Beginners’ Portfolio: What Have Quindell PLC, Blinkx Plc & Sirius Minerals PLC Done For Our Growth Prospects?

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The Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and do not constitute advice to buy or sell.

When I started the Beginners’ Portfolio my intention was to go for a combination of blue-chip dividend-paying shares and growth shares, and the success so far has been mixed with both approaches. Today I’m examining the growth portion of the portfolio, paying special attention to two shares I’ve since sold and one that has only just been bought.

Dodgy accounting

I added Quindell (LSE: QPP) to the portfolio in June 2014, being guilty of a shocking failure to research the company properly. I was taken in by claims of rising revenues, earnings and cashflow forecasts, and the disarmingly low P/E the shares were commanding at the time. But I did quickly start to get a little suspicious, starting with chairman Rob Terry’s dismissal as “hardly a focus” of the canned RAC telematics deal that he had earlier been touting as worth £1bn.

Further weasel-talk from the company convinced me I’d made a mistake, and I dumped Quindell in October at 139p and took a loss of 33%. Subsequent events have supported that decision, and have hammered home my failings — I really should have taken apart the Gotham City analysis and properly listened to what the other bears were saying.

Death of the video star

Video technologist Blinkx (LSE: BLNX) was added to the portfolio as long ago as July 2012, and for a while I was basking in a multi-bagger growth story. Considering the P/E multiples the shares were commanding at their peak, and knowing that such high-growth stocks almost always fall back when they fail to exceed expectations, I really should have sold at least a portion of what I knew to be a high-risk holding in late 2013 or early 2014.

But I took my eye off it, the firm was hit by a failure to move to mobile computing devices quickly enough, short-sellers piled in (quite correctly), and profit warnings led to a share price plunge. The initial promise gone, Blinkx was turfed out in December 2012 — for a painful 40% loss.

Who will buy my potash?

Not to be put off from having a high-risk growth possibility in the portfolio, I added Sirius Minerals (LSE: SXX) to the portfolio in May 2015 at a price of 13.75p. Sirius, sitting on the world’s largest known, and highest grade, deposit of polyhalite potash (which apparently makes great fertilizer), was awaiting some key approvals at the time. Since they have been granted, the shares have risen to 17.25p, which would give us a profit of 20% after all charges if I sold today.

There are key risks ahead, with the difficulty of quantifying the capital requirements from here to the point of production being the biggie — should delays come along and/or costs rise, today’s shareholders could face more dilution than expected.

Overall performance

How has the growth portion of the portfolio performed overall? I’ve chosen the three small-cap startups today, but I also consider Persimmon (up 250%), Apple (up 78%) and ARM Holdings (down 3%) as growth stocks. Persimmon was bought because the share price was clearly stupidly undervalued and could surely only go up as housebuilding inevitably recovered and profits started to grow again, and Apple and ARM are classic technology growth stocks.

As of close of play on Friday, 14 August, the growth portion of the portfolio was up 31.5%, including all dividends, costs and spreads — and the blue-chip portion was up 14.5%. Does that tell us the better strategy? No, the portfolio is only a little over three years old, so it’s way too early to decide.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. The Motley Fool UK owns shares of Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.