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Concentrated porfolio

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
Adamski
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Concentrated porfolio

#358773

Postby Adamski » November 21st, 2020, 2:48 pm

Does anyone here run a concentrated portfolio, and how has it gone this year to date?

Article on shares magazine about a conviction investor Dave from Staffordshire who runs a 15 stock pf, with 50% in Bioventrix.

He's also in BOTB on Aim which has had stellar returns this year since this article was written.

https://www.sharesmagazine.co.uk/articl ... -of-stocks

Most here seem to have broad, diversified Portfolios, but I remember DrunkenMarcus saying his Sipp is 50% Smithson. DM- has this increased gains, and outperformed this year? Looks like it from the Sson chart.

Has a high conviction strategy served you effectively? And would you recommend it?

Dod101
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Re: Concentrated porfolio

#358809

Postby Dod101 » November 21st, 2020, 4:21 pm

You would need to define concentrated. I have about 30 holdings in all of which 11 are growth, 4 are bond funds and the other15 are income. Although I would call that conviction I would not call it particularly concentrated. My biggest holding, Scottish Mortgage is only about 7.5% of my total. Across these holdings I am down about 6% on year end values and a little more from the peak in February.

Dod

scrumpyjack
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Re: Concentrated porfolio

#358820

Postby scrumpyjack » November 21st, 2020, 4:40 pm

There is a huge difference between the one share being an investment trust and the one share being a single company (like Bioventrix)

I have 18% in Scottish Mortgage, but their portfolio is holdings in over 80 companies even if 10% or so is Tesla)

doug2500
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Re: Concentrated porfolio

#358832

Postby doug2500 » November 21st, 2020, 5:13 pm

I try to be about 30 as well. I'd prefer 25 but since my portfolio has grown over time and I have a lot of small caps which are not always great liquidity wise I've grown out to more, smaller holdings.

Fundsmith is about 23% and then another 5 shares take me to about 50% (including bioventix and Smithson funnily enough) so you could argue it's fairly concentrated but with a long tail.

More than 30 I'd struggle to keep on top of, and that I believe is where true risk creeps in. For my style at least.

SoBo65
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Re: Concentrated porfolio

#358845

Postby SoBo65 » November 21st, 2020, 5:44 pm

I currently hold 21 Funds (all IT's except Fundsmith) plus 5 individual holdings.

Top five funds are:

PNL 32%
CGT 9%
SMT 8%
FGT 5%
MWY 5%

Shares are:

Treatt 2.3%
Microsoft 2.2%
Amazon 2.1%
Berkshire Hathaway 1.8%
Allianz 1.3%

Cash 9%

I have topped sliced SMT 4 times this year (10% each time) and disposed of Apple after being held for 8 years.

YTD +8.2%
12months +11%
Last edited by SoBo65 on November 21st, 2020, 5:55 pm, edited 3 times in total.

ADrunkenMarcus
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Re: Concentrated porfolio

#358847

Postby ADrunkenMarcus » November 21st, 2020, 5:44 pm

Adamski wrote:Does anyone here run a concentrated portfolio, and how has it gone this year to date?


My SIPP has only 7 holdings in total and the top three account for 82 percent.

My top holding is: 50 percent in Smithson, followed by 17 percent in Standard Life UK Smaller Companies (the IT) and 15 percent in Spirax Sarco Engineering.

I work on the tax year, so I can report my accumulation units show a total return of minus 11.1 percent for 2019-20. Then, since 5 April 2020, I am up 45 percent - led by Kainos Group, which is up about 90 percent.

Best wishes

Mark.

ADrunkenMarcus
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Re: Concentrated porfolio

#358857

Postby ADrunkenMarcus » November 21st, 2020, 6:03 pm

Adamski wrote:I remember DrunkenMarcus saying his Sipp is 50% Smithson. DM- has this increased gains, and outperformed this year? Looks like it from the Sson chart.

Has a high conviction strategy served you effectively? And would you recommend it?


If we go back to the start of January 2020, I've had four winners and three losers.

Eyeballing the chart:

DP Poland up about 90 percent (shares currently suspended pending publication of an Admission document for a proposed reverse takeover)
Kainos Group up about 58 percent
Spirax Sarco up about 25 percent
Smithson up about 20 percent
Standard Life UK Smaller Cos down about 7 percent
Aberdeen Standard Asia Focus down about 10 percent
Temple Bar down about 40 percent

All figures ex. dividends.

Since April 2014, my accumulation units have outperformed the FTSE All World, FTSE 100 and FTSE 250 but the CAGR is only a bit over 10 percent. I was hit very badly by DP Poland, which accounted for 10 percent of my portfolio as at April 2014. It was then priced at 10p - the shares surged over 600% by the end of 2016 but I never trimmed or realised the gains so they've detracted from my performance very substantially, as they were 9p before being suspended this year! Fortunately my winners have kept performance respectable.

Current holdings:



I would recommend it, however I'd echo the comments about collectives. By having Smithson - itself a concentrated portfolio - as 50 percent of my SIPP, each Smithson holding makes up a decent % of mine in its own right.

Best wishes

Mark.

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Re: Concentrated porfolio

#358868

Postby johnhemming » November 21st, 2020, 6:39 pm

I don't deliberately run a concentrated portfolio, but I do quite a bit of research into certain stocks and at times end up with a relatively high proportion of my portfolio in a few stocks. At the moment the top percentage is 27%, but that stock has gone up by 30% so far this year (on my averaged base cost). I am not inclined to sell any until it gets into the price range I expect it to end up. Then I would expect to sell it down a bit.

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Re: Concentrated porfolio

#358916

Postby OldPlodder » November 21st, 2020, 10:25 pm

On the surface, I run a fairly concentrated portfolio of 11 holdings, which I posted in my first post:
viewtopic.php?p=351427#p351427

But in practice there are many underlying holdings across many aspects and regions, so enough diversity for us.

This is a set portfolio, which should see us easily in retirement income needs. Since only approx. 80% of the income produced is required, there is a good safety margin, since it would take quite a set of events for the 4 income producing ITs to reduce their Divis by that much as a whole basket. No cutters so far, minimal divi per unit growth, no surprise, and no bother if the odd reduction should occur. With reinvested spare divi income, plus new money put in from some consultancy(nothing heavy, couple of projects to finish), the actual income is up anyway, my early Q1 2021 withdrawal will be a lower % of the Q4 2020 portfolio income than originally planned, which will further reduce % withdrawn. So far so good.

I will, very occasionally, probably every few years, rebalance the whole thing to achieve the income taken growth we require, as well as the overall balance. This is likely to be mainly readjusting the balance between the growth and income component, as I would expect the growth component to grow eventually well beyond its broad target of 40%. This in itself should produce enough income growth as a byproduct.

That is our plan, anyway. We tend to stick patiently to plans, as we lay them carefully to start with.

My wife’s ISA also produces income, but we have other family plans for that. It probably won’t need to be touched for our own needs at all.

Plodder

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Re: Concentrated porfolio

#358921

Postby mark88man » November 21st, 2020, 10:47 pm

My work pension is about 3 times as big as my personal pension. The latter is very concentrated. It has been concentrated in the last decade (since I jump started it using transfer of my SERPS pot). I did very well with LLOY and some fixed income, also an early outing in social media, but left those far too early. I then did considerably less well over the middle few years as I chased returns

At the start of the year it was just under 25% up in total from the start in 2010, so not great CAGR. However over the last year it has been in Oil, Gold and Banks and is now about 40% up on the year following success with LLOY which I re-entered at 26p - Oil and Gold are a little more mixed but broadly flat on the year. To my cost I have been avoiding US stocks for the last 2 years, but am re-evaluating

I'm not sure I class a mix of IT portfolios as concentrated, but that is more like how my work pension is organised, although through a dozen low cost global equity, bond and commodity funds. This has created an annual return (using XIRR) just over 9.3% net of costs since 2010

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Re: Concentrated porfolio

#358932

Postby AsleepInYorkshire » November 22nd, 2020, 12:42 am

SoBo65 wrote:I currently hold 21 Funds (all IT's except Fundsmith) plus 5 individual holdings.

Top five funds are:

PNL 32%
CGT 9%
SMT 8%
FGT 5%
MWY 5%

Shares are:

Treatt 2.3%
Microsoft 2.2%
Amazon 2.1%
Berkshire Hathaway 1.8%
Allianz 1.3%

Cash 9%

I have topped sliced SMT 4 times this year (10% each time) and disposed of Apple after being held for 8 years.

YTD +8.2%
12months +11%

As highlighted above in red may I ask why please?

AiY

SoBo65
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Re: Concentrated porfolio

#358939

Postby SoBo65 » November 22nd, 2020, 7:18 am

The reasons for selling Apple were it had grown to 7% of my portfolio which is high for me in an individual share and I considered the share price was high against normal metrics and future prospects. Did not consider this the case with other direct holdings.

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Re: Concentrated porfolio

#358974

Postby dealtn » November 22nd, 2020, 10:31 am

My portfolio currently consists of 43 holdings. None are collectives, all being individual shares.

The top 3 make up 25% of the portfolio.
The top 5 make up 35%.
The top 10 make up 50%.

The portfolio has slightly underperformed a benchmark over the last year, although has outperformed generally over the last decade.

The top 3 have each been held for the entirety of that decade (although the holding sizes have varied). 1 of which has significantly outperformed, the other 2 significantly underperformed.

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Re: Concentrated porfolio

#358995

Postby MaraMan » November 22nd, 2020, 12:27 pm

Until recently my SIPP comprised of 7 investments. Each IT/Fund got around 16% of my portfolio, and Amazon 5%, just over three years ago when I retired and it went into drawdown;

Scottish Mortgage
Monks
Fundsmith
FInsbury Growth
Caledonia
RIT Capital Partners
Amazon

I top sliced SMT and Amazon a few months ago as they had grown well and I diversified with 4 new holdings, but generally have been very pleased with the results. Despite being in draw-down and the against the best efforts of the Corona virus it is up 15% since 1.1.20.

MM

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Re: Concentrated porfolio

#359006

Postby Adamski » November 22nd, 2020, 1:14 pm

Thanks for the replies, glad I started this thread. I thought there may be a few whose holdings have done well this year. Seems that a concentrated portfolio of carefully selected IT/Funds will likely boost returns. Too diversified and you may end up with an index tracker, but with higher management fees.

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Re: Concentrated porfolio

#359024

Postby Wyneric » November 22nd, 2020, 3:02 pm

Having taken the 25% TFLS last month, I am working on replacing the cash in the pot with a portfolio of 3 shares

SQZ Serica Energy 50%

INRG Global Clean Energy 20%

SSON Smithson 20%

Cash 10%

Risky perhaps.... but I hope to have replaced the TFLS early next year..then for something more traditional...

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Re: Concentrated porfolio

#359027

Postby ADrunkenMarcus » November 22nd, 2020, 3:19 pm

Adamski wrote:Thanks for the replies, glad I started this thread. I thought there may be a few whose holdings have done well this year. Seems that a concentrated portfolio of carefully selected IT/Funds will likely boost returns. Too diversified and you may end up with an index tracker, but with higher management fees.


The way I often think of it, whether it's collectives or individual shares, is what I would lose if an individual holding went to zero. The risk rapidly reduces as you add more holdings but this tails off as the number of holdings increases:

1 holding going bust loses me 100 percent if I have 1 holding;
1 holding going bust loses me 50 percent if I have 2 holdings;
1 holding going bust loses me 33 percent if I have 3 holdings;
1 holding going bust loses me 25 percent if I have 4 holdings;
1 holding going bust loses me 20 percent if I have 5 holdings;
1 holding going bust loses me 17 percent if I have 6 holdings;
1 holding going bust loses me 14 percent if I have 7 holdings;
1 holding going bust loses me 12.5 percent if I have 8 holdings...

I have absorbed very significant losses on some holdings which were more than compensated for by others.

However, the gains tail off as well as the number of holdings increases.

If I allocate 1 percent to a share and it goes up x3 then I only have a 2 percent boost to the portfolio, whereas a 20 percent allocation would give a 40 percent boost.

What you said above, that I highlighted in bold, really is the killer for me.

Best wishes

Mark.

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Re: Concentrated porfolio

#359043

Postby dealtn » November 22nd, 2020, 5:00 pm

Adamski wrote: Seems that a concentrated portfolio of carefully selected IT/Funds will likely boost returns. Too diversified and you may end up with an index tracker, but with higher management fees.


Well yes, but only if they are "carefully selected" with hindsight.

I think what really happens is a concentrated portfolio will likely have different returns to the market. That works in both directions so I would be very cautious about using "will likely boost returns". It is just as likely, I would think, to lead to under performance.

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Re: Concentrated porfolio

#359640

Postby stevensfo » November 24th, 2020, 2:44 pm

dealtn wrote:
Adamski wrote: Seems that a concentrated portfolio of carefully selected IT/Funds will likely boost returns. Too diversified and you may end up with an index tracker, but with higher management fees.


Well yes, but only if they are "carefully selected" with hindsight.

I think what really happens is a concentrated portfolio will likely have different returns to the market. That works in both directions so I would be very cautious about using "will likely boost returns". It is just as likely, I would think, to lead to under performance.



I am guilty of, as the previous poster said: Too diversified and you may end up with an index tracker, but with higher management fees.

But it's diversified across Sectors, World regions, Growth vs High Yield, Brokers, Platforms etc. An index tracker probably uses simple global market capitalisation, whereas I prefer to tweak my holdings, increase Emerging Markets debt, decrease UK exposure and so on. So far, it's doing the job. Who knows? Yes, perhaps I have too many holdings, but I prefer to be in the steady, safe and increasing (stress-free retirement) rather than the high volatility (Oh God, can we afford it?) group.

Steve

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Re: Concentrated porfolio

#359879

Postby simoan » November 25th, 2020, 10:50 am

stevensfo wrote:I am guilty of, as the previous poster said: Too diversified and you may end up with an index tracker, but with higher management fees.

But it's diversified across Sectors, World regions, Growth vs High Yield, Brokers, Platforms etc. An index tracker probably uses simple global market capitalisation, whereas I prefer to tweak my holdings, increase Emerging Markets debt, decrease UK exposure and so on. So far, it's doing the job. Who knows? Yes, perhaps I have too many holdings, but I prefer to be in the steady, safe and increasing (stress-free retirement) rather than the high volatility (Oh God, can we afford it?) group.

Steve

I don't think you should feel guilty about having "too many" holdings, whatever that means? I've always thought that this idea that you end up with a closet tracker is nonsense - a lazy generalisation that is wrong and takes no account of an individual wanting exposure to equities through a good stock selection process whilst still being able to sleep soundly at night. It's very easy to hold 70 or 80 shares and comfortably beat the index year after year. I do it all the time and wouldn't bother if I was just matching the index. As long as you feel comfortable with the performance of your portfolio, it meets your long term requirement, and you're not paying high fees in the process, that is all that matters.

One of the problems with investment boards is that you can end up comparing yourself with complete strangers who you don't, and never will, know. I mean, they may not even be telling the truth for heaven's sake!! Don't compare your approach to anyone else - only you know your own financial circumstances and you don't know theirs. For instance, when someone posts that they only have 15 holdings in their portfolio it tells you nothing. You don't know their age for one thing, and then the portfolio may only be a very small part of their total net worth, in which case the additional risk may make sense. Of course, if they have their entire net worth in 15 shares, then IMHO they don't understand risk, no matter what their age.

All the best, Si


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