Patrick Daly is a keen investor who is meticulous about researching potential holdings. Patrick, who is 40 and lives in Surrey with his wife and young son, has read a lot about Warren Buffett’s style of investing in recent and is interested in a value-driven approach to investing.
“When it comes to research I read and read and read. This includes three newspapers a day and around £30 to £40 on books and magazines each week. Reading non-fiction books has allowed me to formulate some thematic investment ideas. I then analyse these ideas, primarily with a value investing philosophy.”
Patrick, who is an aeronautical engineer, has dabbled in investments for years mainly through Isas. But his research has led him to reconsider his pension investments: “In September last year I decided to take control of my former work pension and transferred it into a Sipp”.
Focus on Sipps
This Sipp, which is invested through AJ Bell, is now the main focus of his attention. With both his Sipp and his Isa he invests directly in shares and investment trusts rather than funds.
Patrick says he takes a disciplined approach to these investments. Around 60 to 66% of his Sipp investments are focused on high-paying dividend companies and these will yield at least 4%, although Patrick is ideally looking for a 5% yield.
He then has another 20 to 25% of his Sipp portfolio in lower-paying dividend stocks — with a yield of between 1% and 4%. The remaining 10% to 15% of his Sipp portfolio is focused on growth stocks.
When it comes to these high-yielding stocks, Patrick currently holds Tufton Oceanic Assets (SHIP), an investment company that holds a diversified portfolio of second-hand commercial sea-going vessels.
This is a relatively new investment trust, which has yet to build up a three-year track record, but when Patrick first invested in this trust it was paying a yield of 7.65%.
Around a third of the trust’s holdings are invested in container ships, with other investments in product tankers. Collectively the trust owns around 21 vessels in all. Patrick is optimistic that this trust will continue to benefit from the current demand for containerships.
Other investments include ABB (ABBN) and Neste (NESTE), both of which Patrick say fit into his portfolio of smaller dividend payers.
Robotics and Automation
Both are involved in forward-looking industries. ABB for example is, according to Patrick, the only company to be a major player in all three core automation and robotics areas: robotics, factory automation and process automation. It is also heavily involved in electrification, which is a key investment theme for Patrick. It is also a market leader in grid automation, which involves real-time monitoring and control of “distributed energy resources” – in effect, smoothing out the supply of renewable energy into the grid. The company has seen a strong rise in its share price over the past year according to Morningstar data.
Neste has transformed itself from being a regional oil refinery to becoming one of the world’s leading producers of renewable diesel and sustainable aviation fuel (SAF). Patrick says he expects demand for SAF to increase as airlines seek to reduce their carbon emissions. However he points out that the company’s main problem is supply although it is seeking to address this by building a new refinery in Rotterdam.
High-Risk Mining Shares
Despite his thorough research, Patrick says a few of his investments have failed to deliver.
For example, he used to track a number of small-cap mining stocks with his Isa. “I’ve travelled to Africa many times and read a huge amount on this sector.
“Despite this giving me a headstart in identifying some of these miners, I have found it is almost akin to investing in venture capital start ups, where you have to back a lot in order to emerge with one winner.”
Patrick says these are longer term investments. “I am primarily investing for retirement, ideally to make my retirement as comfortable as possible.”
In recent years his strategy has changed as he has switched from running an Isa to managing his own pension. “I’m more conservative with my selections now and realise the importance of a solid dividend. I’m also playing to my strengths, I hope, by integrating the wealth of information I read on a macro level with a more value-led bottom-up approach to investing.”
