Stephen Hartley might have recently retired but he is still looking for growth opportunities in his investment portfolio.
Stephen, who has worked in financial services and energy industries, is looking forward to having more time to run his investments.
He says: “From when I started working I have always tried to invest any surplus cash. Initially I had invested in some of the Save-As-You-Earn-Schemes offered by previous employers.
“These were fairly straightforward and most of them delivered really good returns. It encouraged me to diversify and invest in other shares.”
Stephen, who lives with his wife in West London, worked in marketing for a big high street bank for many years before changing industries after being made redundant. “Working across different industries gives you a good insight into some of the challenges and some of the opportunities around. I have always been interested in researching companies and looking for stocks that have the potential to deliver good returns. I read the newspapers but also talk to friends and colleagues. Often it’s just a comment about a particular product or service they really like, but it can be worth researching further.”
While he primarily invests in company shares, he has over the years tried to diversify and has a number of fund holdings.
He says: “I know this makes sense to diversify, particularly into other geographic markets. Many of my shares are UK-based. But if I am honest I don’t find it quite as interesting. I’ve made the decision to simply buy some plain vanilla ETF tracking funds. For example I have one that follows an emerging market index, and another that tracks the Japan Nikkei 225.
“My main interest is in investing in company shares so I’ve tended to focus my energies on this, although over the years it’s come to represent a slightly smaller part of my overall portfolio.”
Profitable Shareholdings
Some of his more profitable holdings recently have been in “greener” energy stocks, which he is hoping will continue to be a growth area going forward. For example he has a holding in Drax (DRX). This renewable energy company owns four sites across England and Scotland and is involved in the production of sustainable biomass and hydro-electricty and the sale of renewable electricity to businesses.
The company also operates a global bioenergy supply business with manufacturing facilities at around 13 sites in the US and Canada.
This is a company that has delivered strong returns in recent years and may have benefited from the renewed interest in renewable energy sources. According to Morningstar data it has delivered annualised returns of 12% over the past five years. However its share price, which has shown a strong increase since 2020, is still below previous peaks seen in 2006 - although Stephen has only been invested in this company over the past three years.
Another “green” stock is Biffa (BFF) — again listed on the London Stock Exchange. This is a waste management company that provides collection, recycling, treatment, disposal and energy generation services to businesses and public sector organisations across the UK.
Stephen has seen excellent returns from this company, although the share price has dipped somewhat in recent months. However this is perhaps not surprising given the strong gains made in the last 12 months.
According to Morningstar data, Biffa shares have delivered total returns of 76.92% over the past year, comfortably outperforming the FTSE 100 which has seen total returns of just 19.17% over this period. Over three years investors are looking at total annualised returns of 15.21%.
Stephen thinks this company has also benefits from “ESG headwinds”. He says: “I think that over the past year there has been a lot more interest generally in renewable energy and companies reducing their carbon footprint. Fund managers seem to looking to invest in greener and more socially responsible companies. As a result I think a lot of money has flowed into companies like Drax and Biffa which has helped push their share price up further.
“I think this is a longer-term trend though and if there are companies that have good business models and a sound environmental track record then I think there is a real opportunity for investors, particularly those that get in early.”
However he adds that there may be some fallout from this too, with investors piling into stocks that “tell a good story” but ultimately do not offer a credible business strategy. “Research is important. I think there is a danger of ‘greenwashing’ so I do try to look at bit beyond the hype. No doubt I will get my fingers burned somewhere along the line, but I think there are some interesting opportunities.”
Taking Profits
One of the important lessons he has learned is to take profits. “It is easier said than done though. When prices are going up it easier to get a bit carried away and think this will continue indefinitely. But I’ve also learned that it almost impossible to buy or sell at exactly the right time.”
This was certainly the case with drinks maker Fevertree Drinks (FEVR). “I made some fantastic gains early on, but recently the share price has fallen somewhat. It is still a long-term holding in my portfolio, but I probably should have taken some gains a bit earlier.”
According to Morningstar investors in Fevertree have seen total annualised returns of 18.68% over the past five years, but over the past three years, investors are sitting on total annualised losses of 14.37%.
Stephen says these investments will hopefully help supplement his company pension over the years, providing additional funds for later on in his retirement if they are needed. “We’ve two children, one of whom recently graduated and the other who is at university.
“I am hoping these investments will also help give them a bit of a start when they come to either buying a house or starting their own family — or at least help pay back some of their student debt.”
