As the sun sets on 2024, my approach to investing has again been characterised by resilience and stewardship. My efforts to diversify my portfolio geographically have continued, leading to a year-end weighting of 68.9% towards UK equities, 9.3% US equities, 7.3% Asian equities, 2.8% Swiss equities, 1.1% European equities, and 10.6% cash, including bonds. While this slightly deviates from my long-term aspiration of 65% UK, 25% non-UK, and 10% cash, it underscores a commitment to gradual and measured progress and is considerably closer to my balance at the beginning of the year.
The nucleus of my portfolio lies within my top ten holdings, now comprising 47% of its total value, an uptick from 45% in January, but still slightly lower than my target of 50-55%. This subtle shift reflects a gradual increase in my middle tranche and the reduction in relative weighting of Team Internet Group, Vistry Group, Gore Street Energy Storage Fund, Urban Logistics REIT, and Central Asia Metals, whose places have been filled the increase in value of several new entrants including Stewart Investors India Fund, UBS MSCI Switzerland, Alumasc Group, Concurrent Technologies, and the venerable return of Chesnara, a company which has been a top ten holding for about five years, only briefly leaving the roster in 2023.
Performance: A Measured Year of Modest Returns
The tapestry of my 2024 investing year has been woven with threads of both triumph and tribulation. My portfolio has yielded a poor return of 1%, inclusive of a 4.7% dividend yield, which is far behind my target of 15%. This marks the third consecutive year of underperformance, consequently tempering my Compound Annual Growth Rate (CAGR) to 6.7%. Nonetheless, this period serves as a poignant reminder that enduring wealth is seldom forged through fleeting gains but through steadfast discipline and unwavering patience.
Although I have a penchant for dividend stocks and income-producing assets, overall return is undeniably the more important metric on which to measure your performance as an investor. A yield of 5% a year is worthless if capital losses run at 10% a year – within just twenty years an investor would be out of capital with which to generate the yield. As such, dividend sustainability became an increased focus for me in 2024 along with my constant examination of underlying business performance as a superior measure of share value.
Winners, Laggards, and Timeless Lessons
Despite the lacklustre overall portfolio return, the annals of 2024 highlight several stellar performers within my portfolio: Anglo-Asian Mining with a remarkable 79% return, Alumasc Group at 77%, and Concurrent Technologies garnering 68.5%. These successes are a testament to the rigorous research and strategic selection that underpin my investment philosophy. In stark contrast, Secure Trust Bank (-44%), Digital 9 Infrastructure Trust (-44%), Vistry Group (-39%), Gore Street Energy Storage Fund (-38%), and S4 Capital (-36%) have been formidable underperformers, reminding me of the unpredictable nature of the markets.
Vistry Group was a particularly humbling experience, where my decision to hold out for an additional 50p per share, in hopes of surpassing my price target of £14, culminated in witnessing its value plummet to £5.50. This incident, alongside the disappointments with Team Internet Group and Secure Trust Bank, reinforced the peril of allowing optimism to overshadow prudence.
Conversely, my patient stewardship of Darktrace, held for over two years, culminated in a 33% profit (16% annualised) upon its acquisition. Similarly, my exit of Centamin in July, driven by political risk concerns, secured a 25% gain over three years (8% annualised), even as a takeover announcement followed.
Strategic Reflections: Caution and Patience
In 2024, my investment strategy remained largely consistent, eschewing major overhauls. I have, however, exercised greater caution when contemplating top-ups. My experiences with Vistry Group, Team Internet Group, and Secure Trust Bank underscored the imperative of not automatically conflating price weakness with buying opportunities – sometimes the market has identified something you have not.
A notable enhancement in my approach risk management involved a heightened vigilance towards unrealised gains. This introspection revealed that overreliance on paper profits, particularly within volatile positions, had been my most costly misstep in 2024. Additionally, my tolerance for political risk has diminished markedly, acknowledging the precariousness of asset security in regions susceptible to geopolitical unrest.
A strange irony this year has been that cautiousness has somewhat worked against me and probably cost me more than it ought to have done in previous years. After attending the Association of Investment Company showcase in October, I had a great conversation with Ian and Pat about the challenges of timing one’s sales – a skill which I clearly have some way to improve in 2025.
Broader Endeavors: Expanding Horizons Through Discourse
Among the year’s most enriching and intellectually rewarding pursuits has been my collaboration with Peter Higgins on the Twin Pete’s Investing Podcast. This platform has proven to be not merely a channel for sharing insights but a crucible for refining my own investment philosophy. Engaging in dialogue with Peter – whose expertise and perspectives consistently challenge and enrich my thinking – has been a privilege. Together, we have explored a diverse range of investment topics, dissected market trends, and examined the subtle interplay of macroeconomic forces that shape the global financial landscape.
Our esteemed guests have been another cornerstone of this journey. Each episode with a guest has brought a unique voice and fresh perspective, often uncovering nuances and insights that have significantly broadened my investment acumen. From seasoned fund managers to innovative thinkers, these conversations have deepened my understanding of emerging industries, time-tested strategies, and the ever-evolving nature of the markets.
Equally rewarding has been the engagement with our ever-growing audience, a community of discerning, thoughtful, and supportive listeners. Their feedback, questions, and shared experiences have not only expanded my professional network but also underscored the value of collective wisdom in navigating the complexities of investing. The podcast has become a forum for like-minded investors to exchange ideas, learn from one another, and cultivate a disciplined, long-term approach to wealth creation.
In addition to the intellectual and professional growth this endeavor has provided, the podcast has served as a reminder of the importance of clarity and effective communication. Distilling complex investment concepts into accessible and actionable insights has honed my ability to articulate strategies and principles, a skill that transcends the realm of investing and enriches my broader professional endeavours.
Looking forward, I see immense potential for the podcast to evolve further. Whether through featuring higher-profile guests, delving into specialised topics, or expanding the format to include live audience Q&A sessions, the possibilities for deepening its impact are boundless. The Twin Pete’s Investing Podcast is not just a platform but a passion project—one that continues to shape my journey as an investor and enrich the community of individuals striving for financial success.
Historical Perspective: Navigating a Shifting Market
2024 stands as another challenging chapter in my decade-long investing journey. The UK market, akin to a balloon with a puncture, has been persistently leaking equity to more buoyant markets such as the NASDAQ and S&P 500. This persistent undervaluation of the UK market contrasts sharply with the US market’s seemingly boundless growth – a scenario that, while favourable in the short term, I strongly believe is unsustainable in the long run.
Moreover, the year was marked by a pronounced surge in speculative behaviours and herding, with entities like Palantir, Nvidia, Tesla, and Bitcoin experiencing meteoric rises unmoored from their fundamental valuations. This dissonance between price and intrinsic value serves as a cautionary tale against the allure of unchecked optimism although the cause of the eventual rebalancing is yet to emerge.
A big change for me in 2024 was the adoption of the Sharepad platform over the use of Stockopedia. I have found the tool a significantly more powerful piece of analysis software and in many ways it has forced me to do my own thinking to a far greater extent that Stockopedia ever did. Historically, I used to measure my returns in a manual spreadsheet, a process which has now mostly been subsumed by the Sharepad platform, which also highlighted to me the real variability of returns this year – at one point I had generated around 14% in 12-month trailing returns. In addition, the platform lets me screen a far more nuanced variety of data metrics and dive in far greater detail into the income statement, balance sheet and cashflow statement of businesses I am researching.
Reflections on Losses: Resilience Amidst Adversity
Managing the psychological toll of underperforming investments such as Secure Trust Bank, Vistry Group, and Team Internet Group has been a formidable challenge in 2024. These setbacks tested my resilience, yet I found solace in the understanding that no portfolio is impervious to loss. Recognising that stagnation often precedes downturns, I acknowledge the need for tempered optimism in future investment decisions.
The delicate art of timing – determining when to enter and exit positions – remains an area of ongoing reflection. In 2024, I reaffirmed that patience often trumps urgency. Avoiding precipitous decisions has safeguarded me from substantial losses, reinforcing the adage that it is better to forgo a potential gain than to risk a significant detriment.
Broader Market Trends: Navigating Inflation and Overvaluation
Shifting interest rates and geopolitical developments have profoundly influenced my portfolio strategy. The overvaluation of the US market, coupled with an unsustainable accrual of US debt, remains a significant concern. Despite these apprehensions, my strategy involves incremental investments in the S&P 500, adopting a long-term, buy-and-hold approach.
Simultaneously, rising inflation within the UK – exacerbated by a skilled labour shortage, soaring wages, and employment uncertainties – has necessitated a re-evaluation of my investment priorities. These macroeconomic pressures will undoubtedly shape my strategic adjustments moving into 2025.
Closing Reflections and Goals for 2025
While 2024 has been replete with challenges, it has also been a crucible for invaluable lessons in caution, patience, and strategic refinement. As I look toward 2025, my aspirations remain steadfast: to reclaim the trajectory of double-digit returns, achieve my target asset allocations, and continue honing a disciplined, research-driven investment approach. My hope is that inflation moderates further, although I have a strong suspicion that hope will be left wanting.
As we end 2024 my portfolio is weighted approximately 25% towards indexes and trackers, 13% towards asset managers, 13% towards property, 12% towards technology, 10% towards metals and mining, and 10% in cash and bonds, with trailing sectoral exposure of 5% towards energy, 5% professional services 4% banking, 4% materials and 1% in telecoms.
I feel extremely cautious about markets generally with the US looking as though it’s taken off on rocket fuel that will eventually burn out, the UK looking incredibly unloved, Europe appearing increasingly stagnant and the political risk elsewhere making me feel really very wary. The trouble with a bearish outlook on markets is, of course, that the market can remain irrational far longer than most of us want to acknowledge and attempting to wholesale “time” the market by dipping in and out is likely to do far more damage than simply remaining invested over the long-term.
As a result, am keeping some powder dry for 2025, and as to what may cause me to tap the barrel, think COVID or the Great Financial Crisis. The world was ending but the bargains on offer were endless. That, in my humble opinion, is when to underweight cash and load up, but otherwise I remain committed to the principles that have long underpinned my investment philosophy – prudence, resilience, and an unwavering dedication to long-term prosperity.
With that, I wish all of my readers a very Happy New Year, and thank you for your kind support in 2024!