Investment strategy

Thoughts on my prior investment strategy

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The past one and a half year with its losses have made me think if my present investment strategy is right. During 2016, the portfolio value was down 27.8 %. This first half of 2017, the portfolio is down 28.8 %. This is more than half the value gone in 1½ half year! At the same time, the high number of issues has made me throw more money into what seems like an eternal cash burning flame.

During the same period, the market has changed substantially. I entered the market in 2013/14. By then and up to end-2015 or start-2016 there was a willingness to pay for high hopes. This has changed. I keep a trigger list on this blog. I have practically stopped keeping it up to date. Triggers does not trig anything in the present market. Cantargia, as an example, has made at least one or two press releases during 2017 that could have counted as triggers. They have left no imprint on the (falling) share price.

In terms of my EGS-model (see above), it seems as if rising share prices comes later in the company development. The company simply needs to be closer to the green area of the model before there is an impact on the share price. In other words, an investor return on participating in an IPO comes later than before.

Change in investment strategy?

I think that if I were to re-start my growth share portfolio, I would make a change in my investment strategy. I use my EGS-model to evaluate the shares before a company become profitable. In terms of spreading risk in the portfolio, I should add a phase 2. Phase 2 companies are companies past the last stage in the model (market acceptance-break even).

Companies in phase 2 are mature companies like Fortnox with sales, profit etc. and with a high growth. In spring 2016, I sold G5 Entertainment. I needed cash and felt the share did not belong in the portfolio. Since then the share have had a fantastic development. It would in fact have countered the shrinking value of the portfolio substantially.

My personal conclusion is that if I were to enlarge the portfolio, I will look for companies past (or almost past) break even before considering IPOs of companies with at probable product on market in 2021. Candidates could be Saniona or Invisio and in a year Storytel or Gomspace.

When we reach 2019, the portfolio most likely will be a balance of phase 1 and phase 2 shares. Until then it is probable that the portfolio in total will still be subject periods with to shrinking value and individual shares losing ¾ of its value in 6 months…but to be honest: three shares out of eleven going down more than 70 % in the first six months of 2017 hurts!

Check out my growth share portfolio, the share price trigger list or my EGS (Evaluation of Growth Shares) Model.

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