Warren Buffett, billionaire value investor
By John Kingham
Ultimately it’s results that matter, so my monthly newsletter is based around a virtual but extremely realistic portfolio called the Million Pound Portfolio.
It holds around 25 dividend-paying companies, mostly from the FTSE 100 and FTSE 250. It takes account of all dividends, stamp duties, broker fees and any other real-world details so its results should exactly match those of an equivalent real-world portfolio.
My goal is to grow this portfolio from its 2011 starting value of £50,000 to £1 million by 2041, i.e. within 30 years.
That requires an average return from dividends and capital gains of just over 10% per year, which is above the UK market’s long-term average annual return of 7%.
The vast majority of my retirement investments are in exactly the same companies as the Million Pound Portfolio. The same is true of my wife’s investments so of course I’m very focused on achieving good returns without excessive risk.
Performance
In addition to reaching a million virtual pounds by 2041, the Million Pound Portfolio has several other goals:
- High income: Have a higher dividend yield than the FTSE All-Share at all times
- High growth: Produce higher dividend growth and capital growth than the FTSE All-Share over the long-term
- Low risk: Both income and capital should decline by less than their FTSE All-Share equivalents in down years
Here’s the portfolio’s performance track record to date:
| Performance to 01/07/2021 | Million Pound Portfolio (A) | FTSE All-Share (B) | Difference (A - B) |
|---|---|---|---|
| Value at inception (01/03/2011) | £50,000 | £50,000 | £0 |
| Current value | £110,694 | £95,982 | + £14,712 |
| Dividend yield | 2.7% | 2.6% | + 0.1% |
| 5-Year total return | 32.1% | 42.6% | - 10.4% |
| 5-Year annualised return | 5.7% | 7.4% | - 1.6% |
| 5-Year maximum decline | - 32.4% | - 24.8% | -7.6% |
| 10-Year total return | 119.2% | 87.0% | 32.2% |
| 10-Year annualised return | 8.2% | 6.5% | 1.7% |
| 10-Year maximum decline | - 32.4% | -24.8% | -7.6% |
If you want to see the underlying monthly data, here’s a spreadsheet (Google Sheet) containing monthly total values for the portfolio and its index-tracker benchmark.
Performance reviews
I publish a brief review of the portfolio every month in my monthly newsletter. I also publish performance review articles, usually once or twice each year.
Reviews of companies I’ve sold
Occasionally I’ll remove a company from the portfolio, either because the quality of the company has materially declined or the valuation is no longer attractive, or both.
Whenever this happens I carry out a detailed pre-sale review which is published in the monthly newsletter and, a few days later, as a blog post.
You can read these reviews for all of the portfolio’s past investments below.
| Company (click to read review) | Date sold | Holding period | Total return |
|---|---|---|---|
| XP Power | June 2021 | 4 Years 4 months | 130% |
| Petrofac | May 2021 | 7 Years 2 months | - 74% |
| Standard Life Aberdeen | April 2021 | 5 Years 2 months | 18% |
| Mitie | March 2021 | 9 Years 6 months | - 32% |
| N Brown | February 2021 | 5 Years 3 months | - 63% |
| Hyve | January 2021 | 5 Years 10 months | - 52% |
| Dunelm | November 2020 | 4 Years 1 month | 70.8% |
| Xaar | September 2020 | 2 Years 3 months | - 71.9% |
| Ted Baker | July 2020 | 1 Year 11 months | - 93.5% |
| Aggreko | January 2020 | 4 Years | 8.1% |
| The Restaurant Group | November 2019 | 3 Years 7 months | - 31.2% |
| SSE | September 2019 | 7 Years 10 months | 33.8% |
| Vodafone | July 2019 | 8 Years 1 month | 43.6% |
| Compass Group | May 2019 | 1 year 3 months | 22.5% |
| Centrica | March 2019 | 6 years 7 months | - 36.6% |
| GlaxoSmithKline | January 2019 | 4 years | 27.3% |
| Victrex | November 2018 | 2 years 3 months | 93.1% |
| Senior | September 2018 | 2 years 3 months | 48.2% |
| BHP Billiton | July 2018 | 6 years 10 months | 12.5% |
| Beazley | May 2018 | 2 years 8 months | 98.9% |
| AstraZeneca | March 2018 | 2 years 8 months | 29.7% |
| BP | January 2018 | 6 years 10 months | 41.1% |
| Rio Tinto | November 2017 | 5 years 2 months | 47% |
| Braemar Shipping | September 2017 | 6 years 4 months | - 4.7% |
| Wm Morrison | July 2017 | 4 years 2 months | - 2% |
| BAE Systems | May 2017 | 5 years 10 months | 142% |
| Standard Chartered | March 2017 | 2 years 8 months | - 33% |
| TP ICAP | January 2017 | 5 years 4 months | 57% |
| Homeserve | November 2016 | 3 years 3 months | 134% |
| Chemring Group | September 2016 | 5 years 5 months | - 73% |
| Reckitt Benckiser | July 2016 | 2 years 5 months | 63% |
| Tesco | May 2016 | 4 years 11 months | - 38% |
| Hill & Smith | March 2016 | 2 years 9 months | 83% |
| Amlin | February 2016 | 3 years | 85% |
| JD Sports | December 2015 | 4 years 9 months | 234% |
| Cranswick | October 2015 | 2 years 11 months | 135% |
| RSA Insurance Group | August 2015 | 3 years 6 months | 19% |
| Serco | June 2015 | 1 year 1 month | - 50% |
| Balfour Beatty | April 2015 | 3 years 8 months | 9% |
| ICAP | February 2015 | 2 years 10 months | 42% |
| Imperial Tobacco | December 2014 | 1 year 9 months | 28% |
| Greggs | October 2014 | 1 year 10 months | 30% |
| Royal Dutch Shell | August 2014 | 8 months | 18% |
| AstraZeneca | June 2014 | 3 years | 55% |
| Mears | April 2014 | 3 years | 89% |
| Aviva | January 2014 | 1 year 9 months | 32% |
| Go-Ahead | October 2013 | 1 year 8 months | 36% |
| Interserve | July 2013 | 2 years 4 months | 117% |
| Reckitt Benckiser | April 2013 | 2 years | 47% |
| N Brown | January 2013 | 8 months | 50% |
| UK Mail | October 2012 | 1 year | 34% |
| UTV Media | July 2012 | 7 months | 45% |
| Robert Wiseman Dairies | January 2012 | 9 months | 25% |
Broad diversity to reduce risk
To reduce risk, the portfolio invests in a wide range of companies, industries and countries. For example:
- Company diversity: The portfolio typically holds 20 to 30 companies, with no one company making up more than 8% of the portfolio
- Industry diversity: The portfolio typically holds no more than three companies from any one industry
- Size diversity: The portfolio’s holdings are usually spread fairly evenly between the FTSE 100, FTSE 250 and FTSE Small-Cap indices
- Country diversity: The portfolio aims to have at least 50% of its revenues generated internationally
Important notice: The Million Pound Portfolio, its holdings and any related buy or sell decisions are not recommendations to invest or not to invest. The portfolio is for informational and educational purposes only. You should always do your own research, make your own investment decisions and seek a regulated financial adviser if you are unsure of any investment. Please see the full disclaimer.