5 Years Of Ethical Investing For Fun And Profit
Part of my process is to periodically take a look at my overall performance once a year (or two). The purpose is to hold myself accountable, and the other part is to force myself to try to think about lessons I’m learning, along the way. I use Sharesight to keep track of performance (and do my tax). This is convenient because many of my readers also use this software, so you can follow along at home!
Without further ado, here’s my overall ASX portfolio performance.
The 37.63% figure is capital weighted annualised compound returns. Here is the Sharesight methodology.
The first thing to note is that recent performance has been strong, thanks in large part to the fact the the Pro Medicus (ASX:PME) share price has run so hard. This stock is my largest holding and you can see how, from mid 2016, I underperformed the market for a while. This was due largely to the fact that the Pro Medicus share price dropped after a strong run -- I anticipate near term underperformance for the same reason. As the CEO says, the share price has arguably gotten ahead of itself.
My worst listed investment was the wipe-out on New Solar Options (Class A) ASX:NEWOA, which scored me a handy -93.75%.
The second worst was -83.5% Jayex Healthcare (ASX:JHL), chaired by Michael Boyd. I will never invest in a company he is associated with, ever again.
Skip a few to the most embarrassing result of all time; my decision to sell Touchcorp (ASX:TCH), now Afterpay Touch (ASX:APT). This is by far the worst (investing) mistake I’ve ever made, for two reasons.
First, I sold the company for a loss of about 40%, and then it went on to merge with Afterpay, and multibag.
Second, worse, I also told other people to sell the stock, thus taking them with me on my worst mistake. It makes my heart a bit heavy to think about it, but I’m heartened by the kind words I have received over the years, resultant from wiser decisions.
To delve in to the error here, my problem was that I neither appreciated the potential (or likelihood of success) for Afterpay, nor did I trust the Touchcorp board to realise the value of the Afterpay shares they owned. Ultimately, like so many decisions as an investor, we make judgements about what people are going to do. I underestimated those people, which was a real mistake. There was enough alignment with the board that one could reasonably conclude that the incentives were there for the company to do the right thing. Although the results had been disappointing (and short of expectations set by the company) the stock was undervalued -- and I essentially made it more so by telling people to sell. The silver lining was that a fund we invest in bought shares in it, and has outperformed strongly.
Here’s a list of my top 15 losers (by absolute loss, not percentage) over the last 5 years, so you can marvel at my foolishness.
On to brighter subjects, here’s my top 15 winners over the last 5 years, also by absolute value. I think it’s more interesting to look at absolute gain or loss, because it takes into account position sizing.
Evidently, it's been a rewarding journey overall, but I've endured long periods of underperformance, and I've made many mistakes. The number one cause of bad decisions, for me, is making a decision too impulsively. As a general rule, it is much better if I am in a calm mindset before making a decision. Having said that there secondary cause of bad decisions is lack of animation -- not acting when I should. For example, I could have bought back in to Touchcorp when I realised I was wrong to Sell, rather than anchor to my incorrect decision until I was comprehensively proved wrong. Equally I could have sold Catapult (ASX:CAT) at higher prices when the founders were selling.
I would love to hear what you think of my mistakes and victories, as well as any of your own lessons from the last 5 years. So please sign up to the forums and let me know what you think!
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Disclosure: Claude Walker owns shares in PME, GTK, VHT, BAL, MNF, KME, NEA, NEWOA and MUA. This article contains general investment advice only (under AFSL 501223). Authorised by Claude Walker.