The very little research, but are these really hopeless cases? portfolio vs. FTSE-250

Regular readers of my blog will remember that, for a bit of fun back in 2011, I decided to see how the share prices of eight companies, which had recently taken a bit of a battering, would compare over time to the fortunes of the FTSE-250. I suppose it would be fair to say that one or two of the eight companies could be considered high risk. Indeed one of the companies was Game Group which subsequently went bust.

You can read my original blog here:-

http://michae1mouse.blogspot.co.uk/2011/08/very-little-research-but-are-these.html

My last update was in March of this year where I reported a good turnaround in the fortunes of the hopeless cases portfolio, but with the FTSE-250 still well ahead in terms of it's performance (21.4% against 41%):-

http://michae1mouse.blogspot.co.uk/2013/03/remarkable-turnaround-in-fortunes-of.html

So what's been happening since March?

Well, you may or may not be surprised to know that the FTSE-250 has now gained 48.5%, but more remarkably the hopeless cases portfolio is now showing a 46.6% gain. This is despite a right off in the virtual capital invested in Game Group.

The two biggest stars of the portfolio are Thomas Cook and ITV. In August 2011 their share prices stood at 43.55p and 55.85p respectively. Currently TCG is 150.1p and ITV 167.6p, gains of 244.7% and 200%.

Should we have expected these gains and risked the house with an investment? Well retrospectively it  seems obvious that these were potential multi-baggers in the making. Both companies are huge brands, and if they weren't going to go bust and could be turned around, then subsequent share price gains now appear inevitable. The power of hindsight is wonderful.

However, at the time there were no guarantees that either company wouldn't go the way of Game Group. In fact both TCG and ITV share prices did fall into the teens at one stage, and I think I'm right in saying that both have more than ten bagged since those dark days. Well done to the investors that got in at those levels. Fantastic returns.

The other companies that have posted gains include Vodafone (+21%), Cable and Wireless Communications (+26.4%) and Aviva (+16.5% and +13.8% respectively). There are two figures for Aviva since I reinvested the profits from Cable and Wireless communications into more Aviva shares. See March blog above for reasoning.

The only loser in the portfolio at the moment (apart from game Group) is Man. Group (-61%).

Over the past two years I do find it interesting that this 'hopeless' portfolio is less than two percentage points below the FTSE-250, given that GAME went bust and MAN has lost more than 60% of its value. Apart from TCG and ITV, the other picks have underperformed the indices so far. Neither TCG or ITV were bought anywhere near their lows.

It does bring me back to a point I made in a previous blog:-

http://michae1mouse.blogspot.co.uk/2013/07/a-week-of-mixed-fortunes-for-two.html

"Some investors would argue that the preservation of capital is the most important dictum in investing and I'd agree. However, if you're a stock picker I'd strongly argue that it's the whole portfolio of shares that you look at and you shouldn't get too hung up about any individual stock losses."

and

http://michae1mouse.blogspot.co.uk/2013/06/regrets-i-have-few-but-then-again.html

"As mentioned above, it's never nice when an investment goes against you, but if you have a reasonable ability to pick out the hidden gems amongst the micro-caps (mostly AIM listed) then the rewards from the winners more than negate any losses incurred elsewhere.

As a scenario, let's say that you buy a portfolio of ten micro-caps at £1000 each. Two five bag, six lose half their value and two go bust. Not particularly good stock picking, but your original £10000 investment is now worth £13000 and you've made a 30% profit.

Unless you've proven to yourself that you can pick potential multi-baggers then of course the strategy above isn't going to work for you, but if you've got a proven track record in stock picking and are confident in your own ability then you're likely to do far better than the scenario detailed above. With an added bit of luck you've also got the chance of picking an ASOS or LO-Q for instance that will multiply your original investment manifold times."

P.S. I notice that the New Pistoia Fund is slowly increasing it's holding in Indigovision shares. I'll stick my neck out and say that a bid looks likely in the medium term at around £4 possibly?

As ever no advice is intended or given and I simply write the blog for enjoyment.