After a couple of months of inactivity for the DIY Income Investor portfolio there has been some movement. 2017 has proven to be a very slow year so far, in terms of performance, and I am mainly just sitting tight waiting for the tide to change.
But one of my 'sell' rules has just clicked into action, so I have cleared out a non-performer.
The DIY Income Investor approach is built around human bias. It may appear simplistic but it has worked pretty consistently over the last 10 years or so - to the point where I have to pinch myself sometimes to make sure I'm not dreaming. (As an aside, I noticed today that one of my accounts is showing a mis-priced security, valuing it at £2.4 million (!); out of curiosity I tried to sell it - but no luck there...).
One of the quirks of the system, which would be frowned upon by many hard-nosed investors, is holding on to 'losers' until the price recovers. I hasten to add that I only (usually) do this if a) there is an income stream and b) there is a reasonable expectation that the company is sustainable. I then sell when I can cover my initial capital outlay. (Many investors would highlight this as falling for the 'sunk costs' fallacy - so be it.)
One of my 'losers' (I have a couple!) was Huntsworth (LSE:HNT), a PR firm (when will I learn!) - which I reviewed in a post in April 2017. It has recently shown some marked price improvement - to the point where I was able to sell out and recover the cost price. I had held chunks of this since 2013 and 2014, so I was very glad to finally get it off my hands. The yield has now dropped to under 4% - the point where I lose interest. Other investors may see it differently and expect that the management have actually got their act together and will achieve great things. Maybe - but now I'm going to look for something else.
[Sale price: £0.499]
I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.
Hi DIY,
ReplyDeleteKnowing when to sell something is always a very tricky one - at least you have a clear rule to help - but if the money can be better employed elsewhere then why not take the hit. I've held on to all of my losses (except the ones that went on to go bust completely - Northern Rock amongst them!), and originally when they just turned the corner I sold them, more recently I have hung on but then I had different reasons for buying!
I wait to see what the money is reinvested in!
Cheers,
FiL