My Approach to Investing
Summary
I focus my efforts on small and mid-sized companies searching for those where the growth prospects are not reflected in the share price. I am disciplined about the valuation I am prepared to pay; I don’t like to pay over 20x forecast earnings and favour companies that are paying a growing dividend and have a prospective dividend yield of at least 2.0%. I search for companies generating strong cash flow and if not having net cash, then debt levels that is low to moderate. Where possible I like to meet management and understand what makes them tick and if they have a decent stake in the business so much the better; our interests are aligned! I like companies that are beating expectations and earnings forecasts are being upgraded. Ultimately I am looking for the “double whammy” that comes from a re-rating and from faster than expected earnings growth. Having found a potential investment I look at the share price chart as it can help with timing; so often resistance and support levels work. I size a position based on my assessment of the potential Risk and Reward of the stock. I hold between 20 and 30 holdings, making use of investment trusts for overseas or thematic exposure.
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The most important number to me is the return of the Portfolio! I try not to get too emotionally involved with individual companies; if I cut a holding and it immediately bounces, so be it. All that matters is the return of the Portfolio, each month, each year, each decade!
I invest principally in the UK
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I invest mainly in UK stocks as that is where I have gained my experience. There are clearly opportunities to invest in overseas companies, and it is fair to say that it is now much easier to get the information you need. I think that for a private investor, such as myself, with limited time resources, it is better not to spread my net too wide. For me, it makes sense to focus my efforts on a market where I have experience and familiarity.
I focus on mid and small-sized companies
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I focus on mid and small-sized companies but not exclusively.
The FTSE 100 Index comprises the largest 100 companies and by value accounts for around 70% of the UK market, The FTSE 250, (the next 250 companies) accounts for about 25% of the market by value, and the FTSE Small Cap, FTSE Fledgling and FTSE AIM, the remainder.
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The table below shows the percentage returns over 1, 3, 5, and 10 years to 31st December 2020
My Approach to Investing
Summary
I focus my efforts on small and mid-sized companies searching for those where the growth prospects are not reflected in the share price. I am disciplined about the valuation I am prepared to pay; I don’t like to pay over 20x forecast earnings and favour companies that are paying a growing dividend and have a prospective dividend yield of at least 2.0%. I search for companies generating strong cash flow and if not having net cash, then debt levels that is low to moderate. Where possible I like to meet management and understand what makes them tick and if they have a decent stake in the business so much the better; our interests are aligned! I like companies that are beating expectations and earnings forecasts are being upgraded. Ultimately I am looking for the “double whammy” that comes from a re-rating and from faster than expected earnings growth. Having found a potential investment I look at the share price chart as it can help with timing; so often resistance and support levels work. I size a position based on my assessment of the potential Risk and Reward of the stock. I hold between 20 and 30 holdings, making use of investment trusts for overseas or thematic exposure.
​
The most important number to me is the return of the Portfolio! I try not to get too emotionally involved with individual companies; if I cut a holding and it immediately bounces, so be it. All that matters is the return of the Portfolio, each month, each year, each decade!
I invest principally in the UK
​
I invest mainly in UK stocks as that is where I have gained my experience. There are clearly opportunities to invest in overseas companies, and it is fair to say that it is now much easier to get the information you need. I think that for a private investor, such as myself, with limited time resources, it is better not to spread my net too wide. For me, it makes sense to focus my efforts on a market where I have experience and familiarity.
I focus on mid and small-sized companies
​
I focus on mid and small-sized companies but not exclusively.
The FTSE 100 Index comprises the largest 100 companies and by value accounts for around 70% of the UK market, The FTSE 250, (the next 250 companies) accounts for about 25% of the market by value, and the FTSE Small Cap, FTSE Fledgling and FTSE AIM, the remainder.
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The table below shows the percentage returns over 1, 3, 5, and 10 years to 31st December 2020
ABOUT ME
I launched this website in January 2012 so that I could share with other investors how I manage my investment portfolio; the JIC Portfolio.
There is complete transparency with the current portfolio and all transactions shown. I explain all trades through my blog and hope the site provides food for thought to more experienced investors as well as helping those who are new to managing their own portfolios. I believe JohnsInvestmentChronicle is unique: There are plenty of “tipsters” who will remind you of the “good ones” and quietly forget the disasters; I do not have that luxury as the Portfolio is there for all to see, backed with real money; mine! I have to confront my mistakes and deal with them; there is no hiding place! Above all, this is a true expose of the trials and tribulations of a private investor!
FAQ's
Q. Which investment software do you use?
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A. I have used ShareScope for over six years and do not know what I would do without it. It has definitely helped me make money. I think it is brilliant for tracking your investments (you can set up numerous portfolios) and for finding new ideas. The charting capabilities are excellent and it calculates all your capital gains and presents them in an easy to use format.
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If you apply through me you receive the first two months free and I get one free month! If you are interested in this offer click on the link below
Q. In your blog you often show a price chart, please could you explain what all the lines are and how you use them?
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I do look at charts but only to try and help me with my timing on buying and selling. First of all I have to be happy with the fundamentals; in particular the growth and valuation of the company. Only after deciding that it looks like an attractive investment will I look at the chart to decide whether to buy or wait!
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The following is my standard chart which I have set up on ShareScope.
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Regenersis
I use candles for the share price. It shows the price range during the day and the closing price. The candles are shaded blue for up days and red for down.
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I use four moving averages; 6 day (blue line), 21 day (red), 50 day (green) and 200 day (black).
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The geen “b’s” along the top of the chart are directors buying. With ShareScope, if you hovver over the “b” a pop up box will tell you the size and price of director buying. With Regenersis it was good to see chunky buying at the end of September after the share price had moved up following its results!
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The letters along the bottom are “R” for results, “X” for ex-dividend and “D” for dividend pay date.
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The “B’s” and “S’s” on the candle sticks are when I bought and sold. On ShareScope if you hovver over them with your mouse it gives the trade details; how many shares, price and value.
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The first observation I would make is that virtually every holding of mine has a share price above its 200 dma. I like to be invested in stocks that are performing well (have a nice trend) and are above its 200 dma.The 200 dma can often act as support and as a buying opportunity. If the share price drops through it that would set alarm bells ringing. If the 50 dma crosses the 200 dma going upwards it can be a good sign to buy and vice versa. The shorter term 6 and 21 day moving averages can be useful for short term timing.
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The yellow shaded area is a “Donchian” Channel. The boundaries are the 21 day closing high and the 21 day closing low. In the example above taken on 5th December 2013 you can see that the lowest closing price in the last 21 days for Regenersis was 265p and the highest end of day price was 360p, achieved on Friday 29th November. As each day passes the chart will adjust if there is a new high or low level in the last 21 days. I use 21 days because it is roughly a trading month and if the channel starts to drift downwards it prompts me to at least question whether the trend has changed. The bottom of the channel often acts as support and you can see three times in the last year I have added at the bottom of the channel. In May I reduced my holding slightly as I was slightly concerned that the upward momentum was waining; the 6 dma had moved down through the 21 dma and indeed the 50 dma so I decided to take some profits and watch. The stock tracked sideways for four months but support at the bottom of the Donchian Channel held pretty well. In early September I was aware that it was due to issue its full year results later that month which might stoke up some interest in the stock again. The stock had behaved pretty well over the summer whilst clearly in a consolidation phase. I still liked the fundamentals, It felt like the upward trend might resume, the shares were right on support at the bottom of the Donchian Channel and the 6 dma was moving up through the 21 dma, so I bought back the shares I had sold and a few more.
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What would have concerned me would have been if the 200 dma (black) had not acted as support. As it is, it did not really get that close and therefore in this case was not an issue.
Two further examples below.
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easyJet
Berkeley Group
Both easyJet and Berkeley Group are good examples of where the 200 dma acted as support and represented a buying opportunity. Easyjet in November and Berkeley Group at the end of September.
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easyJet looks like it is in a consolidation stage and I am looking for it closing above it 21 day closing high so that the top of the channel moves upwards; I think that would be very bullish. With Berkeley Group I would hope the bottom of the channel at £22 acts as support!