLUS does have a history of the chart being detached from reality of what it is achieving. Slightly worrying but has stayed above 50MA. In the past it has always recovered swiftly so i don’t expect anything different this time. I am going to hold at least till next year regardless of the chart as I believe the valuation is far too low and the results will be way ahead of broker forecasts again. And I want to have some exposure to the crypto boom without directly buying any particular crypto asset.

TTG +2%

Entry: 19th July @ 204p. Adds: 210p, 214p, 221p

LSE-TTGNov17

Bought aggressively on gap up after disposal of low margin business unit. Going forward business is geared for growth with great margins. Chart has started to look a bit worrying but results are on monday so will see what happens.

PEL -46.9%

Entry: 22nd Nov 2016 @ 3.475p. Adds: 4.1p, 4.25p, 5.1p, 5.6p

LSE-PELNov17

This is a real tiddler at a market cap of only 4m. I bought aggressively and added on breakout to new highs. But when chart broke down I took no action and got into the cycle of postponing the decision till the next update. When the update came it always sounded good. Once at 4p I thought there was no way it would go lower and would probably have a good size bounce on results. I also knew selling my position would move the price so didn’t sell any as I wanted 4p to hold. But it broke 4p after results despite the company’s claims of being on track. I did add a few at 2.75p but quickly sold them at 2.925p as I didn’t really want to put any more capital in to this. Anyway the latest update came and sure enough it was a profit warning. So it’s plunged even further. It is however looking very cheap now if you take the latest results despite the miss on earnings. And it’s hard to imagine the company messing up as badly next year. If they meet expectation next year this should comfortably be back above 6p. So I haven’t decided what to do as I don’t see much downside. But this breaks all trend following rules. So I will probably take half off and leave the rest till at least the next update. But overall a complete disaster and I should never have ignored the chart and accepted a much smaller loss. I should also never have taken such a large position initially in such a small illiquid company. I don’t even know why I am really debating keeping any as it’s clear I should just exit and move on from this disaster.

At the peak PEL was 17.4% of the portfolio. Today it stands at 4.7%. So in 6 months since the peak it’s fallen over 10%. In the meantime the portfolio has returned 33% over that time. So if I’d sold at 17.4% of the portfolio and compounded that 33% I would have added 6% to the portfolio. So that’s a 16% swing in the portfolio through my poor choice. Which is why I would be on over 50% YTD without PEL.

Summary of current holdings

Looking great: KWS, IQE, RFX, FDEV

On the ropes: G4M, BILN, TTG, PLUS

Knocked out the ring disaster: PEL

The entry points have tended to be pretty extended. I’ve got away with it in most of the companies but I really need to start taking safer entries. I also need to be a little slower in building up the positions as PEL has shown what can happen if it turns. FDEV could have also ended up the same way.

I’m generally happy with how I’ve managed the positions giving them plenty of room to run where I can. But obviously the huge errors in PEL have been extremely costly. Potentially costing me 16% of where the portfolio could have been.

Spread Betting (SB)

In September I opened a SB account. I had a view of margin as an unnecessarily risky tool that should be avoided. However I noticed it is used by quite a few PIs so did further research and found out it doesn’t need to mean you take any additional risks. In fact with guaranteed stops you have an insurance tool that isn’t possible with regular shares. So you can trade with an additional safety net. It also cuts out any tax worries so all in all I have completely changed my view on spread betting and am now actively planning on using it.

So far I have taken a few positions through IG index and one position through Spreadex. IG offer better spread and I prefer the platform so I will stick with mainly using IG. But occasionally you will find some shares can’t be traded on one or they have limits so then multiple accounts become useful.

Another provider who offer the best spreads of all are CMC Markets. But their range of stocks is lower. They also have a great feature of allowing you to see level 1 so you can trade sizes that give you the best prices possible. I haven’t yet opened a position through them as they didn’t list anything I wanted to open since my account was setup.

Overall Summary of the year so far

So this is what I wrote coming into the year:

“my strategy is to buy a small concentrated portfolio of Small Cap growth stocks which are profitable and have momentum behind them. I start with small positions and then average up in the ones that do well till they reach my maximum position size. I’ll then run the positions till they give me reasons to sell.”

Looking back that is a pretty good summary of what I have done. And the returns so far show that it is an effective strategy. It’s also a strategy which allowed me to not have to spend much time on the market. Which was ideal for me a year ago.

However my actual execution on timing of buys and sells has been poor which means I am taking on completely unnecessary risk. The returns mask the poor decisions I have made that have had an impact on the bottom line.

Here is the data on when I have been buying and selling broken down by month and then by ticker.

Month Buy Sell Grand Total
Jan 12 6 18
Feb 10 11 21
Mar 2 2 4
Apr 5 5 10
May 1 3 4
Jun 2 2
Jul 5 4 9
Aug 8 7 15
Sep 7 8 15
Oct 6 5 11
Nov 1 1
YTD Total 58 52 110
YTD 1/3rd 19 17 37

I’ve added a 1/3rd column as I run 3 portfolios. My SIPP, ISA and dealing account. So when I enter/exit a position it is generally done across all 3 so 1/3 of the activity is a more realistic number of how active I am.

Ticker Count of trades
BILN 1
BOO 2
CAPD 6
EDL 2
FDEV 5
FUTR 2
G4M 3
IQE 6
KWS 7
MYSL 11
PEL 5
PLUS 7
PRSM 10
RFX 2
SDX 2
SOM 11
SPE 5
SQZ 6
TRD 11
TTG 4
URU 2
Grand Total 110

So roughly 37 trades across 21 companies over the year. 2 of them were for the TSC so really it is 19 companies that I have had core positions in.

A majority of the activity comes in bursts as I sell something and then very swiftly allocate the cash back into something.

In an ideal world I would have just become more concentrated in the 5 best of the original 9 over the year and be holding 5 huge winners.

The original 9 were: TRD, G4M, BILN, PRSM, KWS, SOM, PEL, MYSL, SPE

Out of them only KWS, G4M and PEL have survived. And PEL has ended up being a disaster and shouldn’t be here anymore. So unfortunately most of the original positions broke down and I had to exit. Of the positions entered over the year we have 3 strong candidates in RFX, FDEV and IQE which are looking likely to be remaining in the portfolio for a long time.

Going back a year my scenario was vastly different to now. I was in a job abroad, spent a limited amount of time looking at the markets and had a small window of time to make decisions as the time zone difference meant I only saw the last few hours of the market every day and had about an hour between waking up and being in the office.

Now I am dependent on making a living off the market and have plenty of time to research and develop what I am doing so have no excuse for not looking to improve what I am doing.

It’s also become clear over the year that the UK market is lagging behind and there are better opportunities abroad. So I will no longer be limiting positions to the UK and will start to buy the best from the US and Europe as well.

In regards to the broader market I have followed the long term indicators which have always been bullish and remains so. In my january post I wrote the following:

“I do buy into the view that the current market (99-17) does resemble the market of 65-82. We have been in a secular bear market and are now challenging the resistance points that could see us enter into a secular bull market. If the market does breakout into a secular bull then I’ll have had some extremely fortunate timing as this will go down as one of the best times in history to get into the market. So it’ll mean my odds of being able to rely on the market for income will be significantly higher than they would be if we continued in a secular bear.”

I stand by that statement and believe we have just had the first year of a secular bull market. So expect some incredible gains during the next 5-20+ years with bear markets being smaller and less frequent than the past 20 years. The last bear market was late 2015-early 2016. So I am not expecting one to happen prior to the end of 2018. But I will keep an open mind and know the broad market indicators will give me signs of when it starts. So I just need to make sure I don’t ignore them.

I see so many people chopping and changing their cash position on twitter despite the market being barely able to string a few down days together. They’ll then buy back in a few weeks later when the market has carried on without them.

I think people are more cautious than ever. Among my peers I barely know anyone who invests in the markets aside from through their pension. Unfortunately we grew up in an age where the world has has so many blowups most of my peers won’t go anywhere near the stock market. Once I start seeing a larger % of peers getting into the market then I will start to think that maybe we are nearing a big top. But that happening seems near impossible to envisage during the next 10 years.

So I’ll just stick to following the indicators and continue to make the most out of the strong market.

Sure the UK market has gone sideways lately and experienced a small correction. But it looks like a very healthy correction so far with the averages continuing to look healthy. When you then look at the wider context of the world market indicators it’s clear that money continues to flow in to equities. So I am pretty confident it won’t be long before the UK markets are once again into new highs.

The Plan going forward

Main Goal: Manage the risk.

Secondary goal: Go Global. Expand into US and European equities.

Entries: Stop chasing extended stocks and focus on purchasing the breakouts.

Exits: Much tighter and stricter on initial positions. Take risk off if it isn’t moving as expected.

Follow the rules: Buy the strongest stocks in the strongest sectors in the strongest market.

No more valuation based entries: No more cheating the trends based off some valuations. While having growth along with a low earnings multiple is great, the chart must dictate when/if I enter.

Positions: I am removing any goals on how concentrated a portfolio I will aim to have. 5-7 proved to be tougher than I expect to achieve. I also made poor decisions based on trying to reach that goal. Instead I am currently looking to take the approach of looking at taking positions based off the risk at stop. So positions may end up as a large % of the portfolio but the trade itself has been executed with minimal risk throughout.

Global portfolio: No longer limiting myself to the UK. The UK has performed well over the past year but when you look at some of the other countries it’s obvious there are  stronger markets out there. So going global should allow me to find even larger winners.

To help accelerate my risk focused strategy I have signed up to Trading Bases. www.tradingbases.co.uk which is run by Jase. Not only does he have some excellent risk management but he also focuses on buying the breakouts and has read the same books I have.

So far I am a few days in and the content in the members area has exceeded all my expectations. I have learnt more in the past few days then I did in my first few years of investing. If you want to save a few years of potentially costly investing mistakes then I would strongly recommend joining up. Even if it’s only for 1 month.

 

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Catching up with the last 4 months. June – Sept. 33.6% YTD

It’s been a few months since my last update so I’m going to try and keep this post as short as possible while still covering the major things that have happened in my portfolio and a few things outside of it.

When I started this blog I knew I would be making a major change to my lifestyle in June 2017. That has now happened and I am pleased to say I am now 100% reliant on the stock market to make a living. June and July were spent travelling around a few different countries. Since then I have been back in the UK and will be here for at least the next few months before heading on my next adventure. I didn’t have enough motivation to post while I was travelling and once you are out the habit it’s hard to get going again.  I will aim for at least an update every quarter going forward.

So lets go into each of the months since May.

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MONTHLY UPDATE – May 2017 6.6%

Monthly Performance: 6.6%  YTD: 19.1%

Monthly High: 7.2% 23rd May| Low: -1.4% 3rd May

A stunning month for G4M after its full year results mentioned looking at going into the US. They even managed to get a placing away at a tiny discount of <2%. Consolidation happened on most of the other shares. BILN is finally looking like it will move to a more reasonable valuation. I sold out of the last of my MYSL today as it seems to have solid resistance around the 110p level. I have temporarily put the proceeds into KWS purely because there was a director buy today and a recent secondary placing at 820p. So the dip below 780p was too tempting to resist. PEL is continuing to hold the 4p level so I am continuing to hold but doubt it is going to move much before the next update in July.  (more…)

MONTHLY UPDATE – April 2017 5.6%

Monthly Performance: 5.6%  YTD: 11.8%

Monthly High: 8% 12th April| Low: 0.8% 3rd April

April has been a solid month and has seen the portfolio head back into new highs. KWS was the standout while PEL fell back despite a decent update and some director buying. SQZ also had a great month.

Sold out of CAPD and SPE. Also sold most of my MYSL to take an initial position in SDX and buy back into TRD after a great and unexpected trading update. Picked up a few more SQZ as it finally started to motor. Since originally buying back TRD early in the month it fell back again after a large shareholder sold which spooked a lot of people and allowed me to pick up more at some decent prices.

Portfolio Holdings

% Weightings
Name 31/03/2017 30/04/2017
Capital Drilling Ltd 4.9 0
Paragon Entertainment Ltd 14.9 11.9
Somero Enterprises Inc 21.7 21.1
Serica Energy PLC 6.3 9.9
Billington Holdings PLC 6.8 6.3
Sopheon PLC 3.4 0
Triad Group PLC 0 7.8
Keywords Studios Plc 18.9 22.5
MySale Group PLC 6.4 2.2
Gear4music (Holdings) PLC 16.6 15.6
SDX Energy Inc 0 2.6

Twitterati Stock Challenge

Currently inactive till I have more time.

Market Breadth

April continued it’s trend and proved to be a strong month for the market. All signs continue to be bullish. Bullish divergence happened on the new highs/lows vs Index SPX. The odds are still very favourable for the bulls and I am going to continue to be fully invested.

May Aims

Still need to add funds when I get around to transferring the money to the UK. It’s a busy time for me so I won’t be doing much. May re-enter SPE and PRSM once I have funds available. Will also be closely watching PEL as the trading statement didn’t ignite the share price.

MONTHLY UPDATE – MARCH 2017 -3.2%

Monthly Performance: -3.2%  YTD: 5.7%

Monthly High: 0.9% 1st March | Low: -8.3% 14th March

March was a tough month for my portfolio. Gear4Music, which was my largest holding entering the month, took a battering. Everything else I own went down or sideways for the first half of the month so my portfolio at one point came very close to giving back all the gains from January and February before the recovery started. Strong final day of the month bodes well for the start of next month.

Holdings

(Green = Opened)

STOCK 28-Feb 31-Jan % High Low % Lo/Hi Volume % Weight
SOM.L 263.5 321 18% 325 255.55 27% 258575 21.7%
KWS.L 622.25 647 4% 650 570 14% 155275 18.9%
G4M.L 660 536.5 -23% 724.5 490 48% 79167 16.6%
PEL.L 5.35 5.1 -5% 5.85 4.9 19% 400638 14.9%
BILN.L 237.5 240 1% 269 216 25% 15663 6.8%
MYSL.L 120.125 95 -26% 121.332 93.81 29% 94621 6.4%
SQZ.L 25.75 27.25 6% 28.313 20.572 38% 1127583 6.3%
CAPD.L 59.5 55 -8% 60 46 30% 82783 4.9%
SPE.L 472.5 447.5 -6% 513.9 413 24% 46400 3.4%

Trading Updates/Significant news:

1st – MYSL – Ok numbers. +19% online revenue growth and focus on increasing EBITDA.

3rd – G4M – Strong results. Revenue +58%, profit beats expectation.

15th – SOM – Stunning numbers. Profit +22%, Dividend + 61%

16th – CAPD – Rig utilisation up. Dividend cut to allow investment for growth strategy.

21st – BILN – Stunning results. EPS +20%, Dividend  +66%.

23rd – SPE – Great results – Revenue +11%, PBT +125%. I opened position on 24th.

April expected results/updates:

4th – KWS

19th – SQZ

20th – PEL

Portfolio Review

New Position 

SPE – Sopheon – Entry 501.4p on 24th March

Reentered a stock I have previous held but sold out of earlier this year when I was looking to get my portfolio down to only 5 holdings. Software company whihc generate large revenues in the US. Great growth which seems likely to continue for the next few years. I was hoping to catch a break of 500p but instead it failed and fell back to 400p. So I have got the timing horribly wrong and should have waited till a break of 500p was confirmed before entering. I currently still hold but may sell in April depending on how the price moves.

Existing positions

SOM – Great results have pushed this to become my largest holding. It’s been the least volatile stock I hold and has yet to even get close to breaching the 50MA. Large increase in dividend is a bonus. What a great company.

KWS – Bounced beautifully off the 50MA. Everytime it touches the 50MA is a good buying opportunity. Expecting great results to confirm its place as a gem of company.

G4M – Yikes. Initially results saw it spike to 724p before it fell to 600p the next day. Spooked a lot of investors and once below 600p it looks like a lot of people panicked and a few unlucky people were taken out as low as 490p. Due to the speed of the move I didn’t sell any. It has also been my fastest riser since October I felt it needs a little extra leeway. It then spiked back close to 600p before 2 weeks of low volume selling taking it back to close to 500p which looks like the market makers trying to pick up stock. Given its spectacular rise over the past 6 months it is probably a much needed a shakeout. Potentially I will add once it breaks back over 600p.

PEL – No update. People getting bored waiting so share price hasn’t gone anywhere. 5p has been holding well (Edit: 5p broken early April). I will continue to wait for the update as I am expecting spectacular results and with all the recent director buys I have confidence in the business.

BILN – Great results ruined by a director selling the same day. I’ve decided to keep holding as it’s growing on a 10xPE with a 4.2% yield. While I did say these results were the last opportunity I would give this stock they were too strong to ignore so I’ve changed my view. It’s a matter of time before it pops in my opinion.

MYSL – I really messed up on this stock. Last month I sold and then added when it reversed. Results were inline with my expectations but then it seems like a seller appeared and I didn’t react. There were numerous opportunities to sell. A week after results it broke firmly below the 50MA. I then though surely 110p would hold as it had done the previous month. Sure enough it didn’t. I then though 100p surely would hold. But again it didn’t. After the break of 100p I finally sold some at 96p. But I should have reduced on the break below the 50MA and the break below 110p. It is now on the 250MA line and that seems to be providing resistance so I will continue to hold the rest of the position unless it breaks the 250MA.

SQZ – I did debate selling some during the month as it flirted with the 50MA and had a few days under it. But the days under were on low volume so I didn’t end up selling. Good thing I didn’t as it moved nearly 30% in the final week of the month. Next update should show the high levels of cash generation which should attract investors.

CAPD – I added the day before results at 52p. Results didn’t go down well with the market and it went as low as 46p before closing at 51.5p. As it reversed so much during the day I decided to keep holding. Chart doesn’t look great but the company is well setup to take advantage of the upturn in demand and being operationally leveraged profits should start flowing. I’ll continue to hold.

Twitterati Stock Challenge

URU did break 3.5p but I was slow in doing anything and only exited at 2.91p on the 9th. It then bounced back to 4p after I sold but there’s still been no news since. It really seems to have everyone on twitter onboard so is the biggest P&D I have ever seen. Unless they announce some magical news I can’t see how the share price will stay up. Since then I haven’t had the time to see what’s been getting pumped so haven’t bought anything else.

Market Breadth

Still looking very strong. Almost every market above all MAs and other indicators all positive. April is traditionally a strong month for the market too.

April Aims

Add funds which I didn’t get around to doing during March. Will look to increase my positions in SQZ and G4M if it breaks over 600p as well as potentially opening a position in SDX.

I don’t think I will have enough time to spend this month to try out trading off chart setups so won’t look to do that yet.

Monthly Update – Feb 2017 +2.9%

Monthly Performance: +2.9%  YTD: 9.4%

Monthly High: 2.9% 28th Feb | Low: -0.5% 2nd Feb

February continues from where January left off with a solid 2.9% gain. Every week the portfolio has continued to make new all time highs. Despite this I have come out of Feburary knowing I have made a few trades and missed opportunities which have turned a potentially great month into a good one.

Holdings

(Largest to Smallest): (Red = Closed, Green = Opened)

STOCK 31-Jan 28-Feb % HIGH LOW %LO/HI AVG VOL
G4M.L 600 660 10% 679.3 570 19% 59170
KWS.L 540 622.25 15% 630 537 17% 204290
SOM.L 253.5 263.5 4% 266 245 9% 104845
PEL.L 4.45 5.35 20% 6.1 4.336 41% 611140
MYSL.L 119.125 120.125 1% 121.875 108.85 12% 78835
BILN.L 237.5 237.5 0% 252 220 15% 8610
SQZ.L 23 25.75 12% 26.5 21.688 22% 1199300
CAPD.L 63 59.5 -6% 65.5 53.02 24% 77470
PRSM.L 461 453 -2% 516 376.8 37% 113310
TRD.L 79.5 75.5 -5% 80.9 64.21 26% 38095

Trading Updates/Significant news:

8th Feb – KWS – Sales and profit ahead of expectations

10th Feb – BILN – Inline

17th Feb – KWS – Acquisition of Spov. Strengthens Art division.

March expected updates/results:

1st – MYSL

3rd – G4M

15th – SOM

16th – CAPD

21st – BILN

PEL expected an update last month. Surely has to be this month after they said soon in the Q&A at the end of Jan.

Portfolio Review

Closed Positions

I’ll start with TRD which was my largest holding at the beginning of 2017. TRD fell by 8% during January but looked liked the price had stabilized just below 80p and would breakout over 80p in February. Instead the financial director sold a small amount of shares at 78p RNS. I deemed it a non significant event as this director effectively just sold the stock he’d just acquired from options. I assume he has no interest in holding shares or investing so it was natural for him to exercise options and sell them. However other investors didn’t share the same view and started selling. The price then stabilised above 72p but the 50MA was approaching and when no buyers appeared it triggered more selling which pushed it below the 50MA and then below 70p which I considered to be strong support. When no buying appeared within the next days I also decided that I would sell half of my holding.

I had also been expecting a trading update as I mentioned in last months performance update but after looking into it the last time they had an update in February was in 2014. So the chances of them doing one this year were low/none. After re-analysing the position I decided to then completely cut it as the next guaranteed news wouldn’t be arriving till June. So I expected the price to continue to drift until then. As usual in the market once you make a decision you are made to regret it. This was no exception as a few days later the buyers arrived and the price is now back over 75p while I sold the last of mine at 65.2p.

TRD chart 2017- Green line is 50MA. The small s (Red box) are the days I sold on.

LSE-TRD-Feb17.png

TRD lessons learnt- Don’t ignore Director sales no matter how small they are. It’s always worth trimming a position if specially when it’s a large % of the portfolio. Also make sure you check all the dates you have noted down for the coming month.

PRSM – A very exciting stock which had rapidly advanced over the past year. I had hoped that it would head over 500p and planned to add to the position. Instead it started to plunge during the month and I was forced to exit my position once it went below the 50MA as I was underwater on the position and am keeping losses small. It spent a few days around 400p before starting to climb and provided a strong trading update on the 22nd Feb which saw a big jump. However there appears to still be strong resistance at 500p so it’s been heading back down after testing 500p.

PRSM chart Dec 2016 – Feb 2017

LSE-PRSM-Feb17.png

PRSM lessons – I would have traded this the same way if I did it again. I sold half shortly after strong results when the price didn’t break into new highs. I then exited completely when it fell below the 50MA. I could potentially have waited when it didn’t breakdown below the 380-400 level which has been a strong support level. But as my overall position was under cutting at a small loss then potentially have it fall another 20%+ seemed sensible. Every successful momentum trader knows it is important to keep any losses small.

New Positions

SQZ – Serica Energy – Entry 25.99p on 6th Feb. Additionally 23.19p on 16th.

Oil and gas exploration company. £65m market cap for a company with a large cash position (~£20m) adding around £3m per month cash through existing operations. They also have unused tax losses of US$186m to offset against. They are looking at potential acquisitions and working on numerous projects which can all add additional value. I have been meaning to enter this for a while but never had cash available when there have been good entry points. Hence I took the plunge as soon as I freed up some cash. Then it fell back which allowed me to add more as I am convinced there is a good safety net due to the amount of cash they are generating.

CAPD – Capital Drilling – Entry 59p on 16th Feb

Capital Drilling provide drilling services to mining companies around the world. They have around 90 rigs and a relatively young fleet so they are in a great position to take advantage of the boom in mining. Rig utilisation rates have been increasing strongly. There was a trading update in early February which is very positive. The company are operationally geared so every rig being used will increase their margins. Paying off debt has kept them off the radar of a lot of investors. Assuming they continue to increase utilisation I can see this stock continue it’s rerating. I was a little unfortunate with my timing as on the 21st Feb the CEO retired which knock the price a little and caused me to sell half of the initial position.

Current holdings

G4M, KWS and SOM all made solid progress. The large seller at 255p on SOM seems to have cleared or are moving their selling price up. The charts of KWS and SOM look great. G4M is a little scary due to its continued strong run. I added to KWS at 602p and 622.5p.

PEL didn’t announce any trading update. I was expecting them to based on the website suggesting they would be. They did have a new NED join who took a 3.7% stake. A pretty strong sign and it continues a spate of director buying. Largest mover for the month regardless of no official announcement. I added at 5.1p and 5.6p.

MYSL spent most of the month falling back. I sold some at 110p after becoming concerned it could head lower. But that proved to be the bottom and I picked up some of what I sold at just under 115p. I should have had more patience to see it confirm a break below 110p before looking to sell.

BILN had their trading update. It did bring a few buyers in but not enough to move the price and volume remains very low. Hopefully full results in March will bring draw some attention to them and I will sell out. The longer I leave it the more opportunities I am missing out on so these results are really the final opportunity I am giving the stock.

Twitterati Stock Challenge

The #TSC Twitterati Stock Challenge has gone exceptionally well. URU is up around 100%. There was a placing which directors bought at 4.5p, around an 80% premium to the price at the time. The stock price has been trading in the range of 3.5-4p for a while now. It is a very strange situation seeing a placing above the price especially at a large premium including director purchases. I am waiting for it to break out of the trading range. If it breaks out below 3.5p I’m out. Above I will continue to hold. It’s still the most tweeted stock in my twitter feed.

Other Notes

Other opportunities I have been watching which have performed exceptionally well.

SPE which I sold out of in Jan. Reached 500p and I sold at 336p little over a month ago.

PURP which is an online estate agent. Over 100% up in 2017.

SDX similar to SQZ. In a strong position and generating lots of cash. Up 50% since Jan.

Market Breadth

The market continues to look very strong.

Thanks to the pickles blog for finding another useful index. CNN Fear & Greed Index

This can be added to other market breadth indicators:
Weinstein indicators: Picklespicksthestockmarket

Chris Ciovacco videos: CiovaccoCapital

CAPE & PB ratios:  Star Capital

Market leaders: Largest Companies

March Aims

5 of my stocks have updates/results this month. I don’t envision entering into anything new aside from for the #TSC. But if one of my stocks sells off and I have to exit then I will have funds which I will want to invest (as happened in Feb to TRD and PRSM). Hopefully that will not be the case though.

I will continue to be fully invested into March. Every month the bull market continues increases my belief that this period will go down in history as one of the best there has ever been to be invested in the market.

In late March I will be adding funds which will probably go into SQZ and CAPD. I also hope to get sell BILN if results create some interest.

One other option I am considering is setting aside a pot (Maybe as much as 10% of the portfolio) to use to practise timing buys off great chart setups. Mark Minervini produced one of my favourite books Trade like a stock market wizard. He advocates keeping losses very small and going for double digit % profits in relatively short amounts of time off a few types of setup.

Monthly Update – Jan 2017 +6.5%

Monthly Performance: +6.5%

Monthly High: 6.5% 31st Jan | Low: -1.5% 3rd Jan

2017 couldn’t have got off to a much better start. January has been exceptional with the portfolio going to new all time highs every week.

Out of my 9 holdings coming into this month 6 have made positive gains.

I have sold out of SPE and adjusted my positions in a few others over the month. I am not sure if the trades made a positive or negative difference to the overall results but I am pretty happy with the weighting I have in the 8 stocks now.

I also continued to add capital to the portfolio so including that the portfolio has grown 20%. I probably won’t be adding any funds during February.

Sopheon (SPE) was sold off at a loss a few days ago as it was by far the smallest position and my goal is to get to down to 5 stocks. I had no reason to sell as the chart had given no indication that the uptrend was over. I think it’s a great company and today’s RNS has seen the price breakout into new highs.

Here’s a summary of the stocks I now hold:

Stock 31-Dec 31-Jan % High Low %Lo/Hi Avg Vol
G4M 454 600 32% 602 450 34% 120757
SOM 222.5 253.5 14% 265.41 209.462 27% 228148
MYSL 110.5 119.125 8% 135.759 109.07 24% 152524
PEL 4.25 4.45 5% 4.65 3.95 18% 605976
PRSM 445 461 4% 540 370 46% 257776
KWS 525.5 540 3% 564 500 13% 218162
BILN 245 237.5 -3% 250 225 11% 4752
TRD 84.25 79.5 -6% 86.45 67.525 28% 48852

January is the month of updates and I had some very positive ones:

6th – G4M 55% growth sales. 63% growth own brand. 53% growth customers

10th – SOM revenue slightly ahead of current market expectations. Cash above target level. Possible special dividend.

20th – MYSL  18% revenue, 19% customers, 17% gross profit.

24th – PRSM Recognised revenue 59%. Run rate up 143%  to £946k. Customers 153 (2015: 57)

30th – PEL not an RNS but some excellent Q&As

PEL, TRD and KWS should have updates in February.

I am not sure if BILN will provide an update before results in March. I am planning on selling out of BILN after the next update assuming it ignites some interest. I believe it is significantly undervalued but it is too illiquid for me.

PRSM is growing rapidly but the share price has been very volatile and I have cut my position size post results to reflect the increased risk. If it gets back into an upwards trend over 500p then I may add.

I have also allocated £2000 into a Twitterati Stock Challenge. I classify it as gambling money where I pick stocks based off Twitter.

As it currently stands it is up 50% this month and its contribution is included in my overall monthly total. But it doesn’t have a big impact on the performance. Although if it continues in its current fashion….

It could have also been a lot better. EDL announced more good news shortly after I sold. URU was getting a lot of tweets when it was breaking out at 0.7p. Of the few rules I have one of them is that there must be news. And URU had no news until today. Maybe I should remove all the rules and just go off the tweets. I’ve already amended the Market Cap rule from £10 to £20 mil as URU was above £10m but the volume of tweets was so high that I decided to take the plunge.

There have been a huge amount of stocks which have posted huge gains in a few days this month so all the twitter rampers look like geniuses. I can’t see that continuing.

Broad Market outlook: 

I was considering a separate post on broad market indicators but I think using the monthly updates works.

I am a big believer in the weight of evidence. A good read is Stan Weinstein’s Secrets for Profit in Bull and Bear Markets

This blog has a good overview of the Weinstein indicators: Picklespicksthestockmarket

Another great resource are the videos Chris Ciovacco provides: CiovaccoCapital

As well as technical indicators there are fundamental based ratios that form predictions. Star Capital provide some great value based prediction using CAPE and PB ratios. The UK is currently as good value for a developed economy as anywhere else in the world. Their analysis has the returns one could reasonable expect from the UK market over 10-15 years at 7.6% pa. A pretty respectable return.

It’s also worth following the market leaders to ensure they are all going with the general market trend. AAPL are the largest and beat all forecasts today. Largest Companies

I do buy into the view that the current market (99-17) does resemble the market of 65-82. We have been in a secular bear market and are now challenging the resistance points that could see us enter into a secular bull market. If the market does breakout into a secular bull then I’ll have had some extremely fortunate timing as this will go down as one of the best times in history to get into the market. So it’ll mean my odds of being able to rely on the market for income will be significantly higher than they would be if we continued in a secular bear.

That’s it for this update. I don’t expect to repeat the prior months performance but hope to continue with some gains in February. Good luck to you all.