The idea behind our annual Bargain Shares Portfolio is simple. It’s to invest in companies where the true worth of the assets is not reflected in the share price, and where we can reasonably expect that it will be in due course.
Our portfolios are based on the investment ideas of Benjamin Graham (see box ‘Rules of Engagement’) and they have certainly withstood the test of time, beating the FTSE All-Share index in 20 out of the 24 years in which we have run them. During that time, they’ve generated an average return of 21.8 per cent in the first 12-month holding period, compared with an average increase of 4.5 per cent for the FTSE All-Share index.
My 2022 motley crew of Bargain Shares proved no exception, generating a 12-monthly total return of 20 per cent on an offer-to-bid basis and including dividends. By comparison, the FTSE All-Share Total Return index, the index against which we benchmark our annual performance, produced a positive return of 4.4 per cent. It’s worth pointing out that the FTSE Aim All-Share index lost 17.7 per cent of its value over the 12-month period. So the portfolio’s outperformance was even more striking given that the hidden gems we uncover are found among the stock market's under-researched small and micro-cap segment.