My Value Investor newsletter is about value investing. That is, trading value shares short term. No surprises there then! In case anybody is unaware, it also includes a section each month on constructing a long-term hold high yield portfolio (HYP) which can be used either for income or growth.
What have been our greatest successes since we started publication in January 2004? The latest scorecard dated 1 September shows that there have been 47 value shares tipped of which 21 have been sold and 26 are still in play. For the HYPs, there have been 20 shares selected of which two have been sold leaving 18 held. Here are some figures on this, all including dividends received.
Of the value shares sold these are the top five winners:
The two HYP shares sold both made profits:
Of the value shares held, these are the top five in profit:
Of the HYP shares held, these are the top five in profit:
I'm not going to conceal losers, we've had our share of duds like these:
Worst five value shares sold:
Worst five value shares held:
There are no big losers amongst the HYP shares still held, with even the very worst being down only 2-3% and all of those delivering the dividends which is the essential purpose of the strategy.
In Value Investor the reason for holding on to losing value plays is because I believe value still resides in these shares though as any experienced value investor knows, it can take an awful long time to out sometimes. But you never know when it can happen. If the value is there, a share can languish for years on occasion until woken up by some action. Those looking for very short term returns won't find it in a value strategy. It can happen but when buying you have to be prepared to sit on the shares until they do the business.
On the other hand, once I have become convinced that there is no business left to do, or I am not prepared to give it the benefit of the doubt, then I'll dump them. The above worst of the value sales shows this. These shares, although promising at selection, went wrong for various reasons. It is inevitable that any trading strategy will deliver losses at times.
Somewhat oddly perhaps, my greatest winner of all shares sold to date was the HYP share Exel at a profit of 69.3% though only two HYP shares have been sold and the other, Sainsbury, scraped only a small profit. Also, the top five HYP winners still held are way ahead of the top five value shares still held. One reason for this is that value trading is a more risky approach than HYP in the academic and professional investors' sense that it is more volatile, it will suffer greater fluctuation.
HYP shares, in direct contrast to value, are not bought with the intention of selling at all. The portfolios in Value Investor are not a yield based trading strategy. They are bought in order to derive an income which may then be withdrawn or reinvested to create a growth vehicle. Occasionally though it can be advantageous to income to sell an HYP share and reinvest in a higher yielder.
That is the story of the best and worst in Value Investor since we started it. Sign up here to take out a free 30-day trial.
Stephen owns shares of Lloyds TSB and United Utilities. The average gain for all shares picked to date in Value Investor is 10%.
