My Pension Investments Have Increased Tenfold

Investor views: Private investor Russell Fryer is banking on smaller companies to help boost the value of his pension pot 

Emma Simon 26 February, 2020 | 10:09AM
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Upon reaching their 60s, many investors are likely thinking about how to draw down from their pension pots or take an income from their investments, but Russell Fryer is still trying to grow his money. Aged 62, Russell is happy to keep taking risk as he aims to increase the value of his pension pot. 

"I have always been a higher-risk investor," says Russell. "Initially, I tended to have more money in funds but over the past 15 years or so I have been investing more into individual stocks."

Typically, Russell has around 15 to 20 stocks in his portfolio and while he knows this is a higher risk strategy, he believes these stocks offer a good opportunity for growth. "I have seen good returns from some of my investments along the way, although there have been a few that have not performed well at all, where I have lost every penny," he says. 

Russell, who is divorced and lives in Worthing, has worked in the financial services industry for much of his career and now works for a firm that raises money for technology businesses. This latest career move has helped inform some of his own investments into start-ups and into the tech sector. "I am not anticipating retiring any time soon, so I am hoping my investments will continue to grow and will eventually help to provide a decent income when I do stop work," he adds.

One of his best investments in recent years has been AB Dynamics (ABDP), a firm involved in designing and manufacturing test equipment for vehicles. Shares have been on an upward trajectory, rising from 181.74p to £19 over the past five years. He initially invested £600 in the shares and his holding has increased tenfold to more than £6,000, not including some profit he has taken from the holding along the way. "I continue to hold it and hope it will continue to deliver good returns," says Russell. 

Doing the Research

When choosing investments, Russell likes to do his own research on funds and stocks, and subscribes to a number of different publications to help him. "I don't necessarily follow their recommendations," he adds. "I like to apply my own layer of knowledge. For example, I have been wary about the retail sector so would not buy into companies in this area."

He did, however, invest in some defence companies ahead of the last US election in 2016 on the belief that Donald Trump looked likely to be the next President and seem set to increase his spending on defence. Russell invested in Lockheed Martin (LMT) and Leidos Holdings (LDOS). 

Rated three stars by Morningstar, Lockheed Martin is one of the world's largest defence contractors. Morningstar analysts say the company has capitalised on the rebound in defence spending under the Trump administration, and project at least 5% year-on-year growth in 2019 and 2020.

Morningstar analyst Joshua Aguilar says: "We like Lockheed's portfolio of franchise programs, combined with its solid management team, which continues to focus on returning excess cash to shareholders. We believe US defence outlays, which lag the budget, will continue to grow over the next fewy ears and wide-moat Lockheed is well-position to capture this." 

Away from individual stocks, Russell holds Neutral-rated Aberdeen New Dawn (ABD) investment trust, which focuses on frontier markets, Neutral-rated Fidelity India Focus fund, and Bronze-rated First State Global Listed Infrastrature. These funds allow him to access regions and assets which are harder to invest in as an individual. The returns on these funds have been reasonable, he says. The Aberdeen trust is up 35% since he invested, and the First State fund 40%. 

Small Companies, Big Losses

And while individual stocks have delivered some of his best returns to date, they have also led to significant losses in some cases. "One of the investments that really grates is Sirius Minerals (SXX), which I no longer hold," he says.

Sirius Minerals is a producer of multi-nutrient fertilisers and its shares rose steeply in the early part of 2016, before collapsing. According to Morningstar data, investors have seen a total loss of 74.23% over the past year alone. 

"Like many other investors, I was optimistics about its prospects for producing fertiliser and potash in Yorkshire," says Russell. "But it failed to raise the funding it needed and the share price has since dropped dramatically. Still, this is always a risk when investing in smaller companies." 

Another disappointing holding has been Redxpharma (REDX), a pharma firm principally engaged in drug discovery, pre-clinical development and licensing. Investors in the stock have endured annualised losses of 40.67% over the past three years. Russell still has the shares in his porfolio, having bought on a tip seven or eight years ago, but says the holding is now "practically worthless". 

 

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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About Author

Emma Simon

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