Real estate, alternative real assets and other diversions

Learn from my mistakes and avoid these three value traps

The Fund Manager

Most investors found 2018 to be a bumpy ride and I was no exception.

The market price of my portfolio declined by more than 10% during the year, which was mildly annoying. But that’s not really what I’m talking about.

When I talk about a bumpy ride, I mean bumpy in terms of the performance of the companies I’m invested in rather than the performance of their shares. And in that regard, 2018 was too bumpy for my liking.

I’m not saying 2018 was a complete disaster, because it wasn’t; but it was bad enough to make me take a step back and review my investments and my investment process from the ground up.

What I found was that several of my current holdings (and several of my past holdings) fell into one or more of three classes of value trap:

  1. Companies with large recurring ‘exceptional’ costs (e.g. Centrica or N Brown)
  2. Companies with wafer thin profit margins (e.g. Mitie or Interserve)
  3. Companies undergoing business transformations (e.g. N Brown)

Having uncovered these value traps, I then came up with a handful of strategy tweaks designed to stop me falling into the same traps again.

I thought some of this would be useful for other investors, so I summarised the whole lot into an article for Master Investor magazine. Read the full article here.






The Fund Manager, zLead Article, zNewsletter

About John Kingham

John Kingham

John Kingham is the editor of UK Value Investor, the investment newsletter for defensive value investors. With a professional background in software analysis, John's approach to high yield, low risk investing is based on the Benjamin Graham tradition of being systematic and fact-based, rather than speculative. John is also the author of The Defensive Value Investor: A Complete Step-By-Step Guide to Building a High Yield, Low Risk Share Portfolio. His website can be found at: www.ukvalueinvestor.com.

Articles by John Kingham

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