Investing in individual shares

green_man

When I started investing I started by investing in single companies, and pretty high risk companies at that, but my aim was as much entertainment/challenge rather than any long term investment plan.

It was mid nineties and I typically put £1000/month into whatever company I thought was a good bet based mainly on a value approach or a fancied tech startup (remember them, Durlacher etc ). By 1999 my approx 20k invested portfolio was showing a value of about £60k from approx 3 years on the market I thought this is easy....then....the millennium tech crash completely wiped out my tech holdings. I was still at around 30k due in a large part to housebuilders but my £15k of tech stocks were now worth under £1000.

From then on I started using Funds (or investment trusts primarily) and by mid noughties I doubt I had any single companies left. Any such ‘punts’ now are specialist Investment trusts which whilst possibly relatively high risk are still much less risky than individual shares.

arwain

I was recently looking at the ukvalueinvestor web site, some good information on there for someone interested in holding individual shares. I think reading that site makes one realises that if you want to do it properly then there is a lot of work involved in setting up a share portfolio and in on going maintenance of it.

He thinks that it takes at least 8 hours to research a company well enough to decide if you want to buy it or not, and that you need around a 30 company portfolio to be well diversified so that's a lot of hours of work.

He has a model portfolio on his web site that started the 1st of March 2011. To the beginning of this month it has an annualised return of 8.0%. He compares this to a benchmark of the FTSE All share with has a return of 7.3% over the same period.

Now although he has beaten the benchmark to me, I would be more than happy to have bought a FTSE All share tracker and had slightly less return, but virtually no work involved.

I think you have really got to enjoy researching companies and not just be looking to beat market returns if you want to head down the individual stock route. For most people who wish to invest in equities then I think trackers (probably global trackers) are the best choice.

Thrugelmir

abz88 wrote: »

If Berkshire Hathaway's chief stock pickers can't beat and index fund (which will also have a lot smaller fees!), what makes you think you can?

You understand the currency risk involved as an investor I assume?

There are 25,000 listed companies in the USA. Just 500 in the S&P 500. Safe to assume that BH wouldn't be able to buy sufficient stock in the majority to make holding the company worthwhile.

abz88

Thrugelmir wrote: »

You understand the currency risk involved as an investor I assume?

There are 25,000 listed companies in the USA. Just 500 in the S&P 500. Safe to assume that BH wouldn't be able to buy sufficient stock in the majority to make holding the company worthwhile.

Sorry, I am not following your response. I understand currency risk, yes, but what does that have to do with BH top stock pickers failing to match the returns of a low cost tracker fund? (I don't own shares in BH, as my points suggest, my S&S Isa is in index funds)

BH has an annual revenue of around $250billion, and owns various companies including Duracell, Dairy Queen, Fruit of the Loom plus large holdings in Kraft Heinz Company, American Express, Wells Fargo, Coca-Cola Company, Apple, Bank of America etc. There aren't many companies that they can't afford to buy sufficient stock in "to make it worthwhile".

Again, I don't really see what this has to do with my post? My point is that if the top stock pickers in BH (one of, if not the, largest investment companies in the world) failed to match the performance of a tracker fund then what makes an individual investor doing it on the side think they can?

It wasn't a one time occurrence either, Buffet won a $1m bet with Protege Partners that hedge funds wouldn't outperform an S&P index fund. He backed the Vanguard 500 Index Fund Admiral Shares (returned 7.1 percent compounded annually) and Protege picked a selection of hedge funds (average return was 2.2 percent)

Thrugelmir

abz88 wrote: »

Sorry, I am not following your response. I understand currency risk, yes, but what does that have to do with BH top stock pickers failing to match the returns of a low cost tracker fund? (I don't own shares in BH, as my points suggest, my S&S Isa is in index funds)

BH has become so large that it has become the "market". To build a position the act of BH buying shares will move the market. Individual stock makers will be full aware of BH's actions. Whether it be to buy or sell a particular stock. Likewise given the size of BH many companies are simply too small in terms of market capitisation/free float to be of interest.

My point regarding currency risk is that the returns for a UK investor will be somewhat different to that of a US resident investing in the S&P500.

There's a multitude of listed companies to invest in. Which offers a smaller investor opportunities. No need to restrict oneself to tracker funds that cover the highly researched segment of the market.

NikNikol

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abz88

Thrugelmir wrote: »

BH has become so large that it has become the "market". To build a position the act of BH buying shares will move the market. Individual stock makers will be full aware of BH's actions. Whether it be to buy or sell a particular stock. Likewise given the size of BH many companies are simply too small in terms of market capitisation/free float to be of interest.

My point regarding currency risk is that the returns for a UK investor will be somewhat different to that of a US resident investing in the S&P500.

There's a multitude of listed companies to invest in. Which offers a smaller investor opportunities. No need to restrict oneself to tracker funds that cover the highly researched segment of the market.

Thanks for the response and clarification. My point on Buffets bet with the S&P tracker vs stocks wasn't to advise OP to invest in this, but to highlight that index trackers generally outperform even the picks of BH pickers and hedge funds (and not at the levels that would move markets).

Yes, there are multiple companies to invest in, but to do it successfully as a part time side gig is a lot of work to likely result in lower returns than investing in tracker funds (whether UK, Global, US etc). Unless of course it is a hobby, then I fully accept that people enjoy spending their free time picking stocks and investing

sevenhills

quirkydeptless wrote: »

SSE, my first ever share purchase (OK, it was Southern Electricity when I first got it), just so I could have one. Still got my nice paper certificate :cool:. I also bought PowerGen, National Power and got given some free National Grid shares, but all these got sold off. Despite a recent downturn, they have done pretty well for me, even though I may have to end up selling them to Jeremy Corbyn

I bough £900 worth of National Grid shares, they are 8% up at the moment. I certainly wont be voting for Corbyn!


A few months ago I bough £600 worth of I3 Energy PLC, they jumped 50% this week, so I have now sold them for another company in the doldrums Centrica plc.


https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B033F229GBGBXSET1.html