Economics

Lessons From A 37% Return In 2017

By DeepValueInvestments

Just done my final performance numbers for 2017 – I recon the figure will come out at +c37%.

This isnt bad compared to FTSE AS Total return in GBP of 12%.  Volatility has been minimal – maximum monthly drawdown was 3.8%.

Good ideas

ALF (alternative liquidity fund)- started year at 17c, ended at 25.25c – also paid out 2.5c – so an 80% return.

Symphony International Holdings – now exited, nice easy profit.

Tribal – which I somewhat regret selling….

Rasmala – which I hold some but tendered loads for another cheeky profit.

Made a ctouch on DUPD.

Punts on Fox minerals and DDDD pharma havent really come through yet – but both are up slightly…

On Tejoori I am including this at a value of 48.5c.  If I assume I get 60c a share performance is 44% for the year.  If they run off with my money giving me nothing I am up 9% in the year.  I believe I have gone overboard here and am a bit overweight, in my defence I sold a few things to buy a house (only a cheap one) without scaling down TJI – this may turn out to be an expensive mistake.  I have been reading about Kelly criterion betting – and the implications of that – using it to size some of my more ‘sure thing’ positions.  Actually I went a fraction of Kelly.  Still I think this was a mistake and I am going to be more diversified in future – regardless of outcome.  If the money does / does not come through the result will be reflected in the 2018 performance figures.

I still hold Fondul Proprietea which is still quite attractive and continuing to do tender offers.

KMG, I think the offer is a bit low and might be raised but the FT disagrees.  Of all my trades this is something of a perfect position – in September, likely to be out by end Jan, 30-40% profit.  Pity about my sizing – tax tail is wagging the investment dog.  I need to sort out better broking… Any recommendations for a broker that can cope with  GDR’s and the like and does ISAs?

PIL (Produce Investments – potato farmer) hasn’t done anything – I might give this another year.

Mistakes / Bullets dodged

Dodged a bullet on Terra Catalyst fund – I held this prior to starting the blog but never wrote it up….  Wish I had posted as some readers might have avoided a loss….

Quite sizable loss on SGC -c35% and c5-10% loss on PVCS – still running.

Exited my position in Italian property funds / MKS – no real investment rationale – I needed cash to buy a buy to let….  I may re-enter – I never got round to posting about these – there is lots on the net anyway….

This might stike you as illogical as my buy to let yields c10% whereas I return 20-30% most years investing.  Still I want income, I dont want to be living off capital – something of a false distinction.  I still have a (very) part time job and I would like to stop – possibly replaing it with BTL income.  I made 5x what I make working from investing but can’t quite bring myself to finally quit work a couple more of these should do it…

Crypto

I was obviously lucky to get on board with KR1 and Crypto just before a move up.  I have sold out a bit and will continue to do so.  Some people (myself included) wouldnt consider crypto proper investment – there is no fundamental basis.  Ex crypto I am up 25%.  I intend to slowly sell down crypto but also have something of a methodology to switch – and hopefully ride it a bit more.  I need to be so careful on this – there is much crazyness about.  Having said that, all crypto is only worth slightly more than Google or about the GDP of Taiwan – not huge in the overall scheme of things – but much bigger than it was…

Goldmines avoided

Still there have been lots of mistakes – an aborted position on NCC nearly netted me a 100% gain and I nearly 4 bagged on Tech financials, I was very close to buying in….  With increased funds I am finding it difficult to put positions on and hold them through adversity.  Next year I will likely have more smaller positions.  Hopefully I will then have more confidence to add, instead of larger positions where I am overly nervous.  This is the exact opposite of what I said last year – where I wanted more, larger positions….

Current positioning

Holdings 2017

If TJI pays out and KMG is realised I will be over 43% cash – too much, but I would rather sit in cash than compromise quality.  I also use leverage but haven’t this year.

Looking forward to next year I am expecting a very tough time.  I expect to find good opportunities even more difficult to find, mid/ late bull markets are not when I expect to thrive, nor when I want to be taking much risk.  With rising rates we might get a dip to exploit.  I am also a bit concerned about Crypto, 8% is quite a lot for something I have my doubts about, still it has paid off so far and I should run winners.

I dont expect to post as much next year as I did last year – I finally signed up for CFA level 2 – after a 10 year hiatus so this will take quite a bit of time.  Its somewhat frustrating that after years of consistent 20-30%+ performance I only make a good living out of this rather than a fortune.  This is mostly driven by the small level of my initial capital…  A few years of a ‘proper’ job would help.  Still a few more years of 30%+ profits compounding and I will get there.

Next year’s target is to make 30%+ again.  I will also diversify more, whilst maintaining quality.

As ever, comments are appreciated.