Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Lessons Learned

with 5 comments

While blogging earlier this week I noticed that I was approaching my 100th post on this site. I thought that this would be a good time to ‘take stock’ of the lessons learned since I started to publish my musings back in March.

 

There have been a number of consistent themes on the blog throughout the year. From a macro perspective I’ve been very bearish (and remain so) on all of the world’s leading economies. While this was hardly an earth-shattering stance to take, I have been surprised by just how weak the response of policymakers in both the US and Europe has been. The only other macro-surprise that I’ve encountered is the way the Chinese economy hasn’t slowed down as much as I had anticipated, but given how unreliable official Chinese “data” is (apparently if you sum all of the reported provincial GDPs in China and compare the result with reported national GDP the difference is bigger than the size of the Swiss economy!) you can never be sure what the truth is.

 

From a stocks’ perspective, my preference all year has been for defensives over cyclicals, which is no surprise given my macro call. I haven’t rigidly stuck to that call, however, having made a couple of opportunistic cyclical trades in the past few months (although, to be fair, I had significant defensive exposure within the portfolio to begin with). I’ve also seen two of the companies in my portfolio, Uniq and Chaucer, taken over. I also did a lot of travelling during the year which constrained my ability to monitor the markets and trade more often. Excluding takeovers, here are the trades I’ve made since launching the blog:

 

  • Harvey Nash (Support Services/Recruitment). Sold on 24/3/11 for 71p/share. Price now = 58p. I exited this holding due my nervousness around the UK economy. I like the company, and management, but given my macro view this isn’t one I’d be looking to buy back into anytime soon.
  • Ryanair (Transport / Airlines). Bought on 28/3/11 for €3.25/share. Price now = €3.67. I doubled my holding in Europe’s low-cost carrier because I liked the valuation and the potential for another special dividend. Strong recent results and increasing chatter around a special dividend makes this one I’m a very happy holder of. The main reason why I won’t buy more here is that I have a chunky (c. 20% of my portfolio) exposure to it.
  • Kentz (Energy / Oil Services). Sold on 29/3/11 for £4.03/share. Price now = £4.765. I sold out of Kentz having slightly more than doubled my money on the stock. Clearly the timing could have been better, alas! Kentz is a stock I do like due to its strong balance sheet, track record and excellent management team. I’m sure that I’ll buy it again in the future.
  • Trinity Mirror (Media / Newspapers). Bought on 30/3/11 for £0.47/share. Price now = £0.515. I tripled my holding in this company after its shares had tanked. I like this one a lot – strong asset backing, a very inexpensive rating and decent potential for upside for equity holders from its ongoing deleveraging.
  • AstraZeneca (Healthcare / Pharmaceuticals). Sold on 13/4/11 for £30.095/share. Price now = £29.095. I had made about 10% out of this one (>15% if you add in dividends) and was talked into selling it by a pharma analyst. One that I’d need to do a lot of work on before buying back into.
  • Standard Life (Financials / Insurance). Bought on 20/4/11 for £2.102/share. Price now = £2.057. Doubled my holding in this one after being attracted by the chunky dividend and also a desire to maintain my insurance sector exposure after Chaucer headed for the stock market exit.
  • Smurfit Kappa Group (Industrials / Paper & Packaging). Bought on 19/7/11 for €6.84/share. Price now = €4.80. The dramatic events in the Euro-area have thumped this company’s share price. I believe the shares were fundamentally undervalued at €6.84 when I nearly doubled my holding. At the current level they are even more so.
  • PetroNeft (Energy / Oil Exploration & Production). Bought on 28/9/11 for £0.215/share. Price now = £0.245. Doubled my holding in this Siberian oil producer after market sentiment towards it was dented by poor production figures. Further discoveries of oil during the year underline the deep value in this company, but it is going to have to prevail over its operational issues before it gets the rating it deserves.
Overall, my trading record hasn’t been too bad, but of course had I liquidated my portfolio earlier in the year and bought back in more recently I’d be far happier! At the moment I’ve 20 positions across the UK, Irish and French markets, which is probably as many different holdings as I can manage given the other demands on my time. This is why, as you’ve probably noticed, all of my buys have been top-ups of existing holdings.
I have a bit of cash in my trading account at present, but I’m reluctant to invest more at this time due to a combination of an uncertain backdrop and also the way that I’m toying with around 5 different buy ideas. What the latter tells me is that I don’t have enough conviction to pull the trigger on anything just yet, while in any event having cash gives me the flexibility to respond appropriately if any compelling opportunities present themselves, which is clearly no bad thing. When I was younger I tended to be impulsive and invest whenever I had the funds to do so. Perhaps my current conservatism is a sign that I’m getting old!
On a final note, one of the main benefits for me of operating this blog is that it has given me an opportunity to interact with some of the top investment bloggers. Since going live with the first (to my knowledge) Irish-orientated blog I’ve been joined by two outstanding peers – John McElligott and Wexboy – whose views I highly recommend. In terms of blogs based in other countries, I really value the insights of Expecting ValueKelpie CapitalMakro TraderMark CarterSharecropperUK Value InvestorValuhunterUK and the incomparable Zero Hedge. Hopefully by the time I approach my 200th post this list will be considerably longer.
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Written by Philip O'Sullivan

November 12, 2011 at 4:32 pm

5 Responses

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  1. Philip,

    Many hanks for the great shout-outs and the Blogroll link! Jeez, I’m just aiming for my 10th post so far…

    But should have another Irish stock post out next week – actually my largest portfolio holding! – but there are just 1 or 2 questions bugging me that I think are worth chasing up with management first, I’ll be interested to see how detailed/responsive they will be…

    Cheers,

    Wexboy

    Wexboy

    November 12, 2011 at 8:12 pm

  2. […] Harvey Nash is a stock I used to hold, before selling it earlier this year on UK macro concerns. It issued a solid update last week in which it revealed that it is still […]

  3. […] today after another drug setback. It exited my portfolio earlier this year after a pharma analyst strongly recommended I let it go, so the first pint is on me the next time I meet […]

  4. […] it does, I am very likely to call my broker (!) – as regular readers of this blog are aware, Kentz is a stock I sold out of at 403p/share last year and have regretted doing so ever since, and if the price gets down towards the level I sold it at […]

  5. […] listed recruitment stocks in the past, namely Imprint (which is no longer quoted) and Harvey Nash. I sold out of the latter last year when its shares were trading above 70p. With the price now back in the low 50s, I figured that it […]


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