Family Firms Portfolio Up 67%!
LONDON -- A couple of years ago I began teaching my teenage son, Sim, the basics of investing by helping him build a portfolio of family firms using The Motley Fool ShareBuilder service.
This time last year, Sim wrote about his first year's experience of investing. Today, I'm handing over to him again, to tell you about his second year of investing.
Sim speaks
I can safely say that my second year of investing has been much more eventful than the first!
At the end of my first year, I wrote that I knew to expect there would be big falls in the value of my portfolio sometimes, but that I hadn't really experienced that yet. I didn't have long to wait -- the second year turned into a roller-coaster ride.
August to November
August saw markets falling all around the world, which was scary for a rookie investor at first. However, I'm pleased to say I took the advice of great investors like Warren Buffett, who once said:
When hamburgers go down in price, we sing the Hallelujah Chorus in the Buffett household. When hamburgers go up, we weep. For most people, it's the same way with everything in life they will be buying -- except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
Some companies I had wanted to buy in the first year had been too expensive at the time, but had suddenly got cheaper.
I really like companies with strong brands, so I invested in FTSE 100 (INDEX: ^FTSE) group Reckitt Benckiser (ISE: RB.L) , which makes household products such as Cillit Bang cleaner and Air Wick air freshener, and a smaller company, Nichols (ISE: NICL.L) , which makes Vimto and other fizzy drinks.
I also took the chance to buy more shares in companies I was already invested in: Hikma Pharmaceuticals, Robert Wiseman Dairies, and oil services company Hunting (ISE: HTG.L) .
Finally, I also made investments in some investment trusts, mainly Caledonia.
December to April
During this period, it was hard to find time to focus on investing. Christmas rolled around all too quickly, and by the time January exams were out of the way I was moving house in February. Also, I didn't have much spare money left for investing!
Toward the end of February, I did get a boost of cash. One of my favorite companies, Robert Wiseman Dairies, was taken over. It was a shame to see it leave my portfolio, but a pleasure to see a healthy profit had been made from it.
In March, I had a think about what share I could buy next, but the market had risen a lot and the situation was similar to the months leading up to last year's crash with many of my companies looking quite expensive on earnings and dividend valuations.
I focused mainly on companies with high-quality assets, such as pub groups Fuller, Smith & Turner and Young & Co, and packaging firm Robinson. It was frustrating that none of them went below my target prices on the ShareBuilder schedule days, but did on other days!
I also had a change of heart on investing in investment trusts. I decided I hadn't learnt much from these investments and would rather stick to individual companies, which led me onto selling the investment trust shares.
May to July
In May, the markets once again fell heavily. Suddenly, there were more cheap valuations among the companies of my portfolio and on my watchlist. I bought more shares in FTSE 100 asset manager Schroders (ISE: SDR.L) and small-cap engineer Goodwin.
In June, I bought shares in a new company, Daily Mail & General Trust, a company that looked good value as my dad explained in an article for The Fool.
My portfolio today
At the end of my second year, there are 13 companies in my portfolio. This is how it looks compared with last year:
Company | Value (pounds) at 7 July 2012 | Value (pounds) at 7 July 2011 |
|---|---|---|
Reckitt Benckiser | 495 | -- |
Hunting | 439 | 265 |
Schroders | 402 | 255 |
Nichols | 384 | -- |
Goodwin | 360 | 171 |
Hikma | 270 | 156 |
Halstead | 261 | 224 |
FW Thorpe | 251 | 196 |
Robinson | 216 | 185 |
Daily Mail | 211 | -- |
Mucklow | 206 | 166 |
Fuller | 172 | 163 |
Mountview | 144 | 153 |
Wiseman | -- | 149 |
Cash | 2 | 0 |
Total | 3,813 | 2,083 |
Unit value (base 100p) | 167p | 158p |
p = pence.
If you are an investor adding new money to your portfolio over time, it is hard to measure performance. An easy way is by unitisation. This is how funds do it. So, doing it the same way means you can compare directly with them.
The table below shows how I have done compared with a FTSE All-Share tracker and a FTSE 250 tracker.
Unit Value (7/7/10) | Unit Value (7/7/11) | Unit Value (7/7/12) | Gain/Loss 2010-11 | Gain/Loss 2011-12 | Total Gain/Loss | |
|---|---|---|---|---|---|---|
Family Firms Portfolio | 100p | 158p | 167p | 58% | 6% | 67% |
HSBC FTSE All-Share Index | 284p | 359p | 348p | 26% | (3%) | 23% |
HSBC FTSE 250 Index | 106p | 139p | 130p | 31% | (6%) | 23% |
p = pence.
I'm very happy with how the companies in the portfolio are performing so far, but, like Buffett, I really want to see hamburgers coming down in price! I've now finished my GCSEs and have got a summer job, so I'm hoping that the markets will give me some good investing opportunities in the months ahead.
I've enjoyed several Motley Fool special reports this year as part of my investing education. Being a relatively inexperienced investor myself, I can recommend "What Every New Investor Needs To Know" if you are just starting out -- the report is free and you can download it just by clicking here.
If, like me, you have big ambitions to profit as a long-term investor, I also urge you to grab the free Motley Fool guide "10 Steps To Making A Million In The Market" -- again, you can download it right now by clicking here.
Oils, Pharmaceuticals, Banks, Telecoms -- just where should you invest today? "Top Sectors Of 2012" is The Motley Fool's latest guide to help Britain invest. Better. The report is free.
Further investment opportunities
At the time thisarticle was published G.A. Chester & Son own shares in Daily Mail & General Trust; Fuller, Smith & Turner; Goodwin; James Halstead, Hikma Pharmaceuticals, Hunting; Mountview Estates; A&J Mucklow; Nichols; Reckitt Benckiser; Robinson; Schroders; and FW Thorpe, but no other companies mentioned in this article. The Motley Fool owns shares in FW Thorpe.The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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