The MHP (Magic Hat Portfolio) on Stockopedia (http://www.stockopedia.com/fantasy-funds/magic-hat-463/) is an experiment by me to see if a human can improve on a mechanical Greeblatt Magic Formula screen. I am trying to weed out “mistakes” that I feel the screening commits: unseasoned companies, scams, foreign companies (particularly Chinese), fishy accounting, and statistical quirks. Apart from that, I am agnostic as to the sector the company operates in, although I will try to avoid heavy concentration in any one sector. I will mostly apply “Strategic Ignorance”, by which I mean that I wont try to be clever in my stockpicking. My picking will be mostly mechanical. A summary of most of my Magic Hat articles can be found on the web page http://www.markcarter.me.uk/money/greenblatt.htm This will allow you to see, at a glance, what shares have been bought and sold in the past, as well as what shares have been rejected from consideration and why.
Well, what a month January has been! My portfolio lost 6.8%, compared with the ASX (All-Share) of 7.4%. Mid-month, I decided I was too obsessed with stock market movements, and so switched my attention to other things. When I looked at my performance this morning, I was relieved to find that my portfolio had improved, rather than worsened.
My spent my time programming in Fortran again. GFortran has some neat features, and makes Fortran a truly usable programming language. Many of the features of the latest Fortran standards are included, and it has a lot of convenience. Fortran will never have closures though, which can be very useful.
SHOS (Sears Hometown and Outlet Stores) was kicked out of the portfolio by rotation. It lost 41% over the year, which is not good. It was originally purchased as a net-net. So, buying net-nets is clearly no guarantee of beating the index.
LAM (Lamprell) was also due to be kicked out the portfolio by rotation, except that it now qualifies for the Greenblatt screen over on Stockopedia. LAM shows an EV/EBITDA of 0.91, which is absurdly low. A director had made purchases worth £166k at around 103p in May 2015. LAM is a “provider of fabrication, engineering and contracting services to the offshore and onshore oil and gas, and renewable energy industries.” It has been hit hard by sentiment in the Oil & Gas industry.
On 26.1.2016, LAM announced (http://is.gd/Wy42qm) that a subsidiary had signed an MOU (Memorandum Of Understanding) with Saudi Aramco for a partnership agreement on establishing a Maritime Complex in Saudi Arabia.
It is impossible to call the bottom on oil prices, of course, but things aren’t all doom and gloom at LAM. If oil picks up, we could find LAM shares doing well. Nothing is guaranteed, which is why the MHP has a number of shares, rather than bets the farm on just a couple.
To bring LAM up to a full size holding, some DTG was sold. I was far to top-heavy in airlines, so it made sense to dial things back a little.
That’s all for now. Peace.