Simple schemes to boost members’ participation in … Schemes To Stimulate... · Semi-sys - post review criteria for final selection Criteria Value Maximum Policy Pass/Fail Members

INVESTMENT CLUBS DAY 2012

Mourad KaraThe Mobius Investment Club

[email protected]

www.mobiusclub.co.uk

Investment Clubs DaySixth National Investment Clubs Conference

Simple schemes to boost members’ participation in investment selections & decisions

03rd November 2012

World Money Show

QE II Conference Centre

St James Suite London

Find out what other investment

clubs are up to?

(or How to keep it interesting)


Outline

1. Meet the club

2. Members’ involvement

3. Selection approach

4. Initial investment methods

5. Timeline for different ways

6. Full toolkit and Systematic

7. Semi-systematic approach

8. Lessons learnt

…. "Bulls make money. Bears make money. Pigs get slaughtered“ ….


First - Meet the club - A quick snapshot

The Mobius Investment Club

� Set up in October 1997

� Based in West Yorkshire

� 9 members (9M)

� Average £50 - £100 / month

� Unit Valuation System

� Current NAV ~£60k

� Use COW2000 for accounting

� Meetings in homes - rotating

� www.mobiusclub.co.uk Proshare Clubs Award Winner 2005 and 2006 (runner up 2004 and 2007)

Objectives: to learn, to enjoy, to invest


Members’ participation in investing

Analysis

Research

Prepare

Submit

Review

Decision

Deal

Buy

Monitor

Shares

Deal

Sell

Add to & enhance club’s portfolio

Manage & watch club’s portfolio news, updates (share champions)

Keep a list of good shares for future

submissions

Usually at meetings or offline; prepare, review &

contribute; prior submissions


Selection & investment approach

Selection & Decision

�One member�Sub-committee

�Allocation (sectors,

markets, budgets etc.)

� Allocation - rotating

�Open to all members�Others..

�One member one vote

Investment Profile

� Top-down versus bottom-up

� Long term and short term

� Mainly UK stock markets

� Markets and Sectors

� Mainly shares/stocks (~ funds)

� Stop/Loss

� Blend of investment profiles

� Technical Analysis & fundamentals

Portfolio

•16 slots•12 shares

• 4 funds

• Max ££ /share

• Cash reserve

• Reviewed AGM


Initial investment approach

shouts tips (5,3,1,0)

1997 20122002 2007

Full (toolkit) investment proposals

July 04 July 09July 99

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£60,000

£70,000

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NAV portfo lio

2005-06

�Only 4 new proposals in 12 months

� 70% in cash (not by choice, like in 2008)

� Re-invest in previous shares

� Little or no new research/updates


Timeline for different investment approaches

shouts tips (5,3,1)

1997 20122002 2007


Light-touch investment proposals

Systematic investment proposals

Semi-systematic investment proposals


speculative

Funds


Systematic & Full Proposals

Systematic approach

�Select criteria, schedule & policies

�Discuss & agree concept

�Growth, Value or Recovery filters

�Monthly run (up to max slots)

�Top share meeting criteria (no consultation)

�Report to members

�Share bought (if appropriate)

�Add to main portfolio (S/L monitor cycle)

�Review criteria, schedule & policies periodically

�Idea from Rolling Stocks IC – modified / adapted

�Variant: Conditional sys: 2 working days to reject top share (min 50% members’ support)

�First Year (pilot) – max 6 shares - (£9K) 1year

Proposals (using full e-toolkit)

�Document (8 Sections)

�Submit prior to meeting

�Inspired by 2000 ProShare Toolkit

�Modified – Club’s investment profile

�Standard Template

1.Company activities, details and description

2.Five-year business and profits growth analysis

3. Are management doing a good job?

4. Is the share good value for money today?

5. Earnings per share graph

6. Technical Analysis (Charting, timing)

7.Reasons for past growth (and future)

8.It’s make your mind up time


Semi-sys highlights

1. Discuss & agree concept

2. Select criteria, schedule & policies

3. Shortlist 5 shares – report issued

4. One-Week turnaround - analysis

5. Respond to Coordinator only

6. Justify your selection (personal preference)

7. Select up to 3 shares; (5,3,1,0 points)

8. Total up to 9 points (all selections)

9. Monthly run of semi-sys (up to max slots)

10. Report will all contributions distributed

11. Stock bought if appropriate

12. Add to Portfolio (S/L, monitor cycle)

� Variant – Time it to a meeting for discussion (after submission)

� First Year (pilot) – max 6 shares - (£9K) 1year


Semi-sys - members’ submissions review

Volex FennerTT

ElectronicsKingfisher

Computacen

ter total Max/share

Bob 1 3 5 9 5

Glynn 5 1 3 9 5

Hamood 3 3 1 7 3

Karim 3 5 1 9 5

Martin 5 1 3 9 5

Mourad 5 3 1 9 5

Ray 5 3 1 9 5

Tom 0 0

Total 9 21 11 12 8 61 33

Davis Bodycote Clinton Halfords John total Max/share

Anita 3 5 8 5

Bob 0 0

Karim 5 3 8 5

Liane 0 0

Martin 5 3 8 5

Mourad 1 5 3 9 5

Ray 3 5 8 5

Richard 0 0

Total 1 21 3 16 0 41 25

July 2012 run (Growth)Hamood (7/9 pts), all others

max 9pts

April 2008 run (Value) Bob (0/9 pts), some 8 & 9 pts.Bob is a Chartist (TA) and hence timing

wrong for proposed selection

� Recall (Step 6): members make investment analysis selection using their own preferred profile: TA, fundamental, sector preference, valuations, etc


Semi-sys - post review criteria for final selection

Criteria Value Maximum Policy Pass/Fail

Members participation:

Number of members who responded7 8 >0% PASS

Responding members confidence in short-list:

Total number of points from all responding members

available for all shares

61 63 >70% PASS

Winning share collective support

Total points of winning share relative to maximum

possible

21 33 >50% PASS

Amount to invest £2,500

Volex FennerTT

ElectronicsKingfisher

Computacen

ter total Max/share

Bob 1 3 5 9 5

Glynn 5 1 3 9 5

Hamood 3 3 1 7 3

Karim 3 5 1 9 5

Martin 5 1 3 9 5

Mourad 5 3 1 9 5

Ray 5 3 1 9 5

Tom 0 0

Total 9 21 11 12 8 61 33

Four basic rules

� Evolved & adapted over time

1. Members’ engagement

2. Strength of shortlist proposed

3. Collective support of winner

4. How much to invest

Max £3k per share

Max pts by responding

1. >70% then £3k

2. > 60% then £2.5k

3. >50% then £2k

4. <50% then £0k


Portfolios Four Sections in Portfolio

1. Standard

2. Systematic

3. Semi systematic

4. Funds

SCREENER (example) - Growth

Step 1- Any UK market- Mkt cap > £50M- Shareholder Fund >0- Total Cash > 0----- 0<PE<15- 0<PCR<15- 0<P/CF<15- 0<PSR<15------ EPS Gr (past 4 years) >0- EPS Gr n >0- EPS Gr (n+1)>0- ROCE >15%-----Variables obtained for checks:- Net Gearing- Net cash/ In Out from Operating Activities- Operating Pretax profit- Operating Profit/Loss

Step 2: Tool: MS Excel spreadsheet manipulation• Cashflow > Earnings • Net Gearing less than 50% • Shares with highest combination of EPS Gr FundsM&G Corp. Bond

FundsBlaclRock Gold & Gen

FundsETF Brent Oil

FundsJP Morgan India

StandardTracsis

StandardStanley Gibbons

StandardShell

StandardPersimmon

Semi-SysPace

Semi-SysHill & Smith

Semi-SysFisher (James & Sons)

Semi-SysFenner

Semi-SysDiploma

StandardBG Group

StandardAlbemarle & Bond

PortfolioStocks - October 2012


Timeline for different investment approaches

shouts tips (5,3,1)

1997 20122002 2007


Light-touch investment proposals

Systematic investment proposals

Semi-systematic investment proposals


speculative

Funds


Comparison (engagement)

Schemes Advantages Disadvantages

Shouts, Tips (5,3,1)

Very little preparation or scrutiny

Early days

Full participation

Poor selections (+ submission on the day)

No incentive to prepare or improve analysis

Full Toolkit proposal

Comprehensive analysis of shares

Rich (in depth) debate about shares

Understand “the businesses” and portfolio

Takes long time to prepare:

Too few submissions (poor participation)

Frustrated proposers (if reviewers not up to speed)

Light- touch proposals

Easier to prepare proposal

More submissions made (before meetings)

Club has built experience in scrutiny

�Quality can drop (revert to shout & tips)

�Poor selections

�Wide variance in quality of submissions

�No incentive to properly research submissions

Systematic

proposals

Selection made based on collective profile

Spill-overs to research the other stocks

Collective ownership (refine policy/criteria)

�Not much participation after setting policies

�No incentive to do more (rely on systematic)

Semi-systematic

proposals

Short-list made based on collective profile

Analysis and submission not onerous

Really good participation throughoutSpill-overs to research the other stocks

Collective ownership (refine policy/criteria)

Sometimes less incentive to do more (rely on semi-

sys).


Lessons learnt

• Understand investment/risk profiles of members

• Understand club’s profile (the resulting blend)

• Define strategy based on the above two points

• Innovate – try new things - experiment (really!)

• Write your rules, even simple ones – keep it simple

• Talk to other clubs, borrow, adapt, improve ideas & share

• Review at AGM (or other periods) – refine & document

• Package roles into smaller functions

• Put effort (really) on welcoming new members in (particularly established) club!

• Keep momentum going (meetings, emails, etc..)

• Ensure not 1 or 2 members take over or overpower club/meetings!

• Focus on collective participation and ownership

• Focus on constructive conflict and fairness

Share champions Dealing team Auditors x2

Tax officer Webmaster Chairman

Treasurer Portfolio reporting

Compliance officer Portfolio logs


Give it a try

We have a number of documents online

� The semi-sys and systematic (policy) proposals

� Multiple stock selections (monthly)

� Members collated responses and reviews

� Full toolkit company proposals

� Try, modify, adapt & improve (let us know)

�Web site: www.mobiusclub.co.uk

�Most reports are in http://www.mobiusclub.co.uk/reports/

�Email contact: [email protected]


How to keep it interesting & stimulating!

Mourad KaraThe Mobius Investment Club

[email protected]

www.mobiusclub.co.uk


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Unit Value (in pence)

FTSE-allshare index rebased

Investment performance

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Documents

Simple schemes to boost members’ participation in … Schemes To Stimulate... · Semi-sys - post review criteria for final selection Criteria Value Maximum Policy Pass/Fail Members