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  #61  
Old 03.12.2020, 11:40
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Re: Equity Portfolio Advice

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Advice No1: don't ask for stock recommendations on the Internet.

I go through many news and comments/opinions during the past 5 years (since early 2015)...most of them are general comments with no clear direction. It is easy to see how reliable they are if you go back see what they were advising and then see what happened and why it happened.

That said there are some decent people on the internet with good opinions and some good views. Usually they are off the mainstream channels for the obvious reasons. But you need to find the good advise your self.
To clarify, I am not asking for specific stock recommendations. Some suggestions on perhaps how to spot other excellent fund managers for example would be very helpful.

Also, a little bit more discussion on the various index ETFs could be useful. As I explained in my original post, my strategy here is a little confused (all VT or split VTI, VEA, VWO etc?). Buffet and fatmanfilms suggest VOO would be sufficient but others might disagree. Perhaps for the investing cognoscenti this is not such an interesting discussion but for some people it may be of benefit.
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  #62  
Old 09.12.2020, 20:47
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Re: Equity Portfolio Advice

To add to my earlier post I have two specific questions:

1. How do you find equity funds akin to FS/SSON to invest in. The asset management industry is a minefield and except Morningstar I wouldn’t really know where else to begin?

2. For individual stock picking, what is your process for drawing up a shortlist of companies that make it into your ‘investible universe’?

Thanks in advance.
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  #63  
Old 09.12.2020, 21:01
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Re: Equity Portfolio Advice

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To add to my earlier post I have two specific questions:

1. How do you find equity funds akin to FS/SSON to invest in. The asset management industry is a minefield and except Morningstar I wouldn’t really know where else to begin?

2. For individual stock picking, what is your process for drawing up a shortlist of companies that make it into your ‘investible universe’?

Thanks in advance.
1) They don't exist, no other mutual fund has an AGM or explains exactly their criteria for stock selection.

2) Occasionally, maybe once in 5 years you will see a real opportunity as I did in Apple around 2013. Everyone said I was a fool & Apple was finished.
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  #64  
Old 09.12.2020, 21:10
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Re: Equity Portfolio Advice

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To add to my earlier post I have two specific questions:

1. How do you find equity funds akin to FS/SSON to invest in. The asset management industry is a minefield and except Morningstar I wouldn’t really know where else to begin?

2. For individual stock picking, what is your process for drawing up a shortlist of companies that make it into your ‘investible universe’?

Thanks in advance.
With regards to point 1) - why would you? Isn't it more sensible to find something which complements rather than replicates Terry Smith funds.

I hold Edinburgh Worldwide and Scottish Mortgage in addition to those two - so I get good coverage both of disruptors (ewi and Smt) and operators in industries that are hard to disrupt (fs and sson). I am very happy with the balance, especially as the former will typically outperform in good years and the latter in bad years. I am however not investing more in Fundsmith. My low risk money will go into SSON only from now on.

It's clear that Baillie Gifford have the magic formula for finding outperforming disruptive companies. (Not just Tesla - look at PHIs performance). Their performance for me has been absolutely stellar. Up around 100% with my Baillie Gifford investments this year (I hold SMT, EWI and PHI, the latter of which I bought c. 400, sold for c. 750, rebought at c. 690 and is now back at 750 - all this year). Yes, they won't carry on like this but I will for sure be holding all of them in the long term (in view of the premium on PHI I am not buying the other two at present).

As regards buying individual stocks - I dipped my fingers in with intel - a week after I bought they announced a share buyback, share price went up 5%, I realised I had no idea what I was doing and I sold. Ultimately I think it's significantly more likely I will find an outperforming fund than an outperforming share.

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  #65  
Old 09.12.2020, 21:51
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Re: Equity Portfolio Advice

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1) They don't exist, no other mutual fund has an AGM or explains exactly their criteria for stock selection.

2) Occasionally, maybe once in 5 years you will see a real opportunity as I did in Apple around 2013. Everyone said I was a fool & Apple was finished.
ok 1 is clear - I didn't realise that was the case.

I think re 2 you missed my point. You seem to be talking about an opportunity that existed because the market had so obviously (with hindsight) mispriced Apple. Obviously, a portfolio cannot be comprised exclusively of such opportunities all of the time.

I borrowed the phrase from FS, 'investable universe' which refers to the pool of say the approx 100 companies that they have whittled down to based on in-depth research. These are the companies they would then only ever consider investing in if, for example, the price is right. My question was how do those that stock pick and hold concentrated portfolios approach drafting such a pool of companies, what is their process?
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  #66  
Old 09.12.2020, 22:06
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Re: Equity Portfolio Advice

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With regards to point 1) - why would you? Isn't it more sensible to find something which complements rather than replicates Terry Smith funds.

I hold Edinburgh Worldwide and Scottish Mortgage in addition to those two - so I get good coverage both of disruptors (ewi and Smt) and operators in industries that are hard to disrupt (fs and sson). I am very happy with the balance, especially as the former will typically outperform in good years and the latter in bad years. I am however not investing more in Fundsmith. My low risk money will go into SSON only from now on.

It's clear that Baillie Gifford have the magic formula for finding outperforming disruptive companies. (Not just Tesla - look at PHIs performance). Their performance for me has been absolutely stellar. Up around 100% with my Baillie Gifford investments this year (I hold SMT, EWI and PHI, the latter of which I bought c. 400, sold for c. 750, rebought at c. 690 and is now back at 750 - all this year). Yes, they won't carry on like this but I will for sure be holding all of them in the long term (in view of the premium on PHI I am not buying the other two at present).

As regards buying individual stocks - I dipped my fingers in with intel - a week after I bought they announced a share buyback, share price went up 5%, I realised I had no idea what I was doing and I sold. Ultimately I think it's significantly more likely I will find an outperforming fund than an outperforming share.
A thoughtful response, thank you. Indeed, something complementary sounds great. I suppose by what I meant to akin was along the lines of a long-term strategy and no nonsense etc.

I just started to fish around the Baillie Gifford site in the last few days and so far I like what I see. The only thing is when you look at those tickers you mentioned they all basically went parabolic since March. I know we shouldn't try to time the market but goodness me when you look at the chart it's hard to stomach the prospect of building a position now.

I think for now I will stick with your approach and look for the outperforming funds. I feel I still have a lot of learning before I even think about trying to build my own stock portfolio.

Can I ask why you won't add more funds to Fundsmith and only SSON?
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  #67  
Old 09.12.2020, 23:02
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Re: Equity Portfolio Advice

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A thoughtful response, thank you. Indeed, something complementary sounds great. I suppose by what I meant to akin was along the lines of a long-term strategy and no nonsense etc.

I just started to fish around the Baillie Gifford site in the last few days and so far I like what I see. The only thing is when you look at those tickers you mentioned they all basically went parabolic since March. I know we shouldn't try to time the market but goodness me when you look at the chart it's hard to stomach the prospect of building a position now.

I think for now I will stick with your approach and look for the outperforming funds. I feel I still have a lot of learning before I even think about trying to build my own stock portfolio.

Can I ask why you won't add more funds to Fundsmith and only SSON?
There's a general perception that Smithson is likely to outperform Fundsmith as a result of its exposure to smaller companies that have room for greater growth. It certainly has done so recently (fundsmith is my single worst performing fund in 2020).

Fundsmith is perceived as being lower risk than Smithson (so potentially more suited to retirees), as big companies tend to be lower risk and it's a fund not a trust (so no room for share price to deviate from nav) but I'm still at least 20 years from retirement so I have a moderate - highish risk tolerance, and Smithson is low risk enough for me to occupy the low risk end of my investment spectrum.

I've also got a small holding in FEET (about £10k) - the only fund I invest in which doesn't have a good long track record - I believe there's a decent chance that the new management setup results in a turn around in performance. Certainly it's had a strong 2020. Although it nominally covers the same countries as PHI, in reality there's next to no overlap with feet being overweight in India. I bought feet at a large discount to nav - so if it continues to over perform then I could get not only a good nav rise but also a disproportionate share price change due to a reduced discount.

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  #68  
Old 09.12.2020, 23:24
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Re: Equity Portfolio Advice

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ok 1 is clear - I didn't realise that was the case.

I think re 2 you missed my point. You seem to be talking about an opportunity that existed because the market had so obviously (with hindsight) mispriced Apple. Obviously, a portfolio cannot be comprised exclusively of such opportunities all of the time.

I borrowed the phrase from FS, 'investable universe' which refers to the pool of say the approx 100 companies that they have whittled down to based on in-depth research. These are the companies they would then only ever consider investing in if, for example, the price is right. My question was how do those that stock pick and hold concentrated portfolios approach drafting such a pool of companies, what is their process?
Similar. Build up a list of companies and then wait for them to come into value. I don't just invest in 'hold-forever' stocks, but also those that I'm happy to sell once it's made a decent profit. I guess I should buy more 'hold-forever' stocks and fewer opportunistic ones, that would save some work.
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Old 09.12.2020, 23:26
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Re: Equity Portfolio Advice

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Similar. Build up a list of companies and then wait for them to come into value. I don't just invest in 'hold-forever' stocks, but also those that I'm happy to sell once it's made a decent profit. I guess I should buy more 'hold-forever' stocks and fewer opportunistic ones, that would save some work.
You seem to know a huge amount about chip manufacturers. Do you have much invested outside this area?

How do you assess what constitutes good value when youve found companies you like? (I imagine this is difficult even if you understand the industry)?
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Old 09.12.2020, 23:32
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Re: Equity Portfolio Advice

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You seem to know a huge amount about chip manufacturers. Do you have much invested outside this area?
Sure, in my top 10 (which is now only 50% since I decided to try to be less concentrated - previously ~70%) only my #1 stock is a chip maker (AMD). #10 is related (chip design) (Cadence).
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Old 10.12.2020, 20:04
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Re: Equity Portfolio Advice

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There's a general perception that Smithson is likely to outperform Fundsmith as a result of its exposure to smaller companies that have room for greater growth. It certainly has done so recently (fundsmith is my single worst performing fund in 2020).

Fundsmith is perceived as being lower risk than Smithson (so potentially more suited to retirees), as big companies tend to be lower risk and it's a fund not a trust (so no room for share price to deviate from nav) but I'm still at least 20 years from retirement so I have a moderate - highish risk tolerance, and Smithson is low risk enough for me to occupy the low risk end of my investment spectrum.

I've also got a small holding in FEET (about £10k) - the only fund I invest in which doesn't have a good long track record - I believe there's a decent chance that the new management setup results in a turn around in performance. Certainly it's had a strong 2020. Although it nominally covers the same countries as PHI, in reality there's next to no overlap with feet being overweight in India. I bought feet at a large discount to nav - so if it continues to over perform then I could get not only a good nav rise but also a disproportionate share price change due to a reduced discount.
You've really challenged me to rethink my strategy here as I'm still 30+ years from official retirement age although my intention is to retire from paid employment a lot sooner than that. I feel that I should be taking on at least as much risk as yourself.

With regards to building a position in a given fund (let's assume no major discount/ premium to NAV for closed-end funds), if the price is ostensibly high, could it be a bad time to buy? Is it ever a bad time to buy a fund that you believe in?

I ask because I'm having difficulty reconciling the tenets of the fund manager. For example, a fund looks to buy companies at the right price with respect to their value, hold them for the long-term and maintain a low turnover of positions. What happens if the fund performs so well and a majority of the positions in the portfolio are trading at a price that no longer looks attractive on a long-term view? If you consider that money is fungible then you are essentially buying the positions you hold every day if you're not selling. Surely then in such an instance the turnover has to increase? How do we square the circle?
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Old 10.12.2020, 20:10
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Re: Equity Portfolio Advice

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Similar. Build up a list of companies and then wait for them to come into value. I don't just invest in 'hold-forever' stocks, but also those that I'm happy to sell once it's made a decent profit. I guess I should buy more 'hold-forever' stocks and fewer opportunistic ones, that would save some work.
We essentially come back to your earlier point, time. Basically there's no shortcut and it requires work to do the research. There's nothing wrong with being opportunistic, I just want to make sure (as I'm sure you do) that any punts I might take are well informed and not purely speculative.
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  #73  
Old 10.12.2020, 20:33
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Re: Equity Portfolio Advice

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You've really challenged me to rethink my strategy here as I'm still 30+ years from official retirement age although my intention is to retire from paid employment a lot sooner than that. I feel that I should be taking on at least as much risk as yourself.

With regards to building a position in a given fund (let's assume no major discount/ premium to NAV for closed-end funds), if the price is ostensibly high, could it be a bad time to buy? Is it ever a bad time to buy a fund that you believe in?

I ask because I'm having difficulty reconciling the tenets of the fund manager. For example, a fund looks to buy companies at the right price with respect to their value, hold them for the long-term and maintain a low turnover of positions. What happens if the fund performs so well and a majority of the positions in the portfolio are trading at a price that no longer looks attractive on a long-term view? If you consider that money is fungible then you are essentially buying the positions you hold every day if you're not selling. Surely then in such an instance the turnover has to increase? How do we square the circle?
I think the theory is that the overperformance of Terry funds is largely not due to a reappraisal of valuation (changing P/E etc.) but because they grow at a faster rate due to better fundamentals. Ie the price can increase quite rapidly without a change in value for money.

Obviously Terry doesn't exclude selling if there is a significant shift in valuation. He sold clorox (bleach supplier) after the Covid crisis.

Terry says too many people ask "is the price cheap" rather than "is the company a good company". Because if you buy an exceptional company, even if it's a bit overpriced, they'll eventually deliver an exceptional performance as the high growth rate cumulatively eventually overcomes the one off cost of buying at a high point. Thus for a long term investor quality is more important than valuation.

As Warren Buffett says "it's better to buy an exceptional company for a fair price than a fair company for an exceptional price".

Just look at all the old posts on here saying Facebook is "too expensive" at 10% of what it's trading at today. That's what happens if you are obsessed with P/E and don't consider the potential of exceptional companies to grow very rapidly and disrupt existing "cheap" businesses.

Seems you are about my age (32). My recommendation is to buy fast growing companies and don't worry too much about price.
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Old 10.12.2020, 22:08
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Re: Equity Portfolio Advice

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I think the theory is that the overperformance of Terry funds is largely not due to a reappraisal of valuation (changing P/E etc.) but because they grow at a faster rate due to better fundamentals. Ie the price can increase quite rapidly without a change in value for money.

Obviously Terry doesn't exclude selling if there is a significant shift in valuation. He sold clorox (bleach supplier) after the Covid crisis.

Terry says too many people ask "is the price cheap" rather than "is the company a good company". Because if you buy an exceptional company, even if it's a bit overpriced, they'll eventually deliver an exceptional performance as the high growth rate cumulatively eventually overcomes the one off cost of buying at a high point. Thus for a long term investor quality is more important than valuation.

As Warren Buffett says "it's better to buy an exceptional company for a fair price than a fair company for an exceptional price".

Just look at all the old posts on here saying Facebook is "too expensive" at 10% of what it's trading at today. That's what happens if you are obsessed with P/E and don't consider the potential of exceptional companies to grow very rapidly and disrupt existing "cheap" businesses.

Seems you are about my age (32). My recommendation is to buy fast growing companies and don't worry too much about price.
Yes, I'm 34. All of this you mentioned I understand and agree with. I was really thinking about this in the context of SMT, EWI and PHI. You mentioned that you got in and out a couple of times on PHI (for what reasons is not clear). If you look at the chart of each, the recent performance is so great that it seems crazy to jump in now (like FOMO).

Do you think these are a bit too hot right now and perhaps the short term upside is limited and therefore it may be prudent to wait a little and hope for a better entry point?
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Old 10.12.2020, 22:14
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Re: Equity Portfolio Advice

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You've really challenged me to rethink my strategy here as I'm still 30+ years from official retirement age although my intention is to retire from paid employment a lot sooner than that. I feel that I should be taking on at least as much risk as yourself.

With regards to building a position in a given fund (let's assume no major discount/ premium to NAV for closed-end funds), if the price is ostensibly high, could it be a bad time to buy? Is it ever a bad time to buy a fund that you believe in?

I ask because I'm having difficulty reconciling the tenets of the fund manager. For example, a fund looks to buy companies at the right price with respect to their value, hold them for the long-term and maintain a low turnover of positions. What happens if the fund performs so well and a majority of the positions in the portfolio are trading at a price that no longer looks attractive on a long-term view? If you consider that money is fungible then you are essentially buying the positions you hold every day if you're not selling. Surely then in such an instance the turnover has to increase? How do we square the circle?
If the companies are truly exceptional they are still worth holding unless better opportunities exist. It's never been good to be a seller of Apple for example, far better to have bought more when the market sneezed.
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Old 10.12.2020, 22:42
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Re: Equity Portfolio Advice

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If the companies are truly exceptional they are still worth holding unless better opportunities exist. It's never been good to be a seller of Apple for example, far better to have bought more when the market sneezed.
Makes sense. Just need to try and make sure that there's some dry powder to hand when the market does sneeze.
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Old 10.12.2020, 23:21
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Re: Equity Portfolio Advice

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Yes, I'm 34. All of this you mentioned I understand and agree with. I was really thinking about this in the context of SMT, EWI and PHI. You mentioned that you got in and out a couple of times on PHI (for what reasons is not clear). If you look at the chart of each, the recent performance is so great that it seems crazy to jump in now (like FOMO).

Do you think these are a bit too hot right now and perhaps the short term upside is limited and therefore it may be prudent to wait a little and hope for a better entry point?
I got out as the premium over nav was c. 20%, Share price c. 750 and rotated into Scottish mortgage.

I then bought again when the premium was about 10%, and the share price about 690. It's risen again since to 770.

Incidentally I was told on here I was buying at too high a price at 550. (Bought even earlier at 400 ish). Those were my two original entry points. Didn't own any before 2020.

I honestly wouldn't try to time it (with the possible exception of not paying a silly premium). My mum advised me not to buy Scottish mortgage at 800 earlier this year as it had "risen too much". Now it's over 1100. Could easily hit 1500 next year if you hold fire. (It might not but it's entirely possible)
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Old 11.12.2020, 01:20
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You've really challenged me to rethink my strategy here as I'm still 30+ years from official retirement age although my intention is to retire from paid employment a lot sooner than that. I feel that I should be taking on at least as much risk as yourself.

With regards to building a position in a given fund (let's assume no major discount/ premium to NAV for closed-end funds), if the price is ostensibly high, could it be a bad time to buy? Is it ever a bad time to buy a fund that you believe in?

I ask because I'm having difficulty reconciling the tenets of the fund manager. For example, a fund looks to buy companies at the right price with respect to their value, hold them for the long-term and maintain a low turnover of positions. What happens if the fund performs so well and a majority of the positions in the portfolio are trading at a price that no longer looks attractive on a long-term view? If you consider that money is fungible then you are essentially buying the positions you hold every day if you're not selling. Surely then in such an instance the turnover has to increase? How do we square the circle?
Honestly, the stock market is so volatile right now, there is no shortage of buying opportunities!
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Old 11.12.2020, 01:52
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Re: Equity Portfolio Advice

Polymath - I suspect you are thinking too hard about this. I'd just buy something roughly sensible and enjoy the ride!
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Old 11.12.2020, 07:21
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Re: Equity Portfolio Advice

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Honestly, the stock market is so volatile right now, there is no shortage of buying opportunities!
One should look first at the sectors and second the companies. Buying opportunities were available so far twice this year and we are waiting for the next move. I agree lots of opportunities this year but one need to wait a bit.
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