I strongly believe that it pays to run winners until the rationale for making the original investment no longer holds, or the valuation becomes so stretched that the balance of risk-to-reward becomes unfavourable.
This explains why many companies I follow have produced substantial shareholder returns, a reflection of the compounding effect of recycling profits into businesses producing decent returns on capital. Moreover, as more investors recognise the track record of management, then previously below the radar companies become more main stream.
This is certainly the case of BP Marsh & Partners (BPM: 325p), an Aim-traded insurance sector investment company that has produced a 304 per cent total return (including dividends of 30.78p) since I first suggested buying the shares, at 88p ('Hyper value small-cap buy', 22 Jan 2012). The near 16 per cent annualised gain reflects the success of BP Marsh’s investment team in backing smart entrepreneurial management teams of start-up ventures.