Darren Cornish, who works as a customer experience director, says he invests to be “master of his own destiny”. He explains: “I love my job but some day I’d like to be captain of my own ship. And that means not having to work for money if I don’t want to. I’d rather have my money working for me, than me having to work for my money.”
To this end, Cornish, who is 45, has started to take a more active interest in investments in recent years.
Over the past couple of years he has consolidated some older company pensions into a SIPP, and taken out ISAs for both himself and his wife. He says: “I’ve worked for several larger corporates in the past including Aviva (AV.), Axa (AXA) and E.ON (EOAN) so have shares in these companies. Any cash bonuses in the past were used to try and pay off some of the mortgage, but now I’m looking to invest more actively into my SIPP and ISA.”
Part of his strategy has been to diversify his holdings so it is less concentrated in just a few blue chip shares. He has a blend of funds, investment trusts and individual equities in both these ISA and SIPP portfolios. He adds: “It suits my mindset to be a bit more conservative with the SIPP and take a few more chances with the ISA but overall I treat them similarly.”
Technology Has Delivered Strong Returns
Cornish is keen on technology stocks and thinks this sector has the potential to deliver long term returns. As a result, he currently has investments in ARM Holdings (ARM) and Apple (AAPL), and the biotech fund Polar Capital Healthcare (PCGH).
This week it was announced that ARM Holdings is to be bought by Japanese conglomerate SoftBank in a £24 billion deal. The deal needs the approval of shareholders and the takeover panel to proceed, but both are thought likely.
ARM Holdings makes the chips that appear in many processors and smartphones. Morningstar has described the company as having a “wide economic moat”, meaning it has a competitive advantage over rivals in its sector that, Morningstar believes, is difficult to breach.
Prior to this takeover bid, Morningstar analysts noted: “We believe there are few firms that have the financial and technical wherewithal to internally develop the intangible assets required to replicate ARM designs.”
This is thought to have made it an attractive to SoftBank who are looking to develop chip technology in many household objects.
Apple, which is listed in the US, has a four-star rating from Morningstar reflecting its outstanding performance in recent years.
Morningstar analysts said: “We believe Apple's strength lies in its experience and expertise in integrating hardware, software, services, and third-party applications into differentiated devices that allow Apple to capture a premium on hardware sales. Although Apple has a sterling brand, strong product pipeline, and ample opportunity to gain share in many end markets, short product life cycles and intense competition will prevent the firm from resting on its laurels, or carving out a wide economic moat, in our opinion.”
Funds for Niche Exposure
Morningstar has a similarly positive view on the four-star rated Polar Capital Healthcare fund. This has delivered a 14% return over the past five years compared to a 11.5% return from its benchmark.
Cornish says he has generally stayed clear of the retail sector when it comes to investing, but he does have a holding in Amazon (AMZN). He also has a decent chunk of his money in housebuilders such as Taylor Wimpey (TW.) which has performed well in recent years, although shares have taken a hit post-Brexit.
Amazon is another stock which Morningstar analysts believe has a strong position in its market place and is well defended from competitors. It has a three-star rating. Morningstar analysts said they were more confident now that the building blocks were in place to support assumptions on longer-term margin expansion.
The Dangers of Buying into a Falling Market
But it’s not all been plain sailing. Cornish explains: “I bought into Tesco (TSCO) and RBS (RBS) when I thought that things couldn’t get worse - but they did. I was trying to catch a falling knife and failing.”
Ken Perkins, a Morningstar analyst, agrees it could still take several years for Tesco to reverse its fortunes. He says: “We believe Tesco's scale allows the firm to operate more efficiently than many competitors, and its convenient locations and loyalty program should continue to drive traffic. However, we don't have enough confidence in Tesco's ability to sustain excess returns over the long term.”
Cornish says most of the funds he’s invested in have shown steady returns. “Woodford Patient Capital (WPCT) has been through a bad period of late, but it has patient in the fund name so for this reason I will hold on.”
Taking a Long Term Approach
Cornish says he aims to invest for the longer term and hope for steady returns along the way. “In my line of work I’ve seen a lot of people who are very active traders who are in and out of stocks very rapidly – that isn’t for me. I just don’t have the time or knowledge.”
Although Cornish says he doesn’t try to time the market he says he did snap up a couple of stocks in the market turbulence after the Brexit vote. “They have bounced back well,” he says.
Generally though he prefers to invest on a regular monthly basis, to try to iron out the inevitable ups and downs of the market. “It’s also a good discipline as the direct debit leaves my account before I can think twice about it.”
Cornish describes himself as an obsessive Beatles fan and is also a keen runner and regularly competes in ultra-marathons. This involves extensive training and Cornish says he believes a similar disciplined approach will hopefully pay dividends when it comes to his finances, and allow himself and his wife to enjoy a more prosperous future.
