Member Info for Meconopsis

Ash - you could always transfer your trading account in specie (i.e. without selling and rebuying) to II; then Bed and ISA them into your ISA. It takes away the sale and repurchase risk.

If you're going to sell and repurchase then I'd suggest checking what economic news is due the week(s) you're planning on doing so. It's best to avoid a week where there's an interest rate announcement. The less news the better :)

"If you feel it's a buggered investment with the propensity to belly flop at any time I'm interested why you are not cutting your losses and selling now rather than waiting for £8.10?

What gives you the faith you think it will get to £8.10 rather than £9 (for example)? Over the last 40 years I have always sold at a point of lack of faith and got the cash into something I consider a better short term bet. It has always been the correct decision so I'm interested as to your reasoning. "

I completely agree with these points. I've just been looking at how I did in 2023 and each time I exited a position because of lack of faith in management it was a good one. (So far, the companies may recover.)

In truth, I don't understand the negativity here. SMT are known for trying to get in early to unlisted companies and generally buy and hold. That's always going to bring greater volatility in the short term. It's all very well saying that they missed an opportunity to buy MSFT, APPL, GOOGL, etc, but the investment approach here has been to find the "7" before they become "magnificent" - rather than after. That they were holding NVIDA and Tesla when everyone was focused on FAANG shows foresight. The holding in ASML shows real foresight - it's the very definition of high moat.

The bigger issue for SMT than it's share price is the discount to NAV, which has hampered apparent performance or created a buying opportunity - depending on whether your selling or buying.

Just to revive the "how did 2023 go for me thing" briefly...

An interesting challenge when looking at performance on your platforms is that the platform defines book value, average price paid and performance on a dividends-reinvested basis (presuming that you've reinvested the dividends).

I've finally gotten around to doing some spreadsheeting; importing my transactions since I moved platforms at the beginning of October 2022 and working out my actual book cost versus what the platform says.

It's quite interesting to look at the differences. For example:

- Aviva is -1.7% on a dividends reinvested basis, but +5.5% on what I invested

- M&G is +9% on a dividends reinvested basis, but +19.7% on investment

- DEC, which I exited for a -24.2% loss on a dividends reinvested basis, was a -17.3% loss on my investment

The latter clearly makes me feel slightly better(!)

Overall returns Oct 2022 -> Dec 2023 were +11% of original investment and +7.8% on a dividends reinvested basis.

I have the luxury, this year of being able look at things fairly cleanly as it's only 14 months of data. I need to get out my big-Excel-pants to make the spreadsheet work on a multi-year basis.

I've also looked at what my position would have been had I not exited various investments...

The good news is that I've made good calls where I've exited a position because I've lost confidence in management. I would be around £6k worse off if I'd held those positions. All of them are more underwater than when I exited.

The bad news is that the calls have been generally bad because I've lost my nerve with a sector because of one bad apple. My worst example is selling ADM at a profit because I lost my nerve with DLG's bad management. I exited ADM with a 11.4% profit. That would have been a +52.6% profit had I held my nerve. Ho hum.

For those without Apple News...

"The world’s biggest mining project, a $20bn iron ore, rail and port development in a remote corner of west Africa, is expected to start this year after a 27-year wait beset by setbacks, scandals and several false dawns.

UK-listed Rio Tinto first secured an exploration licence in the Simandou mountains in south-eastern Guinea, 550km from the coastal capital, in 1997. Since then the country of 13mn people has had two coups d’état, four heads of state and three presidential elections.

In that time, Rio Tinto has had six chief executives, lost half the licence, fought drawn-out court battles with several corporate rivals, settled corruption allegations with US authorities and even sought to exit the project completely, only for the sale to fall through.

Finally, in 2024, once Rio Tinto’s state-owned Chinese partners receive the last approval from Beijing, the Anglo-Australian miner intends to fire the starting gun on the most complex project in its history."

Let's all read from the Key Information Document made available to when you invested and which your online investment platform will have asked you to confirm that you read....

(Capitalisation my own...)

"The Company is suitable for all investors seeking a fund that aims to deliver total returns, predominantly driven by capital growth, OVER A LONG-TERM INVESTMENT HORIZON. The investor should be PREPARED TO BEAR LOSSES. The Company is aimed at mass market distribution. The Company may NOT SUITABLE FOR INVESTORS WHO ARE CONCERNED ABOUT SHORT-TERM VOLATILITY and performance, who are seeking a regular source of income or WHO MAY BE INVESTING FOR LESS THAN 5 YEARS."

"Isn’t t that 2022 performance?"

Apologies. *Slaps hand on face*

How the various tipsters did in 2023…

https://gb.readly.com/magazines/moneyweek/2023-01-06/63b7122dddd5302fea40b682

“ What was it Buffett said about just buying a S&P tracker and not touching it, ever? I suspect he's probably right to an extent.”

This an interesting read - https://www.linkedin.com/pulse/warren-buffett-has-underperformed-sp-500-last-20-years-jain-cfa/

“If anybody is wondering why after decades of profits I still invest it is because I've spent most of my returns!!!!”

Top statement!

It’s easy look at the S&P500 returns in 2023 and get carried away. In truth this is less of an “invest in the US or UK” discussion than an “invest in the Magnificent 7 or anything else” one.

The SP493 (what you get if you take away the Magnificent 7) was only +6% in 2023. (https://finance.yahoo.com/news/one-chart-shows-how-the-magnificent-7-have-dominated-the-stock-market-in-2023-203250125.html)

Dividends add 1.9% to the SP493 return - giving 7.9%

This compares with the FTSE100 returning 3.8% + 3.9% in dividends - giving 7.6%

Certainly, I’d prefer the S&P500 return over the FTSE100 one. But you need to understand the outsized influence of the Magnificent 7 on gains and losses.

Interestingly (for me), I read the New York Times and Washington Post most days. Investment pundits in the US are pointing investors at the FTSE100 as it’s so ridiculously valued given that most of the revenue of FTSE100 companies doesn’t rely on the UK economy.

This is the shocker…

In 2022, 82% of FTSE100 revenues were from outside of the UK (https://content.ftserussell.com/blogs/overseas-revenues-boon-ftse-100-performance)

Great post casapinos.

I’m also surprised at the extent of the house builder share price rise. But, having bought in BDEV at a discount to assets of 40% probably shouldn’t be. The thing that I like about house builders is that they tend to have management teams with long tenures who have been through the economic cycle before.

As I said earlier, house building is a key election battleground - the Conservatives are rumoured to be considering a Help To Buy type scheme and Labour are looking to revive the new towns concept and bring back in housing targets. my view is that we’re through the worst of it (TW results on 11th will be a good indicator) and there’s only better/good news ahead - although some of it has been already priced in. A Labour government is likely to bring more good news than a Conservative one.

“i need to work out what to do with my losing shares…dlg…psn…Vodafone”

You’ll know yourself that you have three options:

- sell

- hang tough

- average down

It really depends on your view on whether the reason you bought the company still holds.

I’ve exited DLG and DEC this year and taken losses of -19% and -26% respectively. That’s because I’d lost confidence that I understood the management teams’ competence (DLG) or strategy (DEC).

Hanging tough is only an option if you think the investment return of hanging on is likely to exceed the return from redeploying that money. I did that with BDEV, which was 17% underwater at one point because I believe that it’s a well run company with plenty of assets going through its toughest part of the economic cycle. I also like that it operates at the premium end of the sector - so can move to the cheaper end if needed. I’m now +30% there.

I generally consider averaging down a bit of an accounting trick. Take a £10k investment at 100p a share and the share price drops to 25p. You average down to 50p (requiring the commitment of substantial extra money). You exit at 60p. You might feel that you salvaged the situation, but from my point of view you actually lost £4k on the original investment and you’ve made 20% on the new one. The latter might exceed the former, but you could have covered the losses with another investment.

You really have to believe that the reward of investing more of your money into a losing investment really will give superior yields than investing elsewhere.

I’ve done that with PHNX where I’m currently -15% underwater. I might regret it in the future, but I understand the industry; understand the business proposition; and believe that it’s well run.

Personally, I agree that PSN and DLG will recover - although I think PSN has the most upside as housing is a key election battleground.

You have to ask yourself how much an even doubling of VOD’s share price will do for your loss position. And how likely that is. Don’t get me wrong, MKS has proven that old dogs have new tricks, but the question is whether you need VOD to double, treble or quadruple to give you an exit.

Happy new year all.

“Best performer L&G Global Tech Fund at +54%.

…

All 6 of my dividend paying holdings were a lag on overall performance in that they all came in below the total portfolio finish.”

The problem with all returns is your personal holding period.

I’m a huge fan of the L&G Global Technology fund - I’ve held it for nearly 8 years; continue to hold it and have no plans to exit. I’ve done very well out of it.

But/and - before it rose +54% this year it had previously tanked in 2022. So I had to live through the pain of it dropping around 30%. That drop would have been much worse had it not been for the weakness of the pound against the dollar.

If I take the period Dec 2021 until today then MY personal return for that fund is +10% over two years.

Overall, I’m up around the same as zac on the year and have arrived at the end of the year with a 73% dividend share : 27% fund split - which is a mirror of zac’s position.

It just proves that there’s more than one way of doing things.

“…how much cash one should hold as well ( or percentage) or is some of you fully invested ?”

Personally, I’d think about it in terms of time, rather than percentage.

If you’re taking income mostly from dividends then you want to hold enough cash to smooth out the cash flow and allow for the event that a company or two cuts their dividend payment. I’m working to around six months income.

If you’re planning on selling funds then I’d be tempted to have enough cash to fund through a “stock market event and recovery”. Personally, I’d go for 12 months minimum and - ideally - two years. You have the opportunity cost of the money not being invested, but you can avoid selling funds if they suddenly drop 15-20%.

You can always keep cash in a money market fund (or similar).

You need to look at your total cash position - cheque account, savings, etc - not just SIPP / ISA.

“the high div shres imo dont rise over time like others”

In truth they do. But it depends on your market timing.

I’ve said before - and I’ll say again - that all investment returns as immensely personal. That 30% increase in my favourite fund is less great if you were sat on a 40% drop in fund value from 18 months ago.

My view is that we’re due a “rotation” into value. Just a +1 or +2 of P/E is going to tub into +20-30% on share price.

Or it may never happen.

I am, though, a keen believer in “mean reversion”. If we look at where LGEN and its peers have historically traded then a reversion to mean suggests a good upside.

Or not.

Not advice. Do your own research. Etc.

“why exactly are annuity quick quotes i from internet calculators not thru fin adv from aviva and lgen (the big ones) £1000 to £1500 yr below "just group". (150k)”

My best guesses would be that either:

- Just Group want more of your demographic to balance the statistical profile of their annuitants

- they have a long term investment that your profile matches.

Life insurance is like all insurance - it’s about balancing policies against “underwriting”.

In three months time it could be that LGEN offers the best value.

In truth, AV, LGEN and PHNX are quite different businesses. AV is the type of business you buy to leverage synergies. At the other end, PHNX is very tightly focused and the type of business you buy for free cash flow.

I suspect that LGEN would have the most opposition from shareholders to acquisition. It’s significantly important to a whole heap to companies in a way the other two aren’t (in my view).

“drawdown is a better option all round”

Only if your minimum income requirements are met and you can sleep at night.

“what is the best way of protecting your pension pot against such events”

Almost certainly an annuity.

Bonds are supposed to provide a counter-balance to share price volatility. But have manifestly failed to do that for the last couple of years.

Don’t get me wrong. I’m relying on dividends in retirement. But this year’s dividends provided 180% of my retirement income need and 220% of my minimum. And I’m two years from retirement. I’m also confident that I could easily generate work if I needed to. So I have a lot of room for things to go south on me.

In truth, if I could get a good annuity quote then I’d take it (I’m currently too young).

“0.25 - 0.5 % annual charge is now common”

Even less than that is possible. For fixed fee rate provides like iWeb and Interactive Investor the effective % may well be lower.

Remember that you can transfer out your employer pension to date and still remain part of the company scheme.

“I just don't get the point of annuities. Firstly, they are taxable income so you lose 20% or 40% & they / your money dies with you.”

This one’s easy. You either value certainty or not. Most people value a guaranteed minimum level of income.

Remember that no all annuities are now for life. You can get 5, 10 and 15 year versions that provide income and return capital. It’s a good option for some to bridge a period before getting their state pension.

“…good income paying stocks…preferably in an ISA…”

Whether you’re better off holding retirement investments in a SIPP or ISA very much depends your personal circumstances.

If you’re a 40% or higher tax payer then the money you pay into an ISA is already taxed at 40%+. The great benefit is that your retirement income is tax free.

That same tax payer paying to a pension will be investing tax free and almost always getting an employer contribution. At one point I was paying in 15% of my salary and my employer matching everything above 5% of salary up to 15%. I didn’t pay 40% tax and my money instantly doubled.

If your expectation is to be a 20% tax payer in retirement then the pension wins big time over the ISA if you do the maths. Even if you dip into 40% tax in retirement then you win up until (IIRC) around £80k of retirement income.

Pensions also provide significant inheritance planning benefits as any part not in drawdown can be left in trust - bypassing inheritance tax for that money.

ISA vs SIPP very much depends on the scale of your employer contributions.

In principle, once you get somewhere into to 40% tax in retirement then the ISA wins.

Phyl - if you’re considering an annuity and worried about rates dropping then it’s worth knowing that some providers allow you to buy one now to pay out when you actually retire.