Arthur Weiss has long been fascinated by high-tech investments, and it’s an area that has served him well so far in 2020.
The 64-year-old old is looking to investing in industries with the potential to grow in the future, and picks stocks for his Isa and self-invested personal pension (Sipp) with this in mind. Arthur, a self-employed market intelligence researcher, says: “I’ve had an interest in health and biotech for some time and hold a number of investment trusts focused on this area.”
Why I Like Growth Stocks
Arthur has particularly been on the lookout for actively-managed funds and tracker funds that offer exposure to areas such as 3D printing, nanotech, robotics, artificial intelligence and graphene. But tech doesn’t always have to mean futurist industries; a particularly canny investment in recent years has been grocery delivery service Ocado (OCDO).
“As a general rule, I have to have a gut feel about a sector or believe in the company before investing,” says Arthur. “With Ocado, I was already a customer of the company and liked the service before I purchased shares a couple of years ago.”
The business model seemed like one with growth potential, and the firm has had a further boost in the wake of the Covid-19 pandemic, which has sparked a surge in households looking to get their shopping delivered, rather than risk going to the supermarket. Few could have predicted recent events, and since first investing Arthur has seen the value of his holding double.
Ocado has a two-star rating from Morningstar analysts, who describe it as an “online retail disrupter”, recognizing its role as one of the first niche online grocers. Morningstar analyst Ioannis Pontikis says Ocado Group offers investors “unique exposure in one of retail’s largest and most dynamic segments”.
In the past five years the company has delivered annualised returns of 37.65% for investors, compared to an annualised 2.43% return from the FTSE 100 over the same period.
In a similar vein, Arthur also invested in AJ Bell (AJB) when the online investment platform that more recently floated on the stock exchange in 2018. He already used the company for his Sipp – his ISA is with Barclays — and has been happy with the service. Again, with more people managing their own money, and using online services, he believes there is growth potential in this sector.
Picking Investment Trusts for my Pension
In picking trusts for his portfolio, Arthur doesn’t tend to follow particular fund managers: “I’ve always felt it is quite high risk simply to buy on the back of one fund manager’s record,” he explains. “If that manager fell under a bus, then there would be no safety net! And the recent problems with Neil Woodford’s fund has shown that even good fund managers can fail.”
Instead, he invests in a mix of specialist trusts, such as four-star rated L&G Cyber Security ETF (USPY), and larger global trusts, like the gold-medal rated Scottish Mortgage (SMT), which invests in large-cap companies with a bias towards industry disruptors.
While Arthur has been happy with the performance of both of these trusts, not all his investments have delivered such good returns. One investment he has not been happy with recently is private equity trust 3i Group (III); it has delivered annualised returns of just 1.4% to investors over the past three years. Its longer-term record is more impressive, with annualised returns of 16.33% over 10 years, according to Morningstar data.
And while holdings like Ocado have doubled in value, he hasn’t done as well with Cadence Minerals (KDNC).
He says: “I was looking to invest in a company outside China that was trying to mine rare earth minerals. As China has almost a monopoly on this, and these minerals are essential for many computer and tech processes, I though another source would likely be very profitable.”
Rare Mineral Earth appeared to be doing just this. But Arthur says the company, which has subsequently become Cadence Minerals, has been one of his worst ever investments: “The shares are current worth around 10% of what I paid for them.”
Despite that, he is still holding on to his shares, believing there is little value in selling at this point. He has previously had luck with so-called “penny shares” which has similarly underperformed and then suddenly shot up in value, and is hoping for a similar recovery.
Why I Set up a Sipp
Arthur, who lives in North London with his wife, first started managing his own investments in the 1980s, inspired by big privatisations such British Gas [now Centrica (CNA)]. These have, on the whole, been excellent investments for him. “In some cases, it was like free money,” says Arthur. “In most cases, share prices went up and I sold before they fell.” There were, however, one or two privatisations that were not quite so lucrative, such as AEA Technology, which floated in 1996 and eventually put itself up for sale in 2012 after a string of profit warnings.
It was during this period he started putting money into a pension with Equitable Life, which subsequently closed after promising unaffordable guaranteed annuity rates to investors. Arthur says: “After that, I thought it would be better to manage managing my pension for myself. By the time I retire, my pension will be a combination of what I’ve invested myself, some property income, a small private pension plus the State pension.”
