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My Approach to Investing

 

Summary

 

My approach has evolved considerably since I launched this site in 2012, though the core principles remain intact. I retain a clear value bias: I want to buy things that are cheap relative to their worth, but I am now far more willing to look beyond the UK and the traditional small- and mid-cap hunting ground that defined the early years of the JIC Portfolio. Today, the three portfolios span UK equities, North American stocks, international funds, and a significant allocation to natural resources. Across the three portfolios, I hold roughly 30 to 40 positions, a mix of individual stocks and investment trusts or ETFs, where I prefer expert management over my own stock-picking.

 

The most important number remains the return of the Portfolios. I try not to get too emotionally attached to individual holdings. If I cut something and it bounces, so be it. All that matters is the return of the Portfolio; each month, each year, each decade.

 

From UK-only to Global

 

For many years, I invested almost exclusively in UK equities. That is where I gained my professional experience and felt I had an edge. That is still true to a degree, but I have become increasingly comfortable investing internationally, particularly in North America, as information has become more accessible and the universe of compelling opportunities has widened.

 

A look at the current portfolio tells the story. Alongside UK holdings such as Serica Energy, IG Group and Bloomsbury Publishing, I hold US-listed names like Venture Global, Howard Hughes Holdings and AST SpaceMobile, as well as a substantial number of Canadian-listed resource companies, including Lundin Mining, Faraday Copper, Montage Gold and NGEx Minerals. I use investment trusts and ETFs, such as iShares STOXX Europe 600 Oil & Gas ETF, L&G Gold Mining, and BlackRock World Mining, to gain thematic exposure without the individual stock risk.

 

I still believe the UK market offers excellent value and is frequently overlooked by global investors. But limiting myself to it would mean missing a great deal.

 

 

A Value Bias — but Not Rigidly So

 

I am a value investor at heart. I look for companies whose shares are trading at a significant discount to what I believe they are worth, whether measured by earnings, assets, cash flow, or some combination of the three. I am patient. I am willing to sit in something cheap and wait for the market to recognise what I think I can see.

 

That said, I no longer apply rigid valuation screens as I once did. I used to insist on a maximum forecast price-to-earnings ratio of 20x and a minimum dividend yield of 2%. Those rules served me well in the world of UK small and mid-cap growth stocks, but the portfolio has evolved, and those criteria would rule out much of what I now own. A Canadian junior miner or a royalty company does not lend itself to a PE-based valuation. An oil tanker company like Frontline is better assessed on a price-to-NAV or through-cycle earnings basis. Context matters.

 

What has not changed is my instinct to ask: what am I paying, and what am I getting for it? I still want to feel that the risk/reward is firmly in my favour before committing capital.

 

 

Themes and Sectors

 

One of the more significant shifts in my approach over the past few years has been a willingness to invest around themes — in particular, natural resources. The portfolio has a meaningful allocation to energy (Serica Energy, Rosebank Industries, International Petroleum Corporation, Frontline, the iShares oil & gas ETF) and to mining and metals (Lundin Mining, Faraday Copper, Montage Gold, NGEx Minerals, Fireweed Metals, Talon Metals, LunR Royalties, Lucara Diamond, BlackRock World Mining, L&G Gold Mining, WisdomTree Agriculture). This reflects my view that commodities are in a long-term structural upcycle driven by the energy transition and chronic underinvestment in supply over the prior decade.

 

I use investment trusts and ETFs to manage risk within these themes, and I diversify across the value chain, from producers to royalty companies to exploration-stage companies, accepting that the latter carry considerably higher risk in exchange for the potential for outsized returns.

 

 

 

Where I Find Ideas

 

A great deal of reading. I subscribe to Stockopedia, ShareScope, Investors Chronicle, Shares Magazine and MoneyWeek. I have added Investing.com and mywallst.com to my toolkit in recent years, both of which I find useful for screening and keeping across a broader international universe.

 

My process has not changed fundamentally. I screen for ideas, looking at valuation metrics, earnings momentum, price strength, and then dismiss most of them quickly if they do not meet my criteria. For those that warrant further investigation, I read recent company announcements, study the accounts, review the charts, and try to understand the competitive position and the quality of management. Where possible, meeting or listening to management remains valuable. I want to understand what makes them tick and, ideally, to see that they have a meaningful stake in the business.

 

Before buying, I ask myself: can I realistically see a 30% total return over the next 12 months, and what does the downside look like if I am wrong?

 

 

Charts Help with Timing

 

Before investing, I always look at a price chart. I use ShareScope for this and have a standard layout I have used for years. I look at the share price using daily OHLC bars alongside 50-day and 200-day moving averages. I note director transactions and where I have previously bought and sold.

 

I like to invest in stocks that are trending upwards and are above their 200-day moving average. The 200 DMA often acts as a support level and, when breached on the downside, it sets alarm bells ringing. If the 50-day moving average crosses the 200-day moving average going upwards, that is often a good signal.

 

I try to avoid falling knives. A stock that looks cheap but keeps making new lows is telling me something. It might meet all my other criteria, but if the market is selling and I cannot see why, I would rather add it to my watch list and wait for the share price to establish a base. John Maynard Keynes put it better than I ever could: "Markets can remain irrational a lot longer than you, and I can remain solvent."

 

 

How Many Stocks Do I Hold?

 

Typically, between 20 and 30 positions in the JIC Portfolio. In total, across the three portfolios, 30-40 positions. The expansion reflects a deliberate use of investment trusts, OEICS and ETFs alongside individual stocks.

 

I am comfortable with this number. It gives me sufficient diversification without diluting the impact of a strong conviction call. My largest individual positions represent those where I have the highest conviction; my smallest are typically higher-risk or more speculative ideas where I want some exposure but am conscious of what can go wrong.

 

 

Position Sizing

 

I no longer use a formal position-sizing framework, though the underlying logic, sizing according to risk and reward, remains in place informally. My largest positions tend to be those with the most compelling combination of attractive valuation, strong fundamentals and price momentum. Smaller positions reflect either higher risk, earlier-stage situations, or cases where I am still forming a view.

 

I try to be honest with myself about where a position sits. If something has re-rated and the upside has narrowed, I should be reducing it, not adding to it. If something is cheap, well-run, and largely overlooked, I should find the courage to back my conviction.

 

 

When Do I Sell?

 

In many ways, this is harder than deciding when to buy. I rarely sell exactly at the top; nobody does, but a stop loss means I get out once a trend appears to have changed, protecting the gains I have made.

 

If a company issues a profit warning, I tend to sell quickly. Experience has taught me that management rarely communicates how serious the situation is at the first warning. The old saying holds: profit warnings come in threes.

 

I also sell when the valuation no longer looks as attractive, when I have made a decent return, and the upside has narrowed, particularly if I have a more compelling opportunity to redeploy the capital. And I sell to manage concentration: if a position has grown to a size that makes me uncomfortable relative to the rest of the portfolio, I trim it.

 

The discipline that matters most is being willing to cut losses. We are all naturally inclined to hold losers, because selling them means admitting we were wrong. Warren Buffett's instruction to "cut your weeds and water your flowers" sounds obvious. It is not always easy in practice.

 

 

Investment Trusts and Funds

 

I have long favoured investment trusts for several structural reasons: you can often buy them at a discount to NAV; their cost structures tend to be lower than open-ended funds; and the manager is not forced to sell assets in a falling market to meet redemptions.

 

I use them for two main purposes. First, for geographic or sector exposure where I do not have the expertise or time to pick individual stocks, BH Macro and the YFS Argonaut funds for macro and absolute-return exposure, Pershing Square for its concentrated value approach, and Ranmore Global for international value. Second, for thematic exposure to natural resources, CQS Natural Resources, BlackRock World Mining, L&G Gold Mining, and WisdomTree Agriculture, where individual stock risk can be high, and diversification across the sector makes more sense.

 

 

Discipline

 

Discipline matters as much as any stock-picking skill. The discipline not to buy something simply because the story sounds compelling if it does not meet my criteria. The discipline to ignore noise, the constant stream of market commentary, social media opinion and short-term price movements that can push you into acting on impulse rather than judgement. The discipline to cut losing positions without letting pride get in the way. And the discipline to stay patient when the market has not yet caught up with what you can see.

 

I have not always been as disciplined as I should be. But I keep trying.