As an employee at a start-up business, Stewart Vickers often finds himself drawn to smaller companies with high growth potential for his investments.
The 23-year-old started investing when he graduated and got his first job in the insurance industry. With interest rates at rock-bottom he was looking for a way to grow his money to help him get on the property ladder.
"To this end I’ve mainly invested in shares targeting high growth," he says, "Although as market conditions have weakened, I’ve shifted more towards exchange-traded funds (ETFs).”
ETFs in his portfolio include iShares Momentum and S&P Dividend Aristocrats, both of which target specific slices of the US market. Alongside these, he also holds a number of direct sharholdings and has been very happy with the returns he has achieved so far with investments in Microsoft (MSFT) and Google-owner Alphabet (GOOGL).
Both of these US tech giants have delivered impressive returns for investors over the past decade. Microsoft — which has a four star rating from Morningstar — has seen its share price grow from $26.84 at the start of 2013 to $139.68 today.
Alphabet has seen a similar stratospheric trajectory. According to Morningstar data, its share price has grown from $352 in 2013 to $1,242 today. The company has a three-star rating from Morningstar, which notes that while the share has a “high” rating for uncertainty, it also has a wide economic moat - the firm dominates global internet searches, making it difficult for rival companies to edge into its market.
Stewart, who lives in London with his partner, says: “These may be primarily tech stocks, but they are market-leading businesses which are increasingly looking to diversify. They both also have a huge influence over how we live our lives.”
But not all of Stewart's investments have been so successful, particularly his holdings closer to home. One such company is London-listed Burford Capital (BUR), a firm providing litigation finance and a range of other activities including insurance and risk transfer, law firm lending and corporate intelligence.
Shares climbed significantly over 2016, 2017, and 2018, but more recently there has been a precipitous fall. This is reflected in returns to investors: according to Morningstar data investors have seen total annualised returns of 46.95% over five years, but a loss of 49.38% over the past year.
Stewart says: “I liked the fundamentals of this company, but have been hard hit by the ‘short attack’ on the stock, which prompted shares prices to fall. I don’t know now whether to buy more on this fall or hold out in safety.”
Indeed, Stewart has learned the hard way that investing can sometimes involve hefty losses. One of the first shares he invested in was Thomas Cook, which last month collapsed after racking up substantial losses and unsustainable debts.
Stewart says: “This was one of the first investments I made. I bought a small amount, having noticed that the share price had already fallen significantly. I thought it was a big brand that had fallen as far as it could and that it would recover.”
The share price did rally initially, which Stewart says he took as “validation” of his theory, prompting him to buy more, only for the shares to crash to zero.
He says: “I’ve learned a lot more about how to look at company report and accounts, about balance sheets and the role of debt.”
This isn’t the his only UK shareholding that has struggled in recent years. Stewart also has a holding in Sirius Minerals (SXX), a UK-based company that produces multi-nutrient fertiliser. This small stock saw significant growth in its share price during 2016 but the price has subsequently collapsed: investors has seen total losses of 85.77% over the past year, according to Morningstar data.
Stewart says: “I thought a mine backed by the government was a safe bet, and hoped this share had good growth prospects.“
Stewart has a smaller exposure to Sirius in his portfolio, and has not yet sold the position. He says: “At least I didn’t invest my savings in it like many people did. There’s a lot of infrastructure there, that I am confident can be turned around, although probably with severe dilution of value to shareholders.”
Stewart invests via robo-advisers Wealthify, which he liked because it doesn't have any minimum investment requirements. Through this he has a stocks and shares Isa, Lifetime Isa and a general investment account.
When it comes to choosing investments, Stewart adopts a few ethical principles. He will not invest directly in the tobacco industry, although he admits that it is harder to avoid this if he is investing in index-wide ETFs. He says: “I don’t like investing in this sector. It’s a killer and stock analysts seem to celebrate reports of younger people taking up smoking.”
Similarly he avoids fossil fuels, although again he has some exposure via his workplace pension and ETF holdings. Aside from his equity investments, Stewart also has some cash savings.
He says: “I also have some NS&I savings which I often dip into when I see a stock buying opportunity. I also have a cash savings account via a start-up known as Chip. This had an early offer where I received an additional 1% interest for each friend referred. As a result these cash savings are now yielding 4%.”
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