By John Kingham
Lots of market pundits talk about individual companies, but few are willing to pin their reputation on the long-term performance of a single portfolio.
This lack of transparency always annoyed me, so in 2011 I launched a monthly investment newsletter where I would manage and write about a virtual but extremely realistic portfolio, modelled on my real-world portfolio.
My long-term goal is to grow this model portfolio from a starting value of 50,000 virtual pounds in 2011 to at least one million virtual pounds by 2041.
That requires an average total return (from dividends and capital gains) of just over 10% per year, which is above the UK market’s average rate of return.
My aim is to show investors how a defensive value investment strategy can be used in pursuit of sensible long-term investment goals, such as being able to live off dividend income in retirement.
The model portfolio is very realistic and takes account of all expenses, including stamp duty (0.5% per purchase), broker fees (£10 per trade) and an annual subscription to my monthly newsletter (at the current annual rate).
Eating my own cooking
In addition to reaching a million virtual pounds by 2041, the model portfolio has several performance goals which tie in with my personal goals and those of many other cautious income-focused investors:
- 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 01/05/2021||Model Portfolio (A)||FTSE All-Share Benchmark (B)||Difference (A - B)|
|Value at inception (01/03/2011)||£50,000||£50,000||£0|
|Dividend yield||2.4%||2.6%||- 0.2%|
|5-Year total return||34.8%||43.5%||- 8.8%|
|5-Year annualised return||6.2%||7.5%||- 1.3%|
|5-Year maximum decline||- 32.4%||- 24.8%||-7.6%|
|10-Year total return||116.1%||88.3%||27.8%|
|10-Year annualised return||7.9%||6.4%||1.5%|
|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.
I publish a detailed review of the portfolio every month in my investment newsletter.
I also publish performance review articles, usually once or twice each year.
Investment case studies
Occasionally a holding will be removed from the portfolio, either because the quality of the company has materially declined, the valuation is no longer attractive, or both.
Every time a company is removed from the portfolio I carry out a detailed review which is then published in my monthly newsletter and, a few days later, as a blog post.
You can read the sale reviews for all of the portfolio’s past investments below.
(click to read review)
|Date sold||Holding period||Total return|
|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 UK Value Investor portfolio, its holdings and any related buy or sell decisions are not recommendations to invest or not to invest. The UK Value Investor portfolio should be seen as a source of information and education only. You must 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.