Diary of a Private Investor

Diary of a Private Investor: My aggressive investment strategy has backfired
By the beginning of this month, my portfolio had felt the full, unhindered power of the setback and fallen close to 10pc.

By James Bartholomew
Published: 6:49AM GMT 04 Nov 2009

I have to admit I jumped the gun.

As we were getting towards the end of October without suffering any significant setback in the stock market, I thought, "Hurrah! We have survived the most dangerous month of the year and now we have the run up to Christmas and beyond which usually is pretty good for shares."


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Commodity shares are heading up So, thinking I would get ahead of the crowd, I put remaining cash into shares. I sold my Japanese yen bonds and put these into shares, too. What happened?

The October setback arrived late. My portfolio fell more than the market generally because I have been favouring what you could call "aggressive recovery plays".

I subscribed to the rights issue of Barratts, the house builder, and bought some extra shares into the bargain. I reckoned the price had been depressed by the rights issue and would rise when all the money was secured. I bought at 153p, only to see the shares fall back even further – to 122p.

I bought more Enterprise Inns, the pub owner, too, paying 139.9p. The shares had jumped 20p after the Office for Fair Trading said it has not found evidence that companies such as Enterprise Inns, which require their tenants to buy their beer, are reducing competition in a way that damages consumers.

This removed one of a little pile of concerns that has been weighing down the shares. I was hoping that as these various concerns were dealt with or found not to be quite so bad as feared that the price would float nearer to its net asset value. Instead, the shares fell more than most and traded around 118p this week.

I also recently bought a few shares in Indo-China Capital Vietnam Holdings at US$4.54. I like Vietnam, but did not quite realise when buying that the company seems to be winding itself down.

I also bought a few Real Estate Investors, a small property company, at 4.96p. I had noticed some director buying and, on looking into the detail, liked the look of it.

Finally, I bought a small holding Chaoda Modern Agriculture, an agribusiness quoted in Hong Kong. Chaoda grows vegetables, fruit and tea and sells to supermarkets and abroad. I bought at HK$6.33.

So I bought up to the hilt. All my cash was gone and most of my bonds, making me 95pc invested in shares or even more if you count my mortgage as financing my shares which is about right. Thus, by the beginning of this month, my portfolio had felt the full, unhindered power of the setback and fallen close to 10pc.

I can't give a precise figure because my curiosity about exact changes in my portfolio's value dwindles when I am losing money.

And this is without counting my shares in Aero Inventory, which have been suspended, as I write, because the company had a problem with valuing, ahem, its inventory.

What now? I still believe November to Christmas and beyond is generally good for shares. David Schwartz, who looks at stock market statistics, has said there has not been much evidence of a seasonal trend this millennium.

It is possible something has changed or that the trend has become self-defeating as people try to get ahead of it. But, even on recent figures, shares have risen in more than half the November-to-March periods. I think there is some unknown force that tries to sustain the market. And I still think some of my shares are excellent value.

In the case of Barratt, I am encouraged by recent experiences of the property market. I am an executor of my uncle's estate. We put his house on the market and within three days agents had taken 42 people to it and we had an offer at the asking price. I am also an executor of another estate, where three potential buyers were vying for the house.

As for the stock market, the Bank of England has decided to do another £50bn of quantitative easing. I think and hope this should help keep shares out of trouble for a while at least.

http://www.telegraph.co.uk/finance/personalfinance/investing/6498737/Diary-of-a-Private-Investor-My-aggressive-investment-strategy-has-backfired.html