2022 turned out to be a good year for a value investor

The market has been having a hard time of it; this year the FTSE250 index of medium-sized companies has fallen 19%.  I figured back in February that the economy and the share markets were headed for tough times and so sold a number of holdings, leaving 40% of my portfolio in cash ready to deploy when Mr Market’s fear became really manifest.
Having a significant amount of cash helped the portfolio maintain value, but what gave it a real boost was that the few shares I held onto generally moved up, some by a significant margin.
Smiths News’ shares rose by 22% in the last twelve months – a nice rise before accounting for its significant dividend: 2.75p to be paid on 9th Feb 2023 following the interim of 1.4p back in July. Total dividends in 2022 amount to 11% of the year-start share price of 37.6p.
bp rose from 400p on 26th January (buying date) to 477p today, a 19% return before a very welcome dividend of 4.7%.
The markets are now starting to get to the point where attractive valuations are coming into view, so I’m starting to deploy my cash again.
Coping with two major economic crisis, first Covid then inflation/recession
Back in early 2020 I followed a strict caution-first value investing approach at the beginning of the Covid-19 crisis and, similar to Feb 2022, went to 40% cash. This pile of cash was very useful later in 2020 and 2021.  The shares bought in those years have generally risen nicely – see first table.
Most of the money I handle is invested in solid shares such as Character Group and Dewhurst which are equipped to withstand a recession. Now I’m starting to dig into the cash pile as I come across deep value shares in this period of economic flux.  Orchard Funding Group and Tandem are recent investments.
A list of all the shares I bought in the Covid-19 crisis and subsequently
(Newsletters published at the time of each purchase set out my rationale for buying)
CompanyPurchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Smiths News (Connect Group)18.3.20 £0.151 2.55p £0.462 223%
Character5.6.20 £2.52 27p £4.25 79%
McCarthy & Stone1.10.20 £0.718 0 Sold 7 Dec 2020 £1.185 65%
Capital & Counties Properties6.11.20 £1.032 0 Sold 19 Aug 2021 £1.743 69%
Dewhurst “A”11.11.20 £5.94 27.75p £6.00 6%
MS International16.12.20 £1.292 10p Sold 20th Sept 2021 – 7th June 2022. £2.488 100%
Wynnstay29.12.20 £3.405 15p Sold 24Mar 2021 – 3 Feb 2022 £5.58 68%
Lloyds Bank12.3.21 £0.4169 3.37p £0.4569 18%
J Smart18.3.21 & 24.3.21 £1.253 3.22p Sold 7 Feb 2022 £1.575 28%
Fletcher KingFeb 2020 – May 2021 £0.3265 0.5p Sold Sept 2021 – Feb 2022 £0.40 24%
Orchard Funding7.6.21 £0.568 4p £0.46 -12%
Caffyns22.6.21 £4.65 22.5p £4.50 2%
Highcroft22.7.21 £8.75 78p £9.10 13%
Town Centre Sec10.8.21 £1.426 1.75p Sold 2 Feb 2022 £1.581 12%
bp26.1.22 £4.006 18.7237p £4.7685 24%
Orchard Funding7.12.22 £0.48 0 £0.46 -4%
Tandem2.12.22 £2.8221 0 £2.50 -11%
AVERAGE        41%Longer run performance
Nine and a half years ago that I left a tenured professorship to concentrate on investment.  Back then the FTSE 100 was around 6,600. It is now 7,452 – a slow rise. In addition, there  have been dividends of around 3% per year. The FTSE 250 index has moved from around 15,000 to 18,853.
I believe the numbers in the tables below show that I have outperformed, which is quite a relief given the salary and security sacrifice I made all those years ago.
The tables display the results (so far) of all the purchases I’ve been writing about in my newsletters. The comments I made at the time explaining the rationale for each investment are available for you to read in older newsletters - there is nowhere for me to hide from my appraisals I made three, four or seven years ago – all the errors of omission and commission are there in broad daylight.
I present the returns after taking the hit on broker costs, stamp duty and bid/offer spread.
(Some of you have joined us recently so, in case you are not familiar with them, I briefly describe the criteria for my portfolios following the portfolio performance tables.)
The 2013 Net Current Asset Value, NCAV, portfolio
 CompanyPurchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
French Con.25.7.13 £0.3047 zero Sold July 2015 £0.4378 44%
Caledonian T25.7.13 £0.70 zero Sold April 2020 for £1.391 99%
Fletcher King6.8.13 £0.30 14.25p Sold June 2016 for 46p 101%
Northamber22.8.13 £0.287 1.6p Sold Oct 2016 £0.303 11%
Titon5.9.13 £0.379 6.5p Sold May 2016 £1.06 197%
Mallett12.11.13 £0.7682 12.7p Sold Nov 2014 £0.60 -5%
AVERAGE             75% 
The 2014 NCAV portfolio
CompanyPurchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Holders Tech10.10.14 & 3.11.14 £0.47 1p Sold March 2017 £0.33 -28%
Airea4.11.14 £0.1195 0.9p Sold Sept 2016 £0.309 166%
Northamber17.11.14 £0.4265 0.7p Sold Oct 2016 £0.303 -27%
Caledonian T30.12.14 £1.39 zero Sold April 2020 £1.391 0
AVERAGE        28%The 2015 NCAV portfolio
 CompanyPurchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
PV Crystalox15.1.15 £0.122 zero Sold Dec 2016 £0.237 94%
Arden Partners1.9.15 £0.422 1p Sold May 2018 £0.364 -11%
Northamber4.9.15 £0.443 0.4p Sold Dec 2016 £0.303 -31%
AVERAGE        17%The Buffett-style portfolio
This type of share is rarer than the others, and so I combine all years.
CompanyPurchase date Purchase price



Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
 Dewhurst9.4.14 £3.18 70.5p Sold February 2020 £7.217 149%
MS International9.10.19 £1.723 13.50p Sold 20th Sept 2021 – 7th June 2022. £2.488 52%
Character20.1.20 & 5.6.20 £2.811 35p £4.25 64%
Dewhurst11.11.20 £5.94 27.75p £6.00 6%
MS International16.12.20 £1.292 10p Sold 20th Sept 2021 – 7th Sept 2022. £2.488 100%
AVERAGE        74%(I bought some more of Dewhurst in June 2014 at £3.11, December 2014 at £3.75, November 2017 at £5.46, February 2019 at £5.54 and April 2019 at £5.64. These were sold Feb 2020).
Modified price earnings ratio portfolio 2015/16
CompanyPurchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Haynes11.2.15 £1.159 33.5p Sold 2.10.19 £2.9175 181%
AGA11.3.15 £1.002 zero Taken over June 2015 £1.456 45%
Hogg Robinson10.4.15 £0.4709 2.37p Sold June 2016 £0.656 44%
MS International3.7.15 £1.86 46p Sold 20th Sept 2021 – 7th June 2022. £2.488 58%
BHP Billiton24.9.15 £10.43 127p Sold May 2018 £16.90 74%
TClarke5.11.15 £0.7916 13.61p Sold Feb 2020 £1.1215 59%
Premier Farnell8.4.16 £1.222 3.6p Taken over 20.6.16  £1.632 36%
AVERAGE        71%The AGA holding was doubled 30 April 2015 at a price of £0.9466.
Modified price earnings ratio portfolio 2017
CompanyPurchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Braemar28.6.17 £2.848 20p Sold June 2018
£2.639
 0%
Caffyns10.8.17 £5.012 52.5p Sold July 2020 £2.389 -42%
Connect/Smiths News27.9.17 £1.046 13.35p £0.462 -43%
MS International14.11.17 £1.84 30p Sold 20th Sept 2021 – 7th June 2022. £2.488 52%
AVERAGE        -8%The 2017/18/19 NCAV portfolio
 Purchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Caledonian Trust7.11.17 £1.23 zero Sold April 2020  £1.391 13%
J Smart30.1.19 £1.13 4.14p Sold Mar/Apr 2020 £1.101 1%
Northamber6.12.19 £0.504 0.3p Sold Mar 2020 £0.5717 14%
AVERAGE        9%More Caledonian Trust shares bought in February 2019 at £2.29.
More J Smart bought 30.4.19 at £1.16
The 2018/2019 modified price-earnings ratio portfolio
 Purchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Connect/Smiths News14.6.18 £0.285 6.65p £0.462 85%
N Brown17.8.18 £1.42 9.93p Sold Sept 2021 £0.557 -54%
Spaceandpeople31.10.18 £0.224 0.5p Sold Dec 2020 £0.128 -43%
Tandem2.4.19 £1.59 9.49p Sold Aug 2020 £3.707 139%
MS International6.6.19 £2.22 20p Sold 20th Sept 2021 – 7th June 2022. £2.488 21%
Character25.10.19 £3.506 40p £4.25 33%
AVERAGE        30%More Connect Group shares bought in February 2019 at 40.86p, March 2019 at 38.29p and May 2019 at 39p.
More N Brown bought May 2019 at £1.30.
The 2020/21/22 modified price-earnings ratio portfolio
 Purchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Wynnstay7.1.20  & 29.12.20 £3.33 29p Sold 24Mar 2021 – 3 Feb 2022 £5.58 76%
Daejan5.2.20 £52.90 zero Sold 21 Feb 2020 £79.41 50%
Connect/Smiths News18.3.20 £0.151 2.55p £0.462 223%
Lloyds Bank12.3.21 £0.4169 3.37p £0.4569 18%
bp26.1.22 £4.006 18.7237p £4.7685 24%
Tandem2.12.22 £2.8221 0 £2.50 -11%
AVERAGE        63%The 2020/21 NCAV portfolio
 Purchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
McCarthy & Stone1.10.20 £0.718 0 Sold Dec 2020 118.5p 65%
Capital & Counties Properties6.11.20 £1.032 0 Sold 19 Aug 2021 £1.743 69%
J Smart18.3.21 & 24.3.21 £1.253 3.22p Sold 7 Feb 2022 £1.575 28%
Fletcher KingFeb 20 – May 2021 £0.3265 0.5p Sold Sept 2021 – Feb 2022 £0.40 24%
Orchard Funding7.6.21 £0.568 4p £0.46 -12%
Caffyns22.6.21 £4.65 22.5p £4.50 2%
Highcroft22.7.21 £8.75 78p £9.10 13%
Town Centre Securities10.8.21 £1.426 1.75p Sold 2 Feb 2022 £1.581 12%
AVERAGE        25%Bought more Orchard Funding 7.12.22 at 48p
The return reversal portfolio
 Purchase date Purchase price Divs to 31 Dec 2022 Price 31 Dec 2022 Return to 31 Dec 2022
Havelock Europa20.5.15 £0.14609 zero Sold Dec 2016 £0.0915 -37%
AVERAGE        -37%Brief description of criteria for the portfolios
Shares are allocated to portfolios designed around ideas flowing from research conducted when my PhD students and I asked the question “what works in investment?”
These investigations were often inspired by the ideas of great investors such as Benjamin Graham.
More detail on these ideas is presented in earlier posts (if you put key words into the search box those Newsletters will appear).
Net current asset value, NCAV, criteria

1. Current asset values are taken from the balance sheet (e.g. inventory, receivables and cash).  From this total are deducted all the liabilities. Long term asset values are usually ignored (counted as zero).  Usually, further deductions are made to reduce inventory and receivable values to give a conservative bias.
2. Companies passing the quantitative test are also assessed qualitatively for business prospects, managerial ability/integrity and business stability.

Modified price earnings ratio criteria

1. A cyclically-adjusted price to earnings ratio (CAPE) significantly below average.  That is, a current share price divided by the earnings per share calculated as an average of eps over the last seven to ten years.
2. A high Piotroski score.  These nine factors indicate whether a company is strengthening its financial position and income flow.
3. Finally, and crucially, the same qualitative criteria as for NCAV investing.

Buffett-style criteria

1. A strong economic franchise,
2. Managers of integrity and talent,
3. Excellent accounting numbers, and
4. A reasonable price.

(There is much more on this in my books The Financial Times Guide to Value Investing, The Great Investors, The Deals of Warren Buffett or Warren Buffett's letters)
Return reversal

1. Rank all shares based on their returns over the past five years. Select only the worst 20% of performers – “the losers”.
2. Examine each loser share using Piotroski criteria. Select only those with a high score.
3. Ensure that the company has a market capitalisation below its net tangible asset value
4. Use the same qualitative screening criteria as for NCAV investing.