How to get an outstanding return on your portfolio

Johnny HopkinsStocks3 Comments

You know what they say, “A picture tells a thousand words”.

So, here’s a picture:

(Source: Johnny’s Spreadsheet)

It’s a picture of my portfolio, and as you can see, today it’s up 16.42% since inception (excluding fees).

How do you get an outstanding return on your portfolio?

You get a subscription to Tobias’ “All Investable Screen” here at The Acquirer’s Multiple, and you follow Tobias’ Four steps to implementing a quantitative value investment strategy.

That’s what I did, starting in December last year.

In December 2015, I bought money transfer and payment services company, MoneyGram International Inc (NAS: MGI), and private education provider, Apollo Education Group Inc (NASDAQ: APOL).

In January 2016, I bought mining company, Nevsun Resources (USA) (NYSEMKT: NSU), and post-secondary education services provider, Bridgepoint Education Inc (NYSE: BPI).

In February 2016, I bought Israeli based media and internet company, Perion Network Ltd (NASDAQ: PERI), and an offshore drilling rig owner, Transocean Partners LLC (NYSE: RIGP).

One explanation for the rise in my portfolio – Mean Reversion

The type of investing that we’re doing here at The Acquirer’s Multiple is Deep Value Investing.

Deep value investing is the method that contrarian-activist investors, private equity firms and what professional investors use to value companies in their entirety, when they’re looking to take over and control the destiny of a company.

Part of the process is the idea of mean reversion, which is the force that pushes the intrinsic value and the fundamental business performance. Most businesses and stock markets are cyclical where they have periods of both good and bad returns.

Few businesses can sustain high growth in the long run. If you understand the implications of mean reversion and get something that’s cheap and it’s at the bottom of its business cycle with earnings that are falling, then you arrive at the difference between the market price and the intrinsic value.

As you can see, when the intrinsic value increases, you stand to make good returns.

The trick is, knowing which companies will provide the best odds of mean reverting positively, and avoiding the poor quality companies that you might expect to perform best, but actually perform worst.

What am I going to do now?

Am I going to buy some more, NO!

Am I going to sell any, NO!

Am I going to take profits, NO!

Why?

Because the mechanical system of investing here at The Acquirer’s Multiple tells me not to.

Am I emotional about what’s happening?

No! As sure as night follows day, my portfolio will change. It may rise further, it may drop by half, but that’s ok. Cause that’s my strategy and that’s what I’m sticking to. That’s what all of the best investors have done over time. Stuck to their strategy!

I don’t for one second consider myself a good investor, for that you need a proven track record over many years. But I do have a strategy and the discipline to stick to my strategy unemotionally, and sometimes that discipline alone can be the difference between successful and unsuccessful investing in the stock market.

Only time will tell!

For more articles like this, check out our recent articles here.

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3 Comments on “How to get an outstanding return on your portfolio”

  1. Hi Johnny,

    What a great initiative – thanks for sharing your investment journey!

    When I look at the numbers I calculate your aggregated per share gains at $5.22 on a total purchase price of $34.21 for a change of 15.26% (5.22/34.21) as opposed 16.42% – please let me know where I have gone wrong.

    Kind regards,
    G

    1. Hey Gaurang, thanks for your comment. Yes, your calculation is correct. I simply added up the totals in the ‘difference’ column and divided by the number of shares in the portfolio. Either way, I’m happy with a 15% or 16% return to date. Quick question, do you currently subscribe to The Acquirer’s Multiple?

  2. Hi Johnny,

    Thanks for the clarification.
    I do not have a subscription to The Acquirer’s Multiple.

    Kind regards,
    G

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