James Goodwin took business accounting courses to hone his skills as a stockpicker – Mark Pinder
Some investors are happy to park their money in a ready-made portfolio, sit back and see what returns they get over ten years. Others take a much more drastic approach.
James Goodwin, 28, of York, who works in technology for a telecoms company, first started investing in 2019. Since then, he’s been focused on developing his skills as a stockpicker – even taking a certificate in business accounting to help him find his footing. Way around the company’s balance sheet.
Over the past two years, Mr Goodwin has invested almost £40,000 in just six companies he believes are trading at significant discounts to their true value. The meticulous investor has spent over one hundred hours researching each firm, in some cases even meeting with the management team to learn more about their growth plans.
His largest investment is TinyBuild, an indie video game developer listed on the Frankfurt Stock Exchange. Mr Goodwin has £12,171 in the developer, which is currently trading at just 17 cents a share.
They chose TinyBuild, he said, because its fundamentals are “on par with Team17”, another indie game developer with an impressive development record, now with a market capitalization of £470m.
Mr Goodwin is betting he can turn his investment into £500,000 by 2030 and £1 million by 2035 – Mark Pinder
Other stocks in his portfolio – held within an AJ Bell stock and shares Isa – included insurance company Aviva (£5,082), Icora Resources, a royalty company in the commodities sector (£5,191), pub chain Fuller, Smith & Turner (£5,000). Are. 4,694), Taylor Maritime (£4,694) and Warner Bros. Discovery (£6,229).
Mr. Goodwin has high hopes for Warner Bros., as its streaming business, HBO Max, is expected to still be loss-making next year and become profitable in 2025. He believes the entertainment powerhouse is trading at a third of its true value.
As for Fuller, Smith & Turner, Mr Goodwin says the pub chain has “a lot of premium London real estate”, which he says is valued at 1999 prices, and is therefore very undervalued. Has been done
Mr Goodwin hopes his due diligence will pay off in the long run. He is betting he can turn his investment into £500,000 by 2030 and £1 million by 2035.
“I currently add about £10,000 of incremental capital each year, which can grow with my salary over time,” he said, “but the majority of the target growth will have to come from investing.” “Obviously I am subject to the will of the market, so it may not be exactly on this timeframe, but I fundamentally believe it is achievable.”
Jeremy Robinson, Senior Investment Manager, Charles Stanley
My first impression is that Mr. Goodwin has exposure to some high-quality companies, is using tax wrappers wisely, but has overly ambitious expectations about his returns.
It’s great to see that he is actively using a portion of his annual Isa allowance to “wrap” these investments in a tax-free environment.
I suggest he use the remaining £10,000 (out of his total £20,000 allowance) if possible, especially given the recent cuts to the capital gains and dividends tax allowance, which will fall further in the next tax year .
Given their investments, these are direct equities that add a significant amount of stock risk to a portfolio at this early stage, especially given that four of the positions are companies worth less than £300m.
Aviva and Warner Bros. Discovery will reduce volatility and increase income through dividends, which should help overall returns but I would also add that their portfolios could benefit from diversification into other asset classes and sectors.
At companies, the four small capitalized positions have different return profiles due to a number of factors.
TinyBuild has had a tough year as costs have soared, leading to a nearly 90 per cent drop in its share price.
Ikora Resources is a mining royalty company that generates revenues from coking coal and iron ore. Returns are likely to continue to fluctuate due to unpredictable commodity prices.
Taylor Maritime Investments aims to capture investment in the growth and income streams of second-hand vessels, although weakness in charter rates and vessel values has been an issue.
Fuller, Smith & Turner is doing good business despite disruption from the railroad strike and bad weather. The attraction of the business is the quality of their pubs, with management focused on growth and shareholder value, with a recent share buyback announced.
Aviva is primarily an income play and recent results highlight growth across the business with a solid balance sheet as higher interest rates have seen greater contributions to annuities and other products.
Warner Bros. Discovery is a leading media company but has recently suffered declining revenues due to instability around its studios and a writers’ strike. Costs are being cut and advertising remains tough but the mix of revenue streams is attractive.
To improve returns, he would like to consider expanding diversification into higher-growth, thematic sectors, many of which have been revalued so entry points are lower than where they were in early 2022.
Infrastructure, for example, offers inflation-linked returns as well as a diversified income stream. Holdings like Renewables Infrastructure Group Investment Trust (TRIG) are worth a look.
Mr Goodwin might want to boost his technology exposure with something like Polar Capital Technology Investment Trust – which has been the main driver of returns so far this year. Some companies in this sector are overvalued, but this is a theme that will continue to drive returns in the coming years.
Dan Boardman-Weston, Chief Executive of BRI Wealth Management
It’s great to see someone taking a keen interest in investing and trying to build a strong financial foundation for the future. However, Mr. Goodwin may make some changes to the portfolio to achieve his long-term objectives.
His portfolio is quite esoteric and highly concentrated, with only six direct equity investments, covering sectors ranging from video games to shipping.
They need to diversify much more than the existing portfolio and aim for at least 20-25 individual equities to try to offset pecuniary risk. I would also highlight that stock picking can be quite difficult, and portfolios may have suffered significant losses over the years.
If the investor does not have the confidence to choose direct equities going forward, one approach could be to consider investing in funds.
Current investments are relatively small companies, and these investments are at the riskier end of the spectrum, especially when there are very few of them in the portfolio.
Even though I might love a slice of London Pride while watching Game of Thrones, I wouldn’t want to invest 30 percent of my portfolio in Warner Bros. and Fuller Smith & Turner.
To improve returns the investor should start afresh with the portfolio. However, if he wishes to retain his existing shares, these should be reduced so that each of them does not exceed 2.5 percent of the total portfolio.
To achieve a £500,000 portfolio by 2030, assuming ISA contributions increase to a maximum of £20,000 over the coming six years, Mr Goodwin will need annual returns of more than 30 per cent.
It’s pretty unrealistic that one of the greatest investors of our time, Warren Buffett, “only” managed an annual return of 19.8 percent.
Investors should temper long-term return expectations and perhaps use 10 percent returns as an aggressive and optimistic expectation. From this it is believed that he is ready to adopt a bold attitude towards risk.
If this were the case I would suggest investors to focus on investments with potentially higher returns such as small companies, private equity, technology and thematic investments. Over the long term these have tended to generate better returns than other asset classes.
Investors should consider accessing these themes through investment trusts, which have been trading at wide discounts to net asset value since the financial crisis. This means that the investor can benefit from strong underlying investment growth, as well as very large discounts that can be reduced over time.
Assuming 10 per cent annual returns and regular ISA contributions, the investor will reach their £500,000 target in 2035. If the investor was not willing to take the level of risk required to generate potentially large returns, their goal would be met in 2037.
A low-risk portfolio will have allocation to fixed interest and other non-equity asset classes.
