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OPINION

Kerry Balenthiran's ValuableGrowth Update

Kerry Balenthiran's ValuableGrowth Update
February 20, 2014
Kerry Balenthiran's ValuableGrowth Update

Even though I didn’t start buying until July 2013, and wasn’t fully invested until October 2013, I still managed to earn a respectable 12.1% (excluding the Market Vectors Junior Gold Miner ETF - GDXJ) from my share picks (which I have been describing here on the Chronic Investor blog). This is not far off the FTSE All-Share index which increased by 16.7% and being invested for only half the time means I was exposed to half the equity risk over the year. However my total gain for 2013 including GDXJ was a less impressive 3.1%.

AssetDate BoughtPrice £QuantityCost £ (inc commission & stamp duty)Price on 31/12/13Value £Gain %
Amerisur Resources (AMER)24/06/20130.3950691,999.740.63,016.0650.80%
Tasty (TAST)22/07/20130.8622991,999.981.242,839.2742.00%
SciSys (SSY)24/07/20130.69528281,988.290.671,894.76-4.70%
Advance Computer Software (ASW)10/09/20130.873522631,999.561.042359.1818.00%
Space and People (SAL)14/10/20131.0818301,999.231.372,507.1025.40%
Polar Capital Holdings (POLR)28/10/20135.053911,996.594.91,916.88-4.00%
Barratt Developments (BDEV)28/10/20133.3565891,999.513.492,055.613.49%
SOCO International (SIA)28/10/20133.99454941,996.103.951,952.29-2.20%
Regus (RGU)30/10/20132.05069661,999.032.162,082.704.20%
Augean (AUG)11/11/20130.4444931,999.750.462,066.783.40%
Market Vectors Junior Gold Miners (GDXJ)12/11/2013$35.0545010,147$31.058,468.18-16.50%
HML Holdings (HMLH)11/12/20130.36554161,999.670.361,949.76-2.50%
Total32124.3633108.553.10%

I am encouraged by the performance of my ValuableGrowth share picks and believe that they will continue to outperform over a full year period, however it is clear that the Market Vectors Junior Gold Miner ETF does not conform to my value/growth methodology and was a significant drain on performance last year. I therefore made a New Year's resolution to exit this position at my first target and reinvest this in UK stocks. My target was $44 and the opportunity came on Valentine’s Day and I sold this holding for a 27% profit in dollar terms. Unfortunately, the strengthening pound has negated some of that gain, but nonetheless I am happy to turn that year end paper loss into a reasonable profit in a short period of time. Although I think the gold downtrend has finished and an uptrend has begun, I think there will be better opportunities in UK equities, particularly small caps, over the next 18 months (plus the volatility is too much for me).

The ValuableGrowth portfolio currently looks like this:

AssetDate BoughtPrice £QuantityCost £ (inc commission & stamp duty)Price on 14/2/13Value £Gain %
Amerisur Resources (AMER)24/06/20130.3950691,999.740.552920.7646.10%
Tasty (TAST)22/07/20130.8622991,999.981.152,632.3631.60%
SciSys (SSY)24/07/20130.69528281,988.290.762,163.428.80%
Advance Computer Software (ASW)10/09/20130.873522631,999.561.152,537.2826.90%
Space and People (SAL)14/10/20131.0818301,999.231.482,708.4035.50%
Polar Capital Holdings (POLR)28/10/20135.053911,996.594.881,895.37-5.10%
Barratt Developments (BDEV)28/10/20133.3565891,999.514.092,386.9219.40%
SOCO International (SIA)28/10/20133.99454941,996.104.292,149.647.70%
Regus (RGU)30/10/20132.05069661,999.032.162,059.513.00%
Augean (AUG)11/11/20130.4444931,999.750.442,059.51-2.30%
Market Vectors Junior Gold Miners (GDXJ)12/11/2013$35.0545010147 $44.52 (Sold 14/2/14)11,920.89 (after all costs)17.50%
HML Holdings (HMLH)11/12/20130.36554161,999.670.321,678.96-16.00%
Total32124.3636998.0415.15%

As you can see, there was a big percentage increase in the ValuableGrowth portfolio in the first six weeks of the year, virtually all of it attributable to GDXJ which is up 41.8% in the same period, driven by a stable and now firming gold price. Whilst GDXJ probably has further to go, having fallen over 80% in 2013, I am happy to bank that profit and now have almost £12,000 to reinvest in UK equities. I have identified a few stocks which are on my watch-list, but I am waiting for prices to drop a bit before I buy.

Kerry Balenthiran is the author of “The 17.6 Year Stock Market Cycle, Connecting the Panics of 1929, 1987, 2000 and 2007”.

Disclaimer: Kerry Balenthiran owns shares in all of the other shares mentioned in this article.