One of the best ways to become better at investing (or anything else for that matter) is to learn from the successes and failures of others.
The idea is simple enough, but finding detailed reviews of those successes and failures, along with information about any lessons learned, is not so easy.
And that’s true even though I’ve been writing post-sale reviews of my investments for almost a decade, and regular reviews of the UKVI portfolio since 2012.
Each of those reviews also draws out any lessons learned, but what I haven’t done is collect them together into a single document and then put that document an easy-to-find place on the website.
That’s where The Investment Lessons eBook: 2015 Edition (PDF) comes in.
As the name suggests, it’s a collection of all my investment reviews from 2015, covering both individual companies and the model portfolio as a whole.
My intention is to publish one of these at the end of each year, and I may even work backwards and publish a 2014 edition if I can find the time.
You can download the ebook directly here (as a PDF) or from the free resources page.
I hope you find it useful.
This is great, thanks.
Hi Michael, excellent. Thanks for letting me know.
“5 Undervalued debt free stocks”.
John, I stumbled on your old article in connection with reading some of Richard Beddard’s material.
I see amongst the list was Victrex, something on watch for me.
They admittedly lost the patent for PEEK, but the wider story is their projects for application specific joint ventures and with a lead position in admittedly a growing competitive market, there seems to be a reasonable entry at the 1500 level where it seems to have hovered for a while.
I do like debt free for at least a portion of my wad, Burberry being one of the others.
Hi LR, well spotted. I picked up Victrex a while ago. Quite an interesting spin-off from ICI, and the plastics are pretty amazing in what they can do. Hopefully the company can continue to perform as well as its products!
Hi John,
Re: MITIE Group Plc
I know you are not into panic selling, but taking into account today’s profit warning AND comments from Paul Scott on Stockopedia w.r.t. its balance sheet/NTAV, would you be looking to sell any time soon?
Regards,
Chris
Hi Chris, as you probably guessed I’m not looking to sell Mitie at the moment, despite the profit warning and near-30% share price decline yesterday.
I had a look at Paul’s small-cap value report and he’s basically quite positive until he gets to the balance sheet. Then he rejects the company based on its negative NTAV*.
First of all, that’s completely reasonable. If Paul has a rule that he won’t invest in negative NTAV stocks then that’s fine. It won’t be relevant in all cases but it’s a reasonable rule and probably helps to keep him out of problematic companies. I certainly realise that the metrics I use aren’t suitable in all circumstances, but I still use them nonetheless.
Personally I don’t look at the balance sheet in that way and I don’t care if a company has a negative NTAV. On the tangible asset side, Mitie doesn’t have many tangible assets as it’s a service company supplying cleaners and security guards (and other things) to other companies and organisations. The intangible assets come mostly as “goodwill” from acquisitions, i.e. the price paid over and above the net asset value of the acquired company. This is entirely normal.
On the liability side these have also largely come about from acquisitions, with borrowed money used to pay for at least some portion of the acquired companies.
Rather than worry about whether net tangible assets are positive or not, I’m much more concerned about whether borrowings are sustainable, and in Mitie’s case I think they probably are as its debts are not particularly high relative to its average earnings.
I think that’s long enough for a blog post comment (!) so I’ll finish by saying that while it’s reasonable to look at NTAV, I don’t, and I don’t think it’s particularly relevant in this case. But of course I could be wrong and Paul could be right, and it’s entirely reasonable for Paul to exclude Mitie on the basis of its negative NTAV if that’s one of his core rules.
* For those who don’t know, NTAV is net tangible asset value, i.e. tangible assets minus all liabilities (there are no intangible liabilities!).
Hi John,
Thanks for your detailed reply. I expected you to hold (for the time being at the very least) and appreciate your reasons for you doing so.
As for myself, I bottled it and sold out for a 20% loss (ouch!). My reasons were threefold:
1. Fool that I was, I never was as convinced as I should have been about a predominantly UK focussed business when faced with factors like Brexit still looming. I was attracted by the dividend yield and the relatively low PE. The business fundamentals looked OK, but I always had a nagging doubt.
2. A business like this, to my eyes, seems heavily dependent on low paid workers, and having seen the shenanigans at Sports Direct, I get the feeling that more and more companies of this nature are going to face this issue of paying minimum/living wages (and rightly so, in my opinion). I considered this at the time of purchase, but thought it would not have such an impact. I feel uncomfortable that any company is so reliant on paying such low rates of pay as they seem to imply in their trading update/profit warning.
3. What really determined my selling was the difference in the tone of the optimistic statements from their preliminary results from the 23rd of May and this latest update:
For example, Compare –
“We continue to see a range of good outsourcing opportunities across our key markets and anticipate modest growth in the coming year. We remain positive about the group’s prospects for the future.” (23 May)
with –
“When compared to the same period last year, in the first half we expect revenue to be modestly lower and operating profit to be very significantly lower.” (19 Sep).
To me it seems that they could/should have been more aware of these deteriorating conditions around the time of their 23 May statement. I accept that this may be a harsh opinion to come to, but I still feel a bit, er…, shortchanged ( actually quite a lot – by about 20%!).
All part of the learning experience, I suppose.
Regards
Chris
HI Chris, quick reply:
1: “I always had a nagging doubt” – I have nagging doubts about all my investments!
2: “companies of this nature are going to face this issue of paying minimum/living wages” – Yes, but everybody’s in the same boat. I guess it skews the labour services part of the business towards technological substitutes, but the robots are not yet ready to take over security guards, cooks or cleaners.
3. ” they could/should have been more aware of these deteriorating conditions” – I think they probably were. But most directors will put on a good face in order to keep the market happy (and the share price and stock option values up) for as long as possible, just on the off-chance that it all works out well. If it doesn’t then it’s time for a “shock” profit warning.