Great British Invest off or Passive V Active Portfolios

Prism

aroominyork said:

Prism said:

Portfolio 27/02/2021
Fundsmith Equity - 45.4%
Smithson - 14.3%
Montanaro Better World - 14.1%
Fundsmith Emerging Equities - 14.5%
LF Gresham House UK Micro Cap - 8.4%
Chrysalis Investment Company - 2.6%
Schiehallion Fund - 0.6%

Prism, do you not believe in diversification or do you believe you are sufficiently diversified?

Kind of both of those. I don't believe in diversification for the sake of it, like for example having to own the whole world. I reckon I hold around 230 or so companies in that collection of funds which is enough for me. Maximum holding size is Microsoft at 3.4% of the portfolio which is a touch more than the world index suggests at 2.6% for Microsoft. I would say it is pretty diverse across company size - certainly more so than the world index.

Regionally it is pretty diverse and happens to be quite similar to VLS100 - e.g US allocation is 46%, UK allocation is 21%.

Where it is not as diverse is sector based. I have almost no exposure to energy, property or utilites so when those sectors do well I would expect to completely miss out. Roughly inline on technology.

Its also clearly growth rather than value based but I have no real interest in the buy low sell high type of recovery style.

aroominyork

Growth/value is the main conundrum for me. I am drawn to growth instinctively because it seems better to own good than to own cheap, but I have been DIYing for less than four years and if the last decade had seen value performing better I expect I would view things differently. I'm sure you have seen the charts showing that over the long term value has outperformed growth, so is there a reason to think "this time it's different"? I don't see why it should be different - surely there is a point where P/E multiples trigger a switch of styles. We have had a taster during the last few months - is that an 'out of practice investor universe' dipping its toe in the value water before plunging in? 

Prism

Its hard to say. I do agree that the indexes suggest that value does better than growth and small cap value does best of all. That all makes sense. Growth at any price often falls spectacularly and small caps are unresearched and often offer better bargains. Check out Thrugelmirs recent performance by selecting less popular value and income based equities and funds. If I tipped towards value a bit more I would hope to emulate just a bit of that.

What I don't know though is how the value growth argument effects active funds since many of those fund managers think of themselves as growth, value and quality all at the same time. If we take Buffett as an example he switched from pure value to quality growth a long time ago when he partnered with Charlie Munger. Yet I think its fair to say he is still a bargain hunter. Most recently bought Apple at a low PE let it ride up by a few hundred percent and then significantly top sliced. Terry Smith definitely looks for cheaper prices and uses the term 'glitch' to reference when he jumps in. James Anderson refers to himself as a value investor although personally I think that is pushing the category just a bit too far. 

aroominyork

Smith/Train are clearly growth investors but, as you say, just look for the right moment to build a stake. However when you look at Morningstar's style boxes they are both close enough to the centre (balanced) to give you some reassurance that as and when value comes back into fashion there are many funds that, on a straight growth/value metric, would be much worse hit. Fundsmith here and LT Global here.

Thrugelmir

aroominyork said:

Prism said:

Portfolio 27/02/2021
Fundsmith Equity - 45.4%
Smithson - 14.3%
Montanaro Better World - 14.1%
Fundsmith Emerging Equities - 14.5%
LF Gresham House UK Micro Cap - 8.4%
Chrysalis Investment Company - 2.6%
Schiehallion Fund - 0.6%

Prism, do you not believe in diversification or do you believe you are sufficiently diversified?

@roominyork In what aspect you regard the portfolio not to be diversified? 

aroominyork

Thrugelmir said:

aroominyork said:

Prism said:

Portfolio 27/02/2021
Fundsmith Equity - 45.4%
Smithson - 14.3%
Montanaro Better World - 14.1%
Fundsmith Emerging Equities - 14.5%
LF Gresham House UK Micro Cap - 8.4%
Chrysalis Investment Company - 2.6%
Schiehallion Fund - 0.6%

Prism, do you not believe in diversification or do you believe you are sufficiently diversified?

@roominyork In what aspect you regard the portfolio not to be diversified? 

Fair question, Thrugelmir. I’ve already touched on growth/value and pointed out that Fundsmith is on the softish side of growth. On regions the portfolio is underweight Japan, but there are worse crimes. In market cap it is well enough balanced. In sectors there are large gaps – the flagship fund’s focus on IT, healthcare and consumer defensive carries through, to a reasonably large degree, to SSON and FEET. I think there’s a lack of diversification there.

The other point is whether their key metrics, eg ROCE, are a sound basis for investing in most weathers. I do not know the answer to that and would be glad to hear from more experienced investors.

If I had to choose one active fund to hold, especially if it had to be a conviction one rather than a closet tracker, it would probably be Fundsmith, but I would be nervous with Prism’s approach of so many eggs in similar baskets. For info, my equities include 16% in Fundsmith Sustainable and 4% in Lindell Train Japanese.

Thrugelmir

Don't let your Granny Loose at the Dogs portfolio holdings @ 31-03-2021
A number of changes in the portfolio made at the beginning of the month. Have detailed at the bottom below. 

ACORN INCOME	AIF	3.08%
ATLANTIS JAPAN	AJG	1.51%
CITY OF LONDON INVMENT GROUP	CLIG	2.02%
CONTOUR GLOBAL PLC	GLO	8.57%
EDP ORD	0OF7	3.26%
GCP ASSET BACKED INCOME FUND	GABI	5.52%
GORE STREET ENERGY FUND	GSF	14.92%
GRESHAM HOUSE ENERGY STORAGE FUND	GRID	6.96%
ISHARES II PLC ISHARES BARCLAYS CAPITAL GBP INDEX LINKED GILTS	INXG	7.50%
JARVIS SEC	JIM	17.10%
LEGAL & GENERAL	LGEN	4.38%
MOBIUS INVESTMENT TRUST.	MMIT	3.13%
SIRIUS REAL ESTATE	SRE	2.91%
STANDARD LIFE PRIVATE EQUITY	SLPE	2.37%
STRIX GROUP	KETL	2.15%
TOTAL ORD	TTA	7.08%
TRIPLE POINT ENERGY EFFICIENCY INFRASTRUCTURE COMPANY	TEEC	2.98%
UIL LIMITED	UTL	1.99%
XPS Pensions	XPS	1.57%
Cash Held and Accrued Income		1.01%

Additions to Existing Holdings

GCP ASSET BACKED INCOME FUND GORE STREET ENERGY

Prism

Portfolio 7/4/2021

So I sold Montanaro Better World after 18 months and a 38% return. Mainly due to slight concerns over the valuations of some of the green/ESG equities and the fact there has been a shift away from UK equities in the fund over the time I have held it. So it has been replaced with Royal London Sustainable Leaders which increases my UK allocation to 31% overall. 

Fundsmith Equity - 45.7%
Smithson - 14.8%
Royal London Sustainable Leaders - 13.8%
Fundsmith Emerging Equities - 13.9%
LF Gresham House UK Micro Cap - 8.7%
Chrysalis Investment Company - 2.4%
Schiehallion Fund - 0.6%

Bobziz

@Prism that's a fair bit in UK. Consensus seems to be that it represents good value and has been held back by uncertainty. I guess the strengthening pound is also positive unless the companies held earn a fair chunk overseas. What's your reason for overweighting ? Thanks.

Prism

Bobziz said:

@Prism that's a fair bit in UK. Consensus seems to be that it represents good value and has been held back by uncertainty. I guess the strengthening pound is also positive unless the companies held earn a fair chunk overseas. What's your reason for overweighting ? Thanks.

Partly for those reasons. I have typically had around 20% allocated to the UK but since things seem to be at least partly resolved after several years of uncertainty I'm quite happy to push it a bit higher. I expect it might reach around 50% by the time I retire.