Model Portfolio: Beating The Market In The Long Run by Bargain Value
Today, we would like to start our model portfolio. We believe, that we can beat the market in the long run with simple quant + fundamental + macroeconomic analysis.
After a few months of acquiring information about the UK market, we believe, that it should be possible to earn about 10%-15% average annual profit (after including all costs).
We have been analyzing the market for the long period of time and have tested a few indicators, which has enabled us to establish the strategy, which should give us an edge over the un-weighted index of all stocks. On this base, we have created our investment system, which is the composit of automatic search algorithm in 90% and manual picking from its results in 10%.
Chilton Capital's REIT Composite was up 6.1% last month, compared to the MSCI U.S. REIT Index, which gained 4.4%. Year to date, Chilton is up 6.3% net and 6.5% gross, compared to the index's 8.8% return. The firm met virtually with almost 40 real estate investment trusts last month and released the highlights of those Read More
The choice of the companies will be based on three major rules:
- The company must be marked by STRONG FOUNDATIONS, with an accent on the repeatable growth of profits,
- The company must be UNAPRECCIATED by other investors, which means that it is UNDERVALUED,
- The company should be recognised by the large investor recently; we use Relative Strength to establish this fact.
In order to carry out these assumptions, we have chosen a group of finance indicators including: EBIT dynamic and EV/EBIT, which tests we have presented before on our site. Each one of the indicators provide individual edge over the market and help to “cut off” some superb stocks from the big cake, which the LSE is. We will show detailed tests of other ratios on our site in the future.
With prepered system, we have used our search engine to find stocks, which fulfill established requirements. It had returned 14 stocks from which, we have chosen 10 to our model portfolio. We would like to hold no more than 10 stocks, each with equal share. Below, the short description with the current price of each company is presented:
1. Greggs GRG.L – Food & Drug Retailers
It is the large bakery and retailer of the food on-the-g0. It own 1650 shops in the United Kingdom. The company’s offers include fresh and frozen bakery products like: sandwiches, drinks, pasties and bakes, breakfast products, sweets, and snacks. Is is involved in franchise and property holding operation too. We have conducted analysis of this Greggs before and You can check it here.
Current price (11.12.2015): 1254.00 GBp
2. JD Sporst Fashion JD.L – General Retailers
The next comapny, which hase been analysied before (article about JD). They are a retailer of branded sports fashionwear, and outdoor clothing and equipment. In addition, it licenses fashion brands and operates fitness centers. It has operations in the United Kingdom, the Republic of Ireland, France, Spain, Germany, the Netherlands, Italy, Australia, New Zealand, Canada, Dubai, Singapore, and Hong Kong.
This company is a very hot topic lately. For example, you should check the analysis of UK Value Investor.
Current price (11.12.2015): 1022.00 GBp
3. Atkins ATK.L – Support Services
This firm provides design, engineering, and project management consultancy services. Offers engineering, technically integrated design, and project and cost management services to clients in the public, regulated, and private sectors in the United Kingdom and Europe. The company also provides infrastructure planning, engineering, construction management, environmental consulting, urban planning, and program management services. Operates in North America, China, Middle East, Australia and UK.
Current price (11.12.2015): 1549.29 GBp
4. WH Smith SMWH.L – General Retailers
It is a retailer, which operates in United Kingdom and internationally. It has got two divisions: Travel and High Street. The first one sells various products, such as convenience, books, and news for travelling customers. The second one provides. stationery, books, newspapers, magazines, and impulse products.
Current price (11.12.2015): 1732.00 GBp
5. UDG Healtcare UDG.L – Health Care Equipment & Services
UDG together with its subsidiaries, provides supply chain, packaging, medical, regulatory, and sales and marketing services to healthcare manufacturers and pharmacies operating in the Republic of Ireland, the United Kingdom, North America, and continental Europe. Summing up, they deliver logistics and support in the areas of sales and marketing for medical sector.
Current price (11.12.2015): 547.50 GBp
6. Greencore Group GNC.L – Food Producers
Greencore Group plc produces and supplies various food products primarily in the United Kingdom and the United States. It operates in two segments, Convenience Foods, and Ingredients and Property. They provide e.g.: sandwiches, wraps, rolls, sub-rolls, flat breads, prepared meals and grocery products. In addition, the company distributes edible oils and molasses, as well as provides chilled food distribution services. They sell their products to the retailers.
Current price (11.12.2015): 331.10 GBp
7. Mears Group MER.L – Support Services
Through its subsidiaries, offers rapid response and planned maintenance services to local authorities and registered social landlords, which include responsive repairs; gas services; maintenance, repairs, capital works, and energy investment solution for public buildings; estate cleaning services; and grounds maintenance, hard landscaping, soft landscaping, arboriculture. Further, it provides home care services.
Current price (11.12.2015): 432.00 GBp
8. DCC DCC.L – Support Services
Through its subsidiaries, provides sales, marketing, distribution, and business support services worldwide. Including: oil, LPG, fuel cards, transport fuels, computing products, communications products, unified communications, consumer technology products, supply chain management services, selling&distribiution of third-party branded pharmaceuticals and medical device, recycling and waste management.
Current price (11.12.2015): 5750.00 GBp
9. Cranswick CWK.L – Food Producers
The company manufactures and supplies food products to grocery retailers, food service sector, and other food producers in the United Kingdom, Continental Europe, and internationally. It offers fresh pork, gourmet sausages, cooked meats, cooked poultry, gourmet pastry products, traditional air-dried bacon and gammon, and sandwiches, as well as continental products, including charcuteriey, cheese, pasta, and olive.
Current price (11.12.2015): 1836.20 GBp
10. Pace PIC.L – Technology Hardware & Equipment
The Pace is a United Kingdom-based company engaged in the provision of technology solutions for the Pay television and broadband industries. The Company offers solutions to cable, Telco and satellite operators. Its offerings include Pay television hardware, set-up boxes, media servers and advanced Telco gateways, among others.
Current price (11.12.2015): 427.00 GBp
These companies are in our portfolio at this time. We will present you a report about the current composition, returns and changes once a month. In addition, we are going to perform an analysis of each company included by us in this combination.
The comapnies’ descriptions have been drawn from: