The Daily Telegraph - Saturday - Money
‘We make all of our investment choices sober’
Investing through the current market turbulence has been incredibly difficult. But the Penny Black investment club in Macclesfield has managed to keep its losses under control to an impressive degree by using a simple technique available to all investors.
The markets may have fallen by more than 30pc since their peak in February yet the club’s members have lost only 10pc.
Derek Way, the treasurer and an 87-year-old retired accountant, admitted that the past few weeks had been testing, particularly as the club meets only once a month. But he put its strong performance, relative to the carnage in the markets at least, down to its use of “stop-losses”. ses”.
Available to ordinary investors through fund shops, ps, a stop-loss limits how ow much a share price e can fall before it is automatically sold. .
At the start of February the club had stop-losses on seven of its holdings. They stipulated that any share that fell by more than 10pc from its peak would be sold; all have been triggered in recent t weeks. This left the club with roughly £35,000 in cash, as well as £60,000 still invested in shares.
At their meeting g last week the members decided to reinvest the cash into a number of stocks, tocks, but they put limits on all 20 holdings dings in the portfolio as a precaution. A week later the club was left with just six ix holdings after 14 stop-losses were triggered. riggered. Now it has just £30,000 invested sted and £60,000 in cash.
“I think we’ll wait ait until the next meeting to decide what to do and let things calm down a bit,” said Mr Way.
The club in its current form was established in 2018 and the recent losses mean that over the 23 months of its existence it has made a loss, although once dividends have been taken into account it has beaten the market, even after the costs of running the club. The club will last for five years, at which point its holdings will be sold and the proceeds distributed among the 16 members. Each contributes £200 a month, alongside a £2,000 deposit. At the end of the five years the club will be re-established, giving investors the chance to invest from scratch or bow out. The current club is its fourth incarnation. The first began life in 2000 and the name Penny Black was chosen by the first treasurer to signify a “small but beautiful” project. The third Penny Black made an overall return of 25pc and many members returned to join the fourth. “In the last Penny Black the big winner was Sound Energy. I think we tripled our money on that stock,” said Mr Way. But even bigger gains came from its very first investments in the early 2000s, when it bought Asos, the online shopping firm. Martin Sinker, 76, the club secretary and a retired civil engineer, said: “We bought for pennies but the share price continued upwards and at one point reached £70.” It has not all been plain sailing. Of the first three stocks the club bought this time around, none remains in the portfolio. “Walker Greenbank [the interior design firm] was a particularly poor one,” said Mr Way. “We lost money on it and sold after about four months.” Another recent mistake has been
And it seems to work: the Penny Black investment club has avoided the worst of the recent falls, says Jonathan Jones
Sirius Minerals, the fertiliser company based in Yorkshire. Although they had “great hope” for the firm, it ran into difficulties and the club eventually sold when Anglo American, the mining giant, tabled a takeover offer.
But after 20 years of investing together, members have learnt a lot. Their main advice? Always make your decisions sober.
“Many clubs meet in pubs, but as our meetings start at 11am they are alcohol-free,” said Mr Sinker.
“However, the most important part of the chairman’s duties is to ensure all aspects of the day’s business are concluded by 12.30pm to coincide with the opening of the club’s bar for our desperately thirsty members.”
After that, he said, you should stick to the rules you adopted at the outset and keep the number of stocks to a manageable level. The club allows new holdings to be proposed but they will not be approved until the following month, giving time for members to research them.
“We have no more than 30 stocks so each member is responsible for keeping an eye on two holdings,” said Mr Way.