Victoria heads for the exit

697 days after first buying into Victoria PLC, I’ve let the old girl go.  During that time I gained 18% in total, which works out at about 9% annualised.  

The departure of Victoria means that the UKVI fund no longer holds any of the old asset based valuation companies.  These were companies where the balance sheet was bomb proof, where there was little debt, good liquidity and not much else; other than a very very low price for those assets.
The company has a 10 year ROE average of 6.7% and a 3 year average of 4.2%.  This combined with a price/book value of about 0.4 means that my returns yield estimate (ROE10 divided by p/b) is about 14% which put it at the bottom of my current holdings by that measure.  
On that basis, and using my new rule of one buy/sell decision each month, it was sent back into the wild on December 6th, to be replaced by something completely different.

Author: John Kingham

I cover both the theory and practice of investing in high-quality UK dividend stocks for long-term income and growth.

2 thoughts on “Victoria heads for the exit”

  1. what on earth is the point of the "new rule of one buy/sell decision each month" ???

  2. Hi Anon. The point is to keep the average 'value' of the portfolio as low as possible, or inversely to keep the 'expected' returns as high as possible.The theory behind the portfolio is that of size, price/book and returns on equity. These factors need to be maximised for the portfolio as a whole. So if a holding moves from a price/book ratio of 0.5 to a ratio of 3, but with the same ROE, then clearly it isn't as 'cheap' as it once was. By replacing it with something new from the market that is much cheaper (say the same ROE but a p/b of 0.6) then the average for the portfolio as a whole becomes lower.The once a month idea relates to several things. My spare time and my thoughts on optimal holding periods are the main ones. Value investments typically outperform between 1 and 5 years, so with 20 holdings (which is what I'm building up to) and one trade a month, that gives an average holding period of 20 months, nicely between 1 and 5 years.Really it's just a more interesting alternative to just analysing the portfolio once a year and replacing all the holdings above a value cut-off point, which is what they typically do in research papers.

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