Investor Views: Stock Picking to Fund Adventure Travel

Private investor Mark Taylor invests in ETFs and individual shares to build up a retirement pot - and pay for motorcycle trips

Emma Simon 19 October, 2017 | 12:37AM
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Motorcycle adventure

Mark Taylor has worked in the financial services industry for two decades and is currently employed by investment platform Selftrade, now part of the Equiniti group.

“The impact of technology on investing over the past 20 years has been huge. The time between making a transaction and settlement has decreased hugely, meaning the speed and efficiency of the process has increased immeasurably,” he says.

“In addition, the advent of electronic trading has reduced costs and the time it takes to buy or sell shares. And the emergence of online trading has allowed many investors to access a far wider range of stocks and other assets.”

But while the investment market has significantly changed over the past 20 years, he says his investment goals have remained the same.

“My primary goal is saving for retirement – if I’m lucky enough to have one. But I’m also trying to save for my children. Hopefully there will be enough to help them finish their education or to help them onto the housing ladder, and making a positive impact on the world.”

Taylor says these longer-term, more altruistic goals are also balanced by a saving pot that is dedicated to his next big motorcycle adventure.

Tax Efficient Investing in Smaller Stocks

Not surprisingly for someone who works in the financial services industry, Taylor makes use of tax allowances, by investing in both SIPPs and ISAs.

He says: “Nowadays most of my portfolio is in ETFs, but in the past I’ve concentrated more on individual stocks. Many of these have been mid-cap or smaller companies – at one point around 30% of my portfolio was in the FTSE 250.

“Some of these stocks delivered fantastic returns – although there have been a few horror stories along the way. From time to time I see or read an article about a company that catches my eye and will look to do a bit more research on it.”

Taylor says there are three key factors he looks at before deciding to invest in any one company.

“Firstly I’d have to check whether the company provided a differentiated product or service that makes it unique or gives it a competitive advantage over rival firms in its sector,” he explains. “I don’t buy companies that I don’t understand. I also try to think about what macro-economic impact could set the company back or provide an advantage.”

Taylor admits that this latter requires a bit of “creative guesswork” and reading between the lines of company reports.

He adds: “If I’m happy with this then I will look at the management team and staff. Do they have a clear view on the strategic direction of the business and are they delivering against their promises to shareholders? Has the stock got a strong and sustainable revenue source?

“Finally, I’d look at how the stock has traded in the past few months. Who are the big shareholders in this company and what their activity has been in recent months.”

Stock Successes

Taylor is the first to admit that there is no guarantee of future returns, even if stocks look promising against his checklist, but by adopting this approach he has had decent returns in recent years.

One such example is Burberry Group (BRBY). This British luxury fashion brand has delivered stellar returns to investors over the past decade, rising from £6.32 to £18.83 today.

Morningstar equity analyst Jelena Sokolova says: “Through strong execution, Burberry has transformed from an essentially wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with consistent message, good control over distribution, and a global presence.

“Burberry is the category leader in its trench coat business, enabling it to generate high operating margins in this category through scale and pricing power. Demand for luxury products is linked to GDP growth and an increasing number of wealthy and middle-class people.”

Future global growth is likely to come from China, India and Latin America, where Burberry has established a presence.

Morningstar points out that Burberry has a “narrow moat” meaning its profit margins and products are protected from competition by the strength of its brand. Its shares are currently trading above its fair value estimate of £17.20.

Selling Out of Falling Shares

Taylor has also made good returns in the past from Carillion (CLLN), the support services group, although this company has endured far more difficult trading conditions recently. The company saw its share price rise substantially between and 2003 and 2007, and again from 2009 to 2011.

But since 2014 the trend has been downwards, with a precipitous fall this year. Shares are currently trading at just 43.5p, a fall of 76% in one year.

Taylor says that while he was fortunate enough to sell his holding in Carillon before prices fell he hasn’t always sold other holdings at such an advantageous time.

One such stock was Bradford & Bingley. This former building society was caught up in the fallout from the credit crisis and after a poor rights issue the bank was eventually part-nationalised and part sold to Santander.

Taylor also invested in Connaught PLC. He says: “At the time this company looked as though it had great prospects in the social housing sector, but went into administration after a series of misleading statements, resulting in unexpected profit warnings and material losses.”

Taylor says this highlights some of the difficulties inherent in investing in individual shares and why he prefers to invest in broader ETFs today.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Burberry Group PLC1,590.50 GBP0.00Rating
Carillion PLC14.20 GBP0.00

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk