2023 – Half Year Review

Let’s start with the nasty bit – year to date, my portfolio is down 7%.

Yes, that’s right, after losing 11% in 2022, my portfolio is already down another 7% in the first six months of 2023.

So, take a deep breath, top up the coffee, and let’s see how I’ve managed to lose another 7% of my portfolio.

If we rewind to January, my portfolio was less concentrated than previous years, but had a weighting towards REITs and collective investment vehicles. For many years, I have been accumulating dividend-paying investments, reinvesting the dividends, and as such, REITs and collective investments were an attractive area for me. Unfortunately, as inflation began to skyrocket and interest rates followed, these investments become dramatically less attractive to the wider market – for example, my largest position in December, Warehouse REIT, was paying a 4% dividend, but today, an investor could easily invest cash in a savings account paying 5%.

The story for many of my top holdings was similar – Urban Logistics REIT, Impact Healthcare REIT, Life Science REIT, Digital 9 Infrastructure Trust – all received a significant downward re-rating during the first six months of 2023.

Likewise, my growing commodity exposure also faced headwinds thanks to concerns over economic growth, energy and transportation costs. As of the end of the June, I had built positions in a number of resource-focussed equities including Rio Tinto, Anglo-Asian Mining, Centamin, Central Asia Metals, Atalaya Mining, Kenmare Resources, and Ecora Resources. These have been a mixed bag in the first half of the year but I still believe commodities to be a reasonable inflation hedge in a high inflation environment.

Now let’s get onto the really nasty bits – S4Capital, NCC Group, Secure Trust Bank and Vodafone, all of which are down nearly 50% year to date, putting me well underwater on all my positions (indeed, S4Capital is down nabout 75% from my original purchase price. Go me!)

Each one of these is an interesting situation but none has held up well in a world of rising interest rates and high inflation. S4Capital has a series of accounting issues, a health scare from the Sir Martin Sorrell, and a huge stack of debt. Vodafone has a huge stack of debt and stagnant revenues. Weakness in the banking sector and a slump in EPS has crashed Secure Trust Bank, and NCC Group has had a dramatic slowdown in growth.

Fears over the housing market have seen Vistry and Michelmersh Brick Holdings fall back, and my fund managers Polar Capital Investment Holdings and City of London Investment Group have rolled over with the market.

In terms of acquisitions, the first half of the year has seen me top up some of my favourite holdings; Warehouse REIT, Life Science Investment REIT, and Vistry; add some new positions in renewable energy company NextEnergy Solar Fund, asset managers Aviva, Phoenix and Legal & General; and expand my resource exposure through Kenmare, Ecora, Central Asia Metals, and Rio Tinto.

Buying in a bear market feels a bit like setting fire to money but I try to stand by Warren Buffett’s advice to “be greedy when others are fearful”.

If I look back at my 2022 half year review, this feels a little like Groundhog Day – tough markets, an underperforming portfolio, and a gloomy outlook on the economy. I find myself questioning my capabilities after two years of underperformance, but thankfully, I have a patient and long-term outlook to fall back on. As such, I want to use this year’s Half Year Review to share some thoughts on patience and long-term strategy.

I’ll start with the idea of generational wealth and long-term planning. Here in the West, we seem to have totally lost the skill of long-term planning with a myopic obsession with the short-term. Everything has to be quicker than the year before. Content needs to be shorter. ‘Long-term’ planning might mean five, or if you’re lucky, ten years. How many of my readers are thinking about their Grandchildren, or their Grandchildren’s Grandchildren?

I’m not suggesting we can really know what the world will look like 200 years from now but wouldn’t your behaviour change if your plans replaced months with years, and years with decades?

The Merchant of Venice

There are numerous metaphors for investing – farming is a popular one – but personally, I find myself thinking about a medieval merchant. I’ve always had a romantic love of Venice and imagine myself as a the head of a merchant family in the city. The family has interests in forestry, mining and agriculture, a network of warehouses and shops, and a large shipping fleet, which is used to acquire exotic goods from overseas and transport goods to foreign ports for sale.

My job, as head of the family, is to protect our long-term financial stability and the viability of our collective assets. Over time, some assets will expire (mines run dry and warehouses collapse), and others will become more valuable. I manage the on-shore businesses, some of which have better margins than others, investing the profits and managing the quality. I also have to ensure that goods are safely transported and stored to prevent damage or loss.

Some parts of the empire will be more profitable than others – perhaps the margins on growing the wheat are smaller than mining gold – but as a whole, the stronger parts subsidise the weaker parts and the diversification ensures cash flow never dries up even if it temporarily reduces.

As such, my primary concern is the long-term profitability of all the activities, reinvesting in materials to keep the fleet seaworthy, ensuring our warehouses are dry and secure, housing my workers, investing in profitable ventures over many years and exiting the less profitable.

Just like the Venetian merchant of my metaphor, my approach to investing is to take a long-term ‘stewardship’ approach to my finances, rather than getting overly concerned about individual ventures and bad years. Over a fifty-year period I can reasonably expect half to be good years and half to be bad. Some years will be fantastic and others will be disasters. The key is to structure my assets in such a way that I can survive the disastrous years and live to benefit from the fantastic ones.

When constructing my portfolio, I select broad themes to which I would like long-term exposure. Property, energy storage, commodities, financial infrastructure, enterprise-computing solutions etc. I research these areas and, select the companies that fit my quality criteria, and then try to buy them at a price I consider to be ‘good value’.

Like the Venetian merchant, my goal isn’t the immediate sale of the assets, but their long-term ownership as they increase in value. I monitor their financial performance – earnings per share, balance sheet quality, free cash flow generation, return on capital employed – and providing they continue to perform, I wait.

With this in mind, I recognise that some years, my empire will face challenges. Perhaps a navigator on the flagship sails into rough seas and loses a cargo of rare spices, or a warehouse catches fire with a year’s supply of timber inside. When this happens, the answer isn’t to sell everything and head to the nearest tavern, but act calmly to minimise the losses and continue with the remaining ventures.

To bring things out of my Venetian metaphor and into the present day, ensuring I have sufficient cash available to cover both immediate expenses and longer-term or unexpected calls for capital is critical. Having cash set aside if my roof springs a leak or my boiler suddenly fails means I can continue to keep my household functioning without needing to become a forced seller of equities to fund expenditure.

Funding multiple ventures and diversifying my assets provides an additional level of security. Cash, precious metals, bonds, equities, funds, and real estate all form different ‘ventures’ which seek to grow and protect wealth over the long term. Some years, I may choose to dispose of some assets and other years I may choose to acquire more. Over many decades, however, my goal is to build a resilient cash flow engine of which equities will form a key part.

The 2010s may well go down in my investing history as one of the most relatively ‘calm seas’ I will ever experience. Certainly, we had our moments (Brexit springs to mind), but largely, conditions made for smooth sailing. By contrast, in just the first three years, the 2020s have seen the COVID pandemic, record inflation, interest rates more than quadrupling in twelve months, bank runs, utility firms collapsing, a ramp up in eco-protestors, and a more fractious, divided political landscape than I can ever remember. I can’t say I’m surprised I’m finding it hard work.

H2 2023

As I enter the second half of 2023, therefore, my portfolio is broadly weighted into half a dozen ‘themes’.



  • Precious Metals
  • Industrial Metals
  • Royalties


  • REITS (Digital Infrastructure and Specialist Assets)
  • Home Builders
  • Materials


  • Stock Exchanges
  • Fund/Asset Managers
  • Banking


  • Renewables
  • Energy Storage


  • Cybersecurity
  • Telecoms


  • 10% US (S&P500)
  • 2.5% Asia Income
  • 2.5% Japanese Growth
  • 2% Switzerland MSCI Tracker
  • 2% Europe (Small Caps)

The only real exception to these themes is S4Capital, which I would put in the Professional Services category.

If I look back at the portfolio I had a few years ago, there are a number of significant changes:

  1. Cash is now worth actively managing. With this in mind, I have split my cash position between pure cash yielding about 2% and several bond positions yielding 4-6%. I also hold more of it than I used to.
  2. Greater sector concentration. With inflation taking off, I have gradually rebalanced my portfolio towards a smaller number of sectors. In addition, I now generally avoid consumer cyclicals and businesses that sale ‘discretionary’ goods and services.
  3. International Diversification. Although I am overweight UK, I have introduced international exposure to the portfolio through a combination of funds and trackers.
  4. Heavy weighting to commodities. As more and more currency is printed, currencies weaken, industrial demand grows, I believe commodity prices are likely to be strong performers.
  5. Movement away from small and microcap shares. After learning some expensive lessons with small cap equities, I have gradually reduced my exposure to these and although not eliminated, have gradually reduced from this from 50% to about 30% over two years.

Whether these themes and changes will enable improved performance this decade remains to be seen, but my focus in the first few years have very much been on wealth preservation over wealth creation. As with many things, I feel cautious in the face of headwinds and will continue to tread carefully as we move through the second half but hope that my cautious, long-term focus will see me through.

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