Transactions analysis

Here, we take a deep dive in our investment transactions to help better understand our strategies. 

 

 

 

 

A closer examination of  our investment transactions could reveal our inherent investment (collective) behaviour. It could also underline what approach is actually being taken rather than the one we think we have been deploying. These  transactions  are ultimately the direct translation and reflection of our decision making process “on the ground”.

First let’s establish some basic definitions for the types of investment transactions we cover in here:

  • A buy transaction is the purchase of units in a stock 

  • An accumulate transaction is a buy transaction of a stock already in the portfolio (top up,  also known as increasing a position)

  • A sale transaction is the sale of (all) units of a stock present in the portfolio

  • A partial-sale  transaction is a sale transaction, selling less than the full holding of a stock in the portfolio (top slice, also known as decreasing a position)


Buy and sale transactions

We first start with a high level view of the number of all buy and sale transactions annually executed for the past 20 years. Below is a chart of these transactions (these include the accumulate and partial-sale transactions respectively). The chart also depicts, as a background and contrasting feature, the number of holdings in a portfolio (portfolio size)  at the end of every year.

We can broadly distinguish four phases in the chart (above):

  1. Up to 2006, where the club is still in learning/experimenting phase, undertaking quite a high number of transactions and resulting in a high portfolio turnover (stocks were bought and sold within a year)

  2. 2006 to 2012: This period was in part dominated by the “slowly-developing” financial crisis of 2008. Mobius at the time decided  to time the market and therefore sell all its holdings (note the sharp spike in the #sales line in the chart around that period). It took time for the club to recover from the experience and regain its cruising speed.

  3. 2012-2016: the club started to develop and experiment with new investment strategies (such as the systematic and semi-systematic approach) coupled with a stronger discipline around portfolio management. The club learnt to hold on to great stocks by accumulating more (and absorb/accept short term fluctuations more often than not). The bulk of the #buys spike in this period is made up of  accumulate transactions.

  4.  2016 - to date:  Identify strong companies, a higher level of scrutiny, led to a much smaller number of transactions all round; in particular studying long term perspectives and filtering noise in the information flows.

 The table below is an overarching summary of investment transactions in the club. This table adds some important elements to  the chart above: Since inception, Mobius has completed 376 buy and sale transactions; giving a long term average of 18 transactions per year; of which 11 are buys and 7 are sales. Of the 11 buys, 4 are accumulates. 

  • So on a long term average, Mobius has been  adding and removing 7 holdings to its portfolio annually. 

 

# transactions

#buy

#sale

#acc

#partSale

#buy/sale

Total

230

146

83

10

376

All time avg

11

7

4

0

18

Previous 15 yrs avg

14

8

5

0

22

Last 5 yrs avg

4

4

1

1

8

 

The 3rd and 4th row divide the last 20 years timespan into two periods: The first 15 years (roughly phases 1-3) and last 5 years (phase 4): The  4th row  further highlights what was said  about  the fourth phase above: This row shows the annual averages for the last five years;  quite a contrast to the long term average. In the last 5 years, there were annually only 4 buys (including 1 accumulate); which means only 3 new additions to the portfolio. Likewise, there were 4 sales (including 1 partial sale) leading to a yearly average of 3 holding fully sold from the portfolio. Also worth noting that over the last five years, the club has transacted on average 8 times per year whilst meeting on a monthly basis. So the urge for a high portfolio turnover and unnecessary transactions seem to be dissipating. 

In a nutshell, the portfolio saw on an average annual basis; 

  • 3 new additions and 3 fully sold investments in the last 5 years, 
  • 9 new additions and 8 fully sold  investments in the previous 15 years, 

Accumulates and partial sales

Accumulate and partial sale transactions could be healthy indicators of the investment decision making process. Usually accumulates mean there is growing confidence in a stock. Partial sale on the other hand could be for a number of reasons, not entirely due to the performance of the stock. Some examples include:

  • Forced sale (raising cash for members’ withdrawals)
  • Portfolio overweight limit (by value) - usually max 25% of the portfolio NAV
  • Allowing for other great opportunities to get into the portfolio

The chart below highlights the number of accumulates (#acc) within the overall buy transactions. On a long term basis, 36% (83/240 from table above) of all buy transactions are accumulates. It is quite a high average (over 1/3rd of all buys are accumulates) and in practice perceived as a sign of good stock selection and long term investments. But as the chart shows below, it is by no means uniform over time. 

 

As Mobius got confident in its stock selection, it accumulated  for a period, up to the point where a few holdings reached their limit in the portfolio: This is one the portfolio’s management safeguard rules (no investment can receive more than 1/12th of the NAV). So looking at the portfolio for the last 5 years, a few holdings have reached their investment limit and deemed to be good holdings, they have  a higher than average holding period in the portfolio.  In March 2021, the portfolio’s average holding time was 34 months (compared to the club’s long term average holding period of 16 months).

Consider for example  these three stocks in the (March 2021) Mobius portfolio; Diploma, Ideagen and Tracsis (snapshot in table below at 29/03/21):  The portfolio has 11 entries, most of them quite recent except for these three heavyweight (consistent high performing stocks with an average of 8-year holding period).  Between them, they represent 66% of the portfolio’s NAV (by value).  That also means that the other 8 holdings of the portfolio represent only 34%  of the portfolio between them.

Holdings

Time in Portfolio

% Weight

Diploma

9 yrs, 8 mths

26%

Ideagen

5 yrs, 9 mths

29%

Tracsis

8 yrs, 7 mths

11%

To further clarify this point, consider the transactions table for our three heavyweight below - over the years, Diploma has been accumulated 4 times whilst Ideagen accumulated 3 times and partially sold twice. Ideagen and Tracsis have been partially sold a couple of times to release funds for new opportunities in the portfolio and equally to remain below  the 25% of NAV limit. Diploma would be under close scrutiny, as it just passed the 25% at the time of writing.

 

Company

#Transactions

#buys

#partSales

Diploma

5

5

0

Ideagen

6

4

2

Tracsis

8

6

2

 This goes some way to show that the club supports one of the most enduring mottoes on Wall Street "Cut your losses short and let your winners run”.

Whilst we had a drop in acccumulates in recent years for reasons outlined above, we also have a rise in partial sales (see chart below): These were triggered by conditions such as :

  • Forced sale (raising cash for members’ withdrawals)
  • Portfolio overweight limit (by value) - usually max 25% of portfolio NAV
  • Allowing for other great opportunities to get into the portfolio 

The combination of these three conditions and a portfolio size well below its limit of 12 entries; meant that a couple of large holdings got top-sliced recently (notably Ideagen, Tracsis and Judges Scientific). On a long term average, the part-sale transactions represent only 7% of the total sales.

 


Stocks revisited

Over its lifetime, Mobius has invested in 120 distinct stocks & other asset types (e.g. mutual funds and corporate bonds). Its portfolio has  seen a total of 147 entries present over time: Only 17 stocks featured more than once in the portfolio at different times. As a good investment approach, the club had tried hard to keep a log of previous good companies it invested in: However, this has proved rather difficult so far, once sold, these stocks fall off the members’ radars. This section is about the exceptions to this situation.  Below is a snapshot (March 2021) of the top stocks (sorted by the number of separate times it featured in our portfolio). Persimmon tops the list bought at six different times over  the club’s lifetime.

Sorted List

#

Persimmon

6

Hamworthy

4

Dart Group

3

Marks & Spencer

3

Patientline

3

Retail Decisions

3

Work in Progress: Thank you for your visit. For any feedback, you may contact Mourad Kara.   Last update: September 2021. © Mourad KaraDisclaimers