Chris and Clem Meet Up #18
"Chris a young engineer and Clem an "old" hand meet up regularly (every two/three weeks) for a few beers and a chat - mostly about Chris' retirement savings.
Chris' late Dad was a good friend of Clem's - that's how the two came to know each other.
These regular meetings started purely by chance. Chris just happened to mention that he was living beyond his means and his financial prospects did not look good.
Clem knew exactly what the solution was for Chris and set about giving Chris some sound advice. Clem was not a financial advisor but had spent a lot of time amongst people that were financial experts. He wanted to share his knowledge with Chris.
This is the 18th. article in that series.
The story continues ...
"Thank goodness" said Chris, "we're finally beginning to see the light at the end of the tunnel.
"Let's hope it's not another train coming!
"But with the massive success of the vaccine programme - the end is in sight."
"And being able to meet up - even if it is only outdoors, for now - is a big step.
"I went into town after work on Monday and the beer gardens were chocca. It felt great to be able to get back to the real world."
"How has your portfolio performed since we last spoke?" interrupted Clem
"The overall profit of my portfolio has increased - yet again." replied Chris. "The total percentage increase being 38%
"And I have done what I said I would do last time we spoke, and that is that I've diligently gone through my watchlist and whittled the list down to just FOUR companies. But more on that a little later."
"Chris' Own Share Selections"
"As I said,my overall portfolio has increased by 38%. There are no losses. And the biggest individual gain is ITV with a hopping 105% increase. And, I expect more.
"Most of my selections have increased around 50% with only Morrisons and Glaxo letting the side down with single digit gains.
"Clem - just take a look at my portfolio as of close of play today. I'm showing £11,765.5 profit which equates to almost 38%. And I've only being doing this for about eight months."
"You have taken on board everything that I've told you and, together with a recovering market have done exceptionally well. A couple of your early picks would not pass muster in your 'today' criteria and maybe you should think about those.
"But you have done incredibly well and now it's time for you to stick to your principles and trim your portfolio - albeit - ever-so slightly."
"That's great advice Clem" said Chris. "You've never been wrong with your advice and I'll take it again now.
"In fact, I was considering taking profits on a couple of the holdings. Countryside Properties, for example, when I bought them, they showed good profits for the past few years but their last results - maybe as a result of Covid - went into reverse.
"That would eliminate them from my list. But of course, I already acquired them. And they have increased in value by 40%. but they no longer fit my criteria, so I will take my profit. Just over £1500. Not too shabby!
"When I have identified a new company to invest in, or increase a holding in one I already have, I shall need to raise funds from somewhere.
"Below, I reveal the four companies from my watchlist that still fit my exacting criteria. Unforrtunately, none of them are 'cheap' enough for me to invest in. All their Price Earnings are on the high side. And in this 'booming' market, don't like coming any cheaper.
"I like your principles" Clem butted in. "You are right and you are wrong. Sometimes you have to make a judgement call and take the plunge. Don't be too pragmatic but don't trade just for the sake of it.
"For example, if your chosen shares are too expensive - make a decision. Are they still worth buying or should you look elsewhere. And elsewhere might easily be your existing holdings.
"A lot of amateur investors buy more shares when their existing holdings are falling. They think they are averaging the price out. It makes a lot more sense to buy more shares if your original holdings are RISING.
"And you, my dear friend, are in this position. By all means invest in a new company if you've done your homework, but take a look at your existing portfolio as well.
"Remember what Warren Buffett says: 'Over a lifetime you may on;y have to research 20-30 companies.
"Are those wise words or what?"
"I do get all of that" replied Chris "and I'll prove it to you in the near and distant future that I have taken all of yours, and Mr. Buffett's advice on board"
"Good" said Clem, "now, which companies have you whittled down from your Watchlist?"
"You may recall, Clem, that my watchlist was quite long the last time we met.
"Well, since then I have done quite a bit of research on each of those companies - and, yes, it did take me some time"
"There were some really good companies on that list - the likes of Rentokil, Legal and General, Imperial Brands, IG Group, Premier Foods, and others, but in some small way they just didn't get past my screening.
"However, FOUR companies did pass the test.
"Can we have a drum roll please ....
"Here are the four companies, together with their closing price of today and their current Price Earnings:
"Telecom Plus: a long time favourite of mine. Superbly run company. Closed at 1282p but on a P/E of mid twenties. Too expensive in my view, but at some point, they are a definite BUY. I may take the plunge even at this rating but would much prefer to get in at a P/E a lot lower.
"Next came Bunzl: a 'hefty' price tag of 2443p but a fairly realistic P/E of 15. I'm watching this one very closely.
"Next up: Hargreaves Lansdown: these are the people who are the biggest providers of SIPPs in the UK. Their current price is 1665p with a pricey P/E of 28.
"And finally, another old favourite of mine: Hilton Foods. closed today at 1212p and on a P/E of 21
"There were a LOT of companies on my list that came 'close' to qualifying, but either a dip in earnings, or revenue, or profit excluded them. According to our hero Warren Buffett, a true Consumer Monopoly type business will prosper in good times and bad.
"I think it's fair to say that Covid has sorted out the 'men from the boys'.
"Quite a few of thosee compaies on my list would have qualified were it not for losses made due to Covid.
"Over the next few years, I'd like to think that new companies will fall into my criteria, but in the short term - I think I have a nucleus of companies to invest in.
"Besides, I am only contributing £1,000 per month - which is good, but it limits my share purchases to around once every three months - if that.
"And one more more thing Clem"
"Don't be surprised if I do some trades between now and when we next meet up. I was going to to swap Morrisons for Tesco until Tesco came out with reduced profits for the year.
"What a surprise that was. All down to the cost of Covid - having to employ more staff and the expense of putting in place restrictions.
"So it looks like I'll be sticking with Morrisons for now. Time will tell."
"Let's meet up in three weeks" said Clem rather more seriously.
"It won't be long now before we can meet like we used to in the 'old' days. Pre-lockdown that is" said Chris.
"Yeah" agreed Clem, "Maybe by our next meet-up we can actually be inside the pub - although this meeting in the beer garden is pretty good - weather permitting "
"That's it then - 7th. May - see you then.
Disclaimer: Any individual shares discussed on this website are NOT recommendations. They may, however, be the actual portfolio of the writer.
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