VALUE INVESTING
My Year

By Stephen Bland (TMFPyad)
December 28, 2001

Traditionally we, that is TMF writers, especially those running portfolios, and many value board readers too, all review our situation at the end of the year. Even I, disrespecter of traditions, have done this for the last couple of years. Frankly though, if I wasn't doing this publicly I doubt that I would do it privately either. I don't recall doing an annual review of my situation at this time of the year before I outed myself on TMF. If I did it at all it would be following the end of the tax year, not the calendar one, when one is forced to compile certain figures for tax return purposes anyway.

I don't really like measuring performance in great detail repeatedly, it is bad karma. If you really have to know, all that is needed is a simple total valuation of your investments, it is rough and ready but quite adequate for most. An obsession with repeated performance measurement to several decimal places is unhealthy and probably indicative of some Freudian childhood trauma like catching your parents on the job, as well as taking your eye off the ball.

Okay. I closed 2000 predominantly in cash but with a decent sized side bet in Anglogold made in December of that year. That was my start position for 2001.

In the first few months of this year I bought Scottish & Newcastle (LSE: SCTN) as a very small side bet and made a substantial investment in Inchcape (LSE: INCH). Anglo went on to do the business, then I sold it in May for a profit of roughly 30% and reinvested the proceeds in further Inchcape shares. So by May I was fully invested.

By around October, I had sold both my Inchcape and S&N holdings for profits of about 38% and 20% respectively, leaving me back to cash.  A nice feeling as always. Not long after, I took a position in UK Coal (LSE: UKC) but sold it again within a few weeks for a tiny profit after a negative announcement from the company.

Following that, at the end of November I bought shares in Allders (LSE: ADS) at about 160p, which I still hold.

The total increase in my funds resulting from realised profits in 2001 from the above transactions, which include dividends, was about 36% of the valuation at the beginning of the year. Most of this was down to Inchcape. Allders has not changed much, up very slightly, so it would not change the figures, except marginally for the better, if I brought in unrealised profits. There were no losses.

For what it's worth my cumulative realised gain, since I started writing about value for TMF in September 1998, at the end of 2000 stood at something like 460% after bringing in a gain on Royal & Sun Alliance (LSE: RSA) made in the final days of that year. Adding in the 36% for 2001 takes me to 625% or so. I am doing it only roughly now because as I indicated above, excessive accuracy in performance measurement makes me nervous.

For any new readers, I did not start investing in 1998 but have been investing in value shares for a very long time. However my period of writing about it on TMF began only in 1998.

And that's it really. I notice that some of the regulars on the value board have done a lot better than me for which I congratulate them. In some cases this may have been due to small caps that I would not buy. Others may have done worse, particularly in view of the two shares which went out of business during the year, Independent Insurance and Railtrack about both of which I wrote articles though neither were sufficiently attractive for me to invest.

Anyway, I wish all the value players a prosperous New Year. As always, ignore what the market is doing, ignore what commentators think the market may be going to do, and concentrate on individual share selection. Once you believe you are right with a particular share, don't be put off by negative analyst or press comment. See it as encouragement and bet against them.

More: Value Investing Board | Review of 2000