Dodging an automotive bullet

I have been long on premium German carmakers for some time now, on the basis that a weakening Euro and a growing China would make premium European brands a good investment.  This makes the recent news of the VW scandal a fascinating moment for me.


I’ve held BMW and Daimler (Mercedes), but not VW.  My omission of VW was deliberate; not because I think Golfs are less premium than 3-series and C-classes, but because I have never liked the shareholder governance at VW.

As soon as I read the VW news I sold my entire BMW and Daimler holdings.  This proved to be a timely call, because both stocks have fallen by over 10% since I sold.  I don’t normally sell holdings and I do still consider BMW and Daimler to be good long term bets.  But my gut told me that where there is smoke there is fire, and that the Germans hunt in packs, and whatever VW is being pilloried for is probably going to splatter its near rivals too.  So until the dust settles, I’m going to sit the sector out.

But the wider point here is my original decision to avoid VW.  I know it is too early to claim full vindication here (though I am certainly not the only investor to make this subjective call – VW’s has traded at a ~20% discount to less-premium Renault, for instance).  Why did I decide shareholder governance at VW wasn’t good enough for me?

There is a lot to like about VW.  It has large family holdings – which is usually good for a long-term outlook and dividend policies.  It has scale, and a pretty clear strategy.  It is ‘based in the right place’: Germany == Automobiles.

However, there are also some big red flags about VW: Continue reading “Dodging an automotive bullet”

Omg – the B Team is in second place

A quick post to say Well Done to weenie (@QuietlySaving) for her Monkey Stock challenge.

The idea is simple: each competitor enters a ‘monkey’ portfolio of five randomly-chosen (ish) stocks in the FTSE-350. This starts in September 2015, and the competition runs – I think – for 12 months, with the winner being the portfolio that is worth the most at the end.  The notional starting portfolio is £500, so we are talking five £100 holdings here.

My portfolio is called ‘the B team’ and comprises:

BAB Babcock Intl
BABS Bluecrest Allblue
BARC Barclays

I am thrilled to say that I was first out of the blocks, I am currently number two in the ginormous leaderboard, and to cap it all I am currently, with two enormous weeks behind us, the leading ‘real money’ contestant.  Words fail me.

Fingers crossed for the next eleven-and-a-half months…

Anatomy of a portfolio’s terrible returns

This is the third article examining the 100+ investments that I can track in detail*.  Four significant investments made annualised returns of -10% per year or more, between 1/7/12 to 1/7/15, with a fifth chunky investment proving nearly as bad.  In this post I’m going to examine these, my worst investments in this sample, in detail. (Other posts have examined the best six investments and the average performance).

Analysing investments is a study in risk.  Given that the investment portfolio here, which averaged around 10% per year, had 100 investments in it, you would expect a few investments to deliver negative returns.  So the key questions here are:

  1. Was my original logic sound? It is possible that these investments might actually be ‘good’, but I am showing a loss in the 2012-2015 window – i.e. temporarily under water, but fundamentally sensible holdings.
  2. Were these investments avoidable? Even if the original logic was sound, perhaps there were warning signs I could have heeded?
  3. Did I trade in/out of these investments at the right time?

Awful returns

Let’s look at these five investments in no particular order.

Continue reading “Anatomy of a portfolio’s terrible returns”