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OLTB's Small-cap Portfolio

A helpful place to also put any annual reports etc, of your own portfolios
OLTB
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OLTB's Small-cap Portfolio

#198724

Postby OLTB » February 4th, 2019, 9:52 am

Morning all

I thought I would start a separate portfolio for a number of small cap stocks that I've selected following my most recent purchase this morning of Oxford Metrics plc (OMG). These really are punts, but reading various posts recently, I can see that if you have the cojones to hold on, and manage sensibly, this is where the big bucks (and losses!) can be made.

OMG are in the techie world (which is what I wanted) with two diverse income streams from their businesses Yotta and Vicon. The businesses are involved in infrastructure asset management and motion measurement (local authority road network management and Hollywood visual effects!). A good growth vision (aren't they all...) and importantly, no debt.

Anyway, these small cap stocks will be for my retirement travelling plans, so it's either Bali or Bognor.

The portfolio is as follows and I shall be limiting the small cap exposure to 5% of my overall SIPP (I'm no where near that at the moment):



Fingers crossed and I'll update with the other portfolios in August (and I will unitise!)

Cheers, OLTB.

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Re: OLTB's Small-cap Portfolio

#199115

Postby monabri » February 5th, 2019, 5:41 pm

Small Caps is one area that I've not really had the nerve to go a hunting. After some thought I wondered if there was anything in the Vanguard or iShares stable which would allow collective (risk spreading) investment.

From iShares (I didn't search too hard in the Vanguard funds, to be honest)

I was attracted to CUKS with it's currency in GBP (and an accumulating fund) but put off by the unit price (>£200 per share) !



I'm not confident enough to cherry pick individual stocks (danger of poor governance - Conviviality, Cake, etc).

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Re: OLTB's Small-cap Portfolio

#199122

Postby tjh290633 » February 5th, 2019, 6:12 pm

I had a holding back in the 1990s in Save & Prosper Smaller Companies Income Fund. In December 1996 it got amalgamated with S&P UK Smaller Companies Fund, which had a lower yield. The income from S&P SCI was £83 in 1996. After amalgamation it was £30 in 1998, £15 in 1999, £6 in 2000, and nil in 2001. I got fed up with them in 2007 and transfered the cash into my main PEP (as then was). The IRR from 1994 to 2007 was 12.7%, compared with 6.8% from its companion Equity Income Fund, both by then part of the JP Morgan Fleming Stable. The capital increased from £2,000 to over £11,000 with all income and tax credits reinvested.

It would have been better had they stuck to their original last. The problem was probably the availability of smaller companies with an adequate yield.

TJH

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Re: OLTB's Small-cap Portfolio

#199126

Postby Backache » February 5th, 2019, 6:42 pm

monabri wrote:Small Caps is one area that I've not really had the nerve to go a hunting. After some thought I wondered if there was anything in the Vanguard or iShares stable which would allow collective (risk spreading) investment.

From iShares (I didn't search too hard in the Vanguard funds, to be honest)

There is a Vanguard Global Small Cap Index fund , if you prefer it to an ETF that tracks the MSCI World Small cap Index and has an annual charge of 0.38%

https://www.vanguardinvestor.co.uk/inve ... ion-shares

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Re: OLTB's Small-cap Portfolio

#199143

Postby Lootman » February 5th, 2019, 7:53 pm

Backache wrote:
monabri wrote:Small Caps is one area that I've not really had the nerve to go a hunting. After some thought I wondered if there was anything in the Vanguard or iShares stable which would allow collective (risk spreading) investment.

From iShares (I didn't search too hard in the Vanguard funds, to be honest)

There is a Vanguard Global Small Cap Index fund , if you prefer it to an ETF that tracks the MSCI World Small cap Index and has an annual charge of 0.38%

I think it depends why you invest in small caps. If your aim is a general exposure to that segment of the market then a fund is the way to go, and probably an index fund if fund expenses bother you as global small-cap is an expensive area to invest in.

But part of the appeal of small caps is the thrill of capturing a ten-bagger. Not that I think you should make a farm bet on a single share either (unless you have inside information). But rather a portfolio of 10 or 15 small caps gives you a decent chance of one big winner. And if a couple of others go by the wayside then it won't matter so much.

My best small cap investment was sold when it had increased 25-fold.

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Re: OLTB's Small-cap Portfolio

#199177

Postby Backache » February 5th, 2019, 10:09 pm

Lootman wrote:I think it depends why you invest in small caps. If your aim is a general exposure to that segment of the market then a fund is the way to go, and probably an index fund if fund expenses bother you as global small-cap is an expensive area to invest in.

But part of the appeal of small caps is the thrill of capturing a ten-bagger. Not that I think you should make a farm bet on a single share either (unless you have inside information). But rather a portfolio of 10 or 15 small caps gives you a decent chance of one big winner. And if a couple of others go by the wayside then it won't matter so much.

My best small cap investment was sold when it had increased 25-fold.

I agree with that but you probably can have both.
1) A generalized small cap exposure to hopefully boost portfolio return and 2) What you identify as a bit of potential excitement of the lottery ticket with hopefully slightly better odds.

OLTB
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Re: OLTB's Small-cap Portfolio

#199319

Postby OLTB » February 6th, 2019, 2:36 pm

Thanks all - these four companies are very much a lottery ticket for me and as stated, will be used for my retirement 'special' holiday and how they perform determines where I end up! I will keep an eye on them though, trimming when required (after following the excellent advice in the book 'The Art of Execution' by Lee Freeman-Shor).

I also have a range of these small cap ITs/etfs as I see these as being potential growth areas until I get to retirement in about 13/14 years' time with their corresponding percentage allocation:

ITs
BlackRock Throgmorton (THRG) 4.5%
Edinburgh Worldwide (EWI) 3.5%
Henderson Smaller Co's (HSL) 4.0%
Herald IT (HRI) 5.0%
JPMorgan Japan Smaller Co's (JPS) 4.5%
Montanaro UK Smaller Co's (MTU) 4.0%
Oryx International Growth (OIG) 3.5%
Standard Life UK Smaller Co's (SLS) 3.0%

ETFs
MSCI Emerging Markets Small Cap (IEMS) 4%
SSGA MSCI World Small Cap (WOSC) 12%

Cheers, OLTB.

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Re: OLTB's Small-cap Portfolio

#200081

Postby BasketCase » February 9th, 2019, 9:29 am

Hi OLTB,

Good to read your post and see some similarities with my approach. My SIPP is divided into a number of different baskets, which I intend to use for 5-10 years (am in my mid 40s currently) and then evaluate on a basket by basket basis to see if they are delivering what I want, as a basket, from them within the overall SIPP portfolio context.

Within the UK baskets, I have one that is a proxy for an HYP, one that is aimed at income (from ITs and ETFs), one that is focused on individual small caps and one that uses ETFs and ITs to "benefit" from a small - medium cap focus.

In case it's of interest/helpful to someone, this is simply because I want to over-weight the entire portfolio (compared to UK, global and emerging benchmarks) to both income and small cap given the number of studies that have shown the benefits of both over long-term periods. This is not the same as betting the farm on either as the basket weightings for income and smaller companies are not that substantial. I then keep an eye on whether the total income generated, and capital return, is more than benchmarks.

So the small cap basket using ETFs and ITs has Aberforth Smaller Companies, Blackrock Smaller Companies, Henderson Smaller Companies and the Vanguard Funds FTSE 250 ETF. The concept being I want to capture the theme, but don't want to risk being dependent on one manager and am happy to take the additional cost (time and purchase costs) of having four "funds" for the basket. When the basket is underweight and needs additional funds, I can then add to the particular ETF/IT that is most attractive at the time.

The growth basket with individual smaller companies is a mix of two approaches.

The first looking for smaller companies with low debt (or preferably cash on the balance sheet), good yields, growing dividends, attractive valuation metrics, good return on capital (so they can reinvest in their growth plans) and good growth prospects (even if I have to accept some cyclical risk) - two current examples being Somero (forward yield of 6.1%) and Ramsdens (forward yield of 4.4%).

The 2nd theme being more growth focused small caps where the driver is strong return on capital and a business model that should (could!) have legs for some time as it is supported by long-term drivers and good technology. Examples currently include Gamma Communications, SimplyBiz and OnTheBeach. These are all on higher ratings, but are not the momentum-type plays that some go for (and scare me too much given the potential capital loss if you ignore valuation completely). With this theme I do not worry about the yield whatsoever.

The point is that I do think, with the first theme, it is possible to construct a small portfolio of individual shares that give a rising growing dividend income (as a sub-basket) and that have attractive fundamentals (including low/no debt). Individually they are all far more risky than an HYP, but together they can do an income job. In saying this, it is more difficult as you have to keep a close eye on them and, if you are also interested in the capital value of these small caps, I think you can't leave them be as you might for an HYP. This has led in the autumn of last year to me clearing out a number of these so, to be fair, I don't have sufficient nos of shares to spread the risk sufficiently (once I am more comfortable with the market conditions, I will address this).

For the global and emerging market allocations, for both income and small cap baskets, mine only have ETFs and ITs (would not buy an individual company in one of these regions, unless, like Somero from America, they are quoted in the UK).

Anyway, I have enjoyed reading others' posts for some time and thought by posting something in addition showing that there are other portfolio approaches out there and that can overweight both income and smaller caps, it may encourage others to share views on how they approach their portfolio management and construction.

Thanks again OLTB and others.

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Re: OLTB's Small-cap Portfolio

#201106

Postby Bouleversee » February 13th, 2019, 4:40 pm

Lootman said:

"My best small cap investment was sold when it had increased 25-fold."

Am curious to know what that was. Do tell, please. Also why you sold the lot at one fell swoop.

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Re: OLTB's Small-cap Portfolio

#201732

Postby Shelford » February 16th, 2019, 10:25 am

An interesting thread.

Small caps should be part of anyone’s portfolio. Depending on your risk profile and where you are in your investment journey, I would probably not want more than 10-15% of an equity portfolio in such as they are higher risk. A way to sooth the nerves on volatility is to drip feed over time.

The list of ITs that you have is a good one. I don’t think however it is wise to have so many. With 8-10 ITs there will both be duplication, as well as in aggregate several hundred companies invested. If so, all you have done is create an index hugger with fees at least double the all world etf proposed by another.

In short, agree 100% that you should invest a chunk of your equity portfolio in small caps, particularly if you have long term goals (+10 years). But it is imho 100% wrong to do it with a large basket of duplicating and expensive ITs.

OLTB
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Re: OLTB's Small-cap Portfolio

#218691

Postby OLTB » May 1st, 2019, 11:58 am

Just added Hurricane Energy (HUR) yesterday to the above small cap portfolio at a price of £0.4695 per share.

I'm enjoying 'dabbling' in the small caps even though I've nothing substantial to show for it yet - there won't be any 'farm bets', just little trickles and hopefully one of them may pay off.

Cheers, OLTB.

OLTB
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Re: OLTB's Small-cap Portfolio

#227738

Postby OLTB » June 7th, 2019, 11:55 am

Morning all - I've dabbled a bit more and just bought Starcom plc (STAR) into the smallcap portfolio fold. This is a real punt and may or may not come off - they have a relatively new deal with Bosch and AGM later this month will hopefully be positive. Portfolio now looks like this:



Performance wise:

FireAngel: +67.51%
Oxford Metrics Group: +15.19%
1pm: -9.53%
Hurricane Energy: +21.70%
Starcom: n/a
Tarsus: +57.71% (takeover announced and shares will be exchanged for cash)

Cheers, OLTB.


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