This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
By
Bruce (TMFGoogly) has been ruminating about the composition of the portfolio recently. Most of the discussion has centred on whether Rentokil Initial (LSE: RTO) or Unilever (LSE: ULVR) should be sold to make way for a top-up of PizzaExpress (LSE: PIZ). At Fool HQ this is known as a "switch" -- as you can see we are very imaginative when it comes to jargon. Such decisions always have the potential to be looked at with regret afterwards.
Another thing that struck me was that most investors probably don't think in terms of selling to buy. I suspect that most Fools are continually adding capital to their portfolios. The Qualiport does the same thing by adding fresh ammo twice a year. In some respects I like the discipline this imposes. It's the same concept as making regular additions to an index tracker, for example, smoothing out those nasty peaks and troughs in the market.
Buying Targets
Whenever I've "switched" in the past I always seem to pick the worst time possible. On more than one occasion the share I've sold leaps in the most vulgar fashion and my new purchase slumps in despair. We've always said it is impossible to time the market. So to time it twice at the same time has to be... well, even more impossible. How does the saying go? "To mistime the market once may be considered unfortunate, but to do it twice begins to look like carelessness"?
But back to targets. I've never really been happy with saying "I will buy this share if hits 650p". To my mind, especially when you are buying for the long term, a company that you intend to buy at 650p you should also be prepared to buy at 700p. Whilst I can see why some people like to draw a line in the sand I say "if there's any doubt about it, there's no doubt about it". If you are worrying about a few percent here and there, then perhaps this is not the sort of investment opportunity you are looking for.
The other problem with such policies is that the prices in the market have no respect for any targets you set, whether it is prices you have bought at already or prices you intend to buy or sell at in the future. I have found that some flexibility is required. Perhaps I ought to be more patient. Or maybe I tend to go on gut feel, or smell as Pyad would put it, more than other Qualiport followers?
Doubling up
Of course this can create its own problems. Firstly there is the temptation to buy as soon as there is spare cash in the bank. Secondly there is the tendency to always be looking for more companies to invest in. Even before I came across the Fool I had come to conclusion that for the private investor a concentrated portfolio of up to ten stocks made a lot more sense that scattering one's investments over a wide area. The trouble with placing small bets is that they have to be phenomenally successful to make any impression on your overall returns. And they also distract you from paying attention to the largest stocks in your portfolio. I suspect I'm in good company by having spent an inordinate amount of time in the past analysing a company that was frankly insignificant to my portfolio as a whole.
The solution I came up with was topping up on existing holdings when they seemed to offer good value. As a long-term holder I have come to know a few companies well and even in just the past three years have seen times when they looked cheap for no reason (as well as expensive with no apparent cause). At the moment I find myself using the vast majority of surplus funds for investing when one of my holdings looks harshly treated by the market. In fact I have purchased shares in most of my holdings three or four times. Bruce seems to coming to the same conclusion himself, having added to a number of his holdings in the last few months. As Maynard has said, when you think you're right, bet big. It is like using the doubling up dice in backgammon. Hurt your opponent and inflict the maximum damage when he is looking the other way.
Then again this is a policy that suits my temperament, others won't feel comfortable adding to share that may be showing an overall loss to date. I read with interest one of Pyad's recent articles about how many investors try to copy acknowledged gurus such as Buffett and how often they fail by not possessing the unique qualities these sages have. I think many people may start off that way, but as they become exposed to more and more styles of investing they tend to cherry pick the bits of each method that suit them best. That's certainly the approach I've taken and by reading between the lines on the message boards I suspect many other Fools do the same. Maybe I'll get to the stage that Pyad has reached when my investing style has fully evolved. Personally, I hope not. For me learning about investing and tweaking my thought processes along the way is part of the fun.
Other Qualiport news
It has been a happy week for the Qualiport. Despite market and Misys (LSE: MSY) wobbles a number of its stocks have posted some pleasant gains. PizzaExpress has been on a roll ever since the 650p buy target was set. Having dipped to as low as 700p the price has since put in a strong recovery to over 800p. So the margin of safety looks to be somewhat slimmer. Sentiment has no doubt been boosted by the dozen Fools who descended on the Oxford Circus branch prior to the last social event.
Rentokil is also looking less glum after the disposal of a distribution business in the US for £50m. Other parts of the business are also up for sale including some of its plant hire and personnel recruitment operations. Part of the proceeds may be used to fund a share buyback programme. Given the recent debates surrounding his holding will Bruce put his hand up for this one?
Dell (NASDAQ: DELL) had the honour of being the best performing share within the S&P 500 in the 1990s, chalking up a rather impressive gain of 89,000%. But rival PC manufacturer Gateway (NYSE: GTW) suffered this week after it warned that profits would fall below expectations due to unreliable supplies of microprocessors. Gateway currently get all their supplies from Intel (NYSE: INTC), and so do Dell. No doubt Bruce will be hoping that Dell swept up some of those unfulfilled Gateway orders and did not have similar supply problems.
Comments please on the Qualiport message board.
Related Links
Company Change Bid DELL(US)+2.00 47.90 EMA -0.07 13.18 IIG -0.00 2.84 MSY -0.55 7.44 PIZ +0.27 8.20 RTO +0.25 2.64 ULVR +0.23 4.95 LLOY -0.25 6.75 Qualiport Stocks Last Rec'd Total # Company Buy Current Change 22/04/99 542 Misys 5.57 7.44 33.5% 17/04/98 301 Emap 10.20 13.18 29.2% 27/10/98 1133 Indep Ins 2.60 2.64 9.0% 27/01/99 74 Dell (US) 44.63 47.90 7.3% 04/11/98 245 Pizza Exp 7.93 8.20 3.5% 19/12/97 783 Rentokil 2.55 2.64 3.5% 29/09/99 356 Lloyds TSB 7.56 6.75 (10.7%) 17/07/98 266 Unilever 7.53 4.95 (34.2%) Last Rec'd Total # Company In At Value Change 22/04/99 542 Misys 3065.85 4032.48 966.64 17/04/98 301 Emap 3139.85 3967.18 827.34 27/10/98 1133 Indep Ins 2990.63 3212.06 221.51 27/01/99 74 Dell (US) 2007.42 2148.24 140.82 04/11/98 245 Pizza Exp 1966.34 2009.00 42.66 19/12/97 783 Rentokil 2046.53 2067.12 20.59 29/09/99 356 Lloyds TSB 2723.20 2403.00 (320.20) 17/07/98 266 Unilever 2052.00 1316.70 (735.30) Cash: £ 57.27 Current Total : £21,213.05 Total Invested: £20,184.62 Profit/(Loss) : £1,028.43 Value Per Share Day Month Year History Qualiport -0.82% -2.84% -2.84% + 0.44% FTSE 100 +0.89% -6.14% -6.14% +10.58% FTSE All Share +0.96% -4.88% -4.88% +15.34%