It's taken years to recover from a greedy mistake. Here's how I fixed it

Telegraph

2 days ago

Getting the 'weightings' right – i.e. the respective sizes of the different holdings in one's portfolio – is crucial to overall investment success, as I know to my cost.
In December 2021, after three profits upgrades in one year, my holding in flavour and fragrance manufacturer Treatt touched £13 per share compared with my original equivalent purchase price of 31p back in 1999. As a result, Treatt became by far my largest holding, equating to over 35pc of my Isa. Of course, with the benefit of hindsight, I should probably have sold half and bought a nice stretch of salmon fishing or similar, but their future looked ever rosier.
I did reduce my holding by 20pc on a steadily rising price, selling from £4 upwards and finally in April 2021 at £10.80.
Sadly, they went into reverse – as a particularly large US contract was not repeated and they endured management changes, more difficult trading and profits warnings.
These combined to deliver a substantial de-rating, with the shares slumping earlier this year to £2 and change. I bought more at 251p and they have now recovered to 280p, a price representing hardly more than net asset value (Nav), thus Treatt is clearly vulnerable to a private equity or trade predator.
However, I still believe in having the confidence to retain large holdings – backing winners – but not to anything like that 35pc level. A painful lesson!
It has since taken me three and a half years to rebuild the combined value of my Isa and non-Isa portfolios, not helped by a disastrous investment in Videndum, which was hit by the Hollywood writers' strike and held far too much debt.
Thankfully today my overall value is pleasingly at a new peak and providing a much-appreciated dividend income.
That value is held across 25 UK companies, I do not invest overseas, and I have always believed in a fairly concentrated portfolio. As a result, the weightings within my portfolio are critical to achieving my goals of capital growth plus significant dividend income.
My two largest holdings – Concurrent Technologies and M&G – each comprise broadly 15pc of the total value. The former has shown outstanding growth under the leadership of Miles Adcock, nearly quadrupling in value on the back of an increasing flow of design contracts primarily from the USA defence and related sectors. I hope and believe that Concurrent has an outstanding future ahead.
Meanwhile M&G, carefully stewarded by Andrea Rossi, has to be the greatest dividend stock on the market. Why more investors have not come on board given its unique strength and double figure dividend yield remains a mystery.
Next are my two 10pc holdings. Anpario, in natural animal feed supplements, brings an impressive near 20-year annual dividend growth. And PZ Cussons, of which I have frequently written and spoken.
It has been an abysmal performer over recent years, but my hunch is that when it divests from Africa, its UK brands and valuable businesses in Australia and Indonesia will be recognised. Indeed, it will be surprising if major global players in the soaps, toiletries and cosmetic sectors are not looking seriously at it.
Next come my 5pc holdings – Cerillion, Christie, Goodwin, Legal & General, Treatt and VP. Cerillion, providing billing services for the global telecoms sector, has been a superstar, advancing from 84p per share when I first bought them in 2016 through to a highly rated £18 today. Hopefully more growth to come, but mindful of my Treatt scar I have recently trimmed my holding.
Christie has been hugely undervalued for a long time but has now started to motor. As I wrote in my last article, the disposal of its loss-making stock-taking business has transformed both bottom-line profitability and liquidity – recent results were very encouraging and the dividend more than doubled. I added to my holding at 85p in April, and they are currently trading 50pc higher.
I firmly believe that niche engineer Goodwin is the UK's greatest untold industrial success story with a magnificent growth record and an excellent future. Legal & General needs no introduction, again a wonderful high yielder, and Treatt has been already covered. Old established plant hire VP offers both an attractive 7pc yield and likely capital growth on increasing UK infrastructure spend.
Thus, it is the aforementioned 10 companies who will be key to my overall performance over the short to medium term. But they aren't the whole story.
Next come eight holdings of 1pc – Aviva, shipbroker , Hollywood Bowl, defence-focused MS International, Phoenix for its yield, STV – disappointing but undervalued, Supermarket Income Reit – high yielding and at a discount to Nav, and, finally, Vianet, an old favourite with valuable technology but still to deliver.
My most recent purchase is Carr's Group, a small global business in feed supplements for ruminants, which makes nine. The new management team impresses and it is chaired by Tim Jones, who formerly successfully chaired Treatt in its growth years. Having divested from virtually all their engineering interests and currently returning cash to shareholders, Carr's are now focused on growth in agriculture, probably both organically and by acquisition.
Finally to six small holdings: high yielding Duke Capital and ITV with its good yield and continuous takeover chatter, two much undervalued property companies in Town Centre Securities and Workspace (both around half asset value), and global drinks group Fevertree, likely to benefit significantly from the Molson tie-up.
Lastly, to my worst performer, leading insolvency litigation financing specialist Manolete. Very disappointing so far but considerable scope for recovery, standing at only half its original IPO price and seemingly currently trading at record levels. If its major 'cartel' cases are settled favourably, the shares could really bounce.