h2 for 2000

This review covers the second half of 2000 and the next review will take place in July 2001.

Chuffy

The end of the year has come as a relief in a lot of ways especially when I compare the end result to that of 1999. I think I can safely assume that I lost the plot and missed another chance to exit an investment with substantial profits intact as I failed to heed my own advice. I have not learned from the hard lessons experienced in the first six months of the year and I only have myself to blame.

The portfolios have given up a lot of the gains of the previous year and squandered this years as well. The Acorn and Spartan portfolios both recorded losses, the Pensions portfolio returned a paltry 1%. The silver lining has come from, of all places, the Fixed portfolio which has returned 40% since the beginning of the year!

It is very clear that I need to look hard at what went wrong and more importantly, how to try and prevent its reoccurrence. I think its about time that I introduced a benchmark to compare against. I have always avoided doing this in the past because by the very fact of holding a small number of equities this leads to volatility and underperformance in bad years, this can lead to berating yourself for not hitting an unrealistic target. 

What I want to do is set myself a goal for Chuffy as a whole and for each individual portfolio. The figure will include any movements from the Feeder account and any additional payments into the portfolios, it is important that I measure only the performance and nothing else. I made a start in January 2000 but it needs to be set out in such a way that underperformance or patterns can be identified and possibly remedied.

I will use two benchmarks for Chuffy, Acorn, Spartan and the Pensions portfolios. I have decided to set a 20% return target for Chuffy as a whole and use the FTSE All share index as the other benchmark. I have still to come up with targets and benchmarks for the others but they will be in place by the end of January 2001.

Acorn

The Acorn portfolio had a very disappointing second half in 2000. The total figure managed to claw its way back from the negative territory for a short time but slipped further down almost on a weekly basis. I made no changes during the period but with hindsight I should have crystallized a profit.

Imagination Technologies: The company continues to perform well and reported growing profits and an acquisition but this did not stop the share price collapsing with all the other TMT stocks that had also peaked earlier in the year. The arrival of the Playstation 2 and slow take up of the new Kyro chip has focused investors attentions on the implications for IMG's future earnings streams. The Sega Dreamcast sales drop and expected downturn in PC sales has un-nerved the City, with the next set of results being crucial to steady things. I am happy to remain a holder of the shares because of my knowledge of the business and the managements proven capability. I should also say that if I did have my time again then I would have sold them in March!

Chorion: The period under review has been frustrating in the extreme when it comes to the markets treatment of COR. The company has done everything it said it would and more, the business has expanded and profits are racing ahead, cash is being controlled and invested wisely, but the share price has nose dived consistently since the last set of excellent results. The two divisions, Bar Nightclubs and Intellectual Property, are to be separated to release value for shareholders and the media awareness campaign has already begun. The Bar Nightclubs are proving to be the main growth driver as the "Tiger-Tiger" format is rolled out, which is the most profitable venue of its kind in Europe. The company has now the largest presence in the West End, which at one stage looked to be bad news when Westminster City Council decided to have all such establishments closed by 1am. The proposal has been challenged and a compromise looks on the cards. The Intellectual Property division had a lackluster performance due to continual development of the Enid Blyton and Agatha Christie brands, although the latter did report good growth. There were also some very detailed contracts involving Noddy and the BBC which also caused some drag on growth, but appear to be resolved now. All in all, I am pleased with the way the businesses are moving and look forward to seeing what happens after the demerger.

Spartan

The Spartan portfolio has experienced quite a lot of activity during the period under review. The arrival of our first baby in late June made me look at the levels of monthly payments and whether I should maintain them at the high levels that I had built up to. As expected, I could only reduce these payments for so long before my obsessive impulse to save kicked back in again. I finally carried out my threat to unload one of the holdings and have added a number of new funds. The Online Investment Club was started, I opened an account at an Online bank and began dabbling in Premium Bonds!

As for performance, the overall picture was pretty poor. The recovery begun in July ran out of steam and by the end of the year any improvements had been replaced by small losses. I decided that I had too much capital concentrated in UK equities and have begun to identify markets and funds that can give me exposure to new areas and give a larger geographical spread. I am closely monitoring the performance of the second largest UK fund and my Technology fund for signs that they haven't lost their "edge" over their peers.

Prudential 1 & 2: The performance has been in line with bonus expectations and both policies continue to rank in the upper regions when it comes to payments and safety. I will continue to maintain payments into these with-profits policies.

Scottish Widows: The takeover of SW by LloydsTSB finally resulted with the cheque arriving in August, six months late. I paid the money into the Feeder account because it wasn't enough to invest separately. The policy again has performed well and I am very happy that I chose to back SW instead of Equitable Life which was to have been my second choice for a new with-profits policy. I will maintain payments into this policy.

Family Assurance: This policy has again done reasonably well against a generally declining UK market. The tax-free status also enhances any gains but the return for the period under review wouldn't have the tax man too worried about lost revenue! I will maintain payments to this policy.

Allied Dunbar: Overall, this maximum investment plan has held its own despite the "faceless" nature of the funds held in it and the relative poor performance of them. The policy has two years to run and I can't wait until I can dispense with it. I think what I don't like about it is, apart from the high charges of course, that when the markets are doing well the units slowly reflect the rises but when there are downturns they automatically get marked down! I will reluctantly maintain payments and count the days until the release date.

Ivory & Sime ISIS Trust: The trust had its winding up/continuation vote in October and the shareholders backed the Board to reorganize and continue. The shares have been split and Preference Stock has been issued, this again means that the Trust will not distribute a dividend to ordinary shareholders but will use the funds to enhance the capital growth and reduce the discount to net asset value. The warrants that I held were sold by the Trust and I used the funds to begin another investment. The Trust continues to be a good long term investment and I am pleased that the vote went the way it did. I have increased my payments to take advantage of the extension to the £7000 ISA limit.

Fidelity American: This fund did well to avoid the plummeting NASDAQ with its associated effects and actually turned in small gain during the period. The fund no longer enjoys top performer status in its sector but the manager is more than capable of maintaining the excellent record. The fund was one of the casualties of my reduction in monthly payments in July but I intend to maintain them at the lower level.

Manek Growth Fund: This fund has had a terrible time during the last six months and has really suffered as the markets ran to quality and away from growth stocks. I still have a lot of time for the manager, Jayesh Manek, who has learnt well from his baptism of fire when he first began the fund and saw it fall badly against its peers. Although I intend to closely monitor its performance because at the end of the day I already have one large UK fund and if this one fails to make some decent headway in the next six months I will be looking to replace it. I reduced the payments in July but I also intend to maintain them.

TU European: This fund has done pretty well during the period and I am pleased with its progress. I feel a number of factors like increased flexibility, more cross border activity, increasing pension funds for equity investment and increased demand from retail investors are going to continue to drive European markets over the next few years, even though European companies remain behind in certain areas compared to their US counterparts. The fund is unusual as it also invests in the UK as well as Continental Europe which has helped to maintain its above average performance. Although I reduced the level of the payments I am quite happy to continue investing in this fund.

Societie Generale UK Growth: This fund was sold and the proceeds invested in a new fund.

Henderson Pacific Growth Trust: This fund was added as a result of the sale of the Soc Gen fund. I was looking for a trust that invested in the Far East but avoided Japan. The trust is managed from Singapore and has been created by the merger of two trusts under the Henderson umbrella. I wanted to avoid the Japanese market within this fund because I feel that the business cycles in the Asian economies is now separate from that of Japan. I used the EGG bank account to get a discount when the fund was purchased but have also begun monthly payments which I intend to maintain.

Witan Investment Trust: This fund was added as a result of the sale of the Ivory & Sime ISIS warrants. I want to begin to build a substantial holding in a Global fund and Witan fitted my requirements exactly. The trust stands on a decent discount to NAV but has a management who are committed to keeping it under control. The spread across the markets suits my criteria and the annual return has been steady year on year. I have been adding lump sum payments, when ever the price has fallen, as well as the monthly ones.

Baillie Gifford Japan Investment Trust: I have started to build a holding in this trust in the belief that in a few years from now the Japanese economy will have begun to get back on its feet after the decade long recession it has been suffering. I still feel that it will require major changes in their whole system structure and attitudes before real headway can be made which is something they are still grappling to come to terms with. So with this time frame in mind I selected a trust that has a good management and record in all of the Japanese markets, with BG Japan fitting the requirements.

Aberdeen Technology: This fund has taken a real beating as High Tech stocks around the Globe have retreated to more realistic levels. I believe the manager has taken the right steps to reduce the exposure to those stocks that were driven up as the boom went into overdrive earlier in the year. The long term outlook remains favourable once we get past this "wheat from chaff" stage. What I do intend to do is monitor this fund just as closely as the Manek fund for signs of serious weakness against its peers and compare this in six months time. Meanwhile I will maintain payments at the current level.

FROLIC: The online investment club which began life this year hasn't had the start we all were hoping for. The club itself has the maximum number of members, 20, with everyone paying in £250 to join and £50 minimum monthly subscription. We have made a start by investing in Trafficmaster, Soco International and Vodafone. Unfortunately, none of our selections has done very well since their purchases and Trafficmaster fell 20% within 48 hours! I remain confident that in the long run we will be able to create a good team of investors who are all pulling in the same direction and hopefully our current selections will come good.

EGG: I opened an account with the online bank to take advantage of the discounts available for lump sum investments at their investment supermarket. Although initially I was only going to use it for this purpose I have now begun to make regular payments into it. I like the level of interest they are paying and the ease of use on the website, so as time goes by I intend to increase my usage of the account.

Premium Bonds: This has to be the real "dullard" or "wild card" investment of the whole portfolio, depending on which way Lady Luck decides to turn. My reasons for deciding to use PB's is that I know a number of people who have been fortunate enough to land small but regular cheques which add up to a more than reasonable return over a couple of years. I don't labour under the illusion of expecting to land anything "big" but its these small payouts that attract me The returns are of course Tax Free and you always stand a remote chance of winning something decent. The other aspect I like is that I can always cash them in and get back the whole amount invested. This has to be balanced against any possible gains that could have been made by investing elsewhere or the effect that inflation has on the value of the capital. I intend to conduct this as a two year experiment and will be investing £100 per month.

Pensions

This has been a busy period for the Pensions portfolio in which, at one point, it stood on a 40% gain for the year but by the end this had shrunk to 1%. I squandered a gain made on the sale of one of the equity holdings and failed to bank an even bigger gain with the re-invested capital.

Managed Funds

Prudential: This policy has done as well as I had expected but no more than that. As I have mentioned before now; this pension was "free" in the respect that it came about by me opting to come out of SERPS and now that I am self employed I wouldn't be entitled to SERPS anyway so it really is money for nothing.

Allied Dumbar: This policy still surprises me, in that it manages to produce a return even though I no longer pay into it and the charges are high. Again, the temptation to move it is tempered by the very high penalties that would be imposed.

National Mutual: This policy has produced a less than average return during the period due to the fact that the company, NM, take their fees for administering my Self Select pension. If this continues then I will definitely be looking at alternative providers.

Equities

Hansom Group: This period has seen a lot of activity in HSO with the departure of Jonathon Mervis and the appointment of Alasdair Locke as Chairman. The new man has identified a target for the shell reversal, an online business to business property website called First Property Online. The business is backed by a number of well respected companies in the business and has produced a site that can provide a trading facility for properties of up to £5 million. The choice of target has come as a shock for the market and the shares have fallen dramatically. Hansom changed its name to First Property Online and early indications are encouraging. The new business has £3.5m in the bank, a strong group of backers and a good management team, only time will tell if my research and gut feeling are correct on this one.

TBI PLC: I sold my entire holding in TBI as the price leveled off at 78/80p so thereby making a 52% profit in three months. I was fully prepared to hold on but I felt that the capital could be best invested elsewhere.

Fixed

This has been an extraordinary period for the Fixed portfolio and I never took into consideration the events that occurred when I began to move capital into the portfolio. The result has been that this portfolio stands out like a beacon of profitability against the others, especially as this was supposed to be the calm backwater.

Commercial Property: This has been an outstanding investment but for reasons I never imagined when it was purchased. I received an offer for the premises of £127,000 which after deducting any CGT would leave a profit of £40,000 in just over 12 months! I have turned down this offer after seeking advice because values of local properties have shot up due to a number of specific factors. The building contractors who have made the offer intend to demolish the building and erect a number of houses to used for renting. I have mixed feelings about the offer because on the one hand it is an excellent return in such a short time but my long term thinking has been to refurbish and let for regular income. I intend to sit it out and wait for developments. The renovation is nearing completion so I have the benefit of being able to make the decision in the new year.

Prudential With-Profits Bond: The bond paid its first bonus and after replacing the capital taken in commission it has yielded as I expected. I may take a look at making further additions to this bond at the time of the next review.

Back to Top of Page