A manufacturer and distributor of reinforced polymer products. It operates in two segments, conveyor belting and advanced engineered products and is considered a world leader in reinforced polymer technology. I no longer have a holding in my income portfolio (epic code: FENR).
On 17 December I took the decision to sell the balance of my holding in Fenner. I first bought Fenner on a 9.5% yield, back in November 2008 for 68.5p and top sliced my holding on six separate occasions as the price recovered from November 2009 to February 2012, obtaining prices that ranged from 180p to 474p. The balance remaining, that represented about 16% of my original purchase, was sold at 439.63p (including costs).
During the 5 years I had an interest in the company it returned 108.5% pa (dividends not reinvested), a truly excellent performer. Some may say that had I not top sliced the investment, my returns would have been substantially higher, but then I would breach one of my cardinal rules of capital preservation. None of my investments will be allowed to breach 15% of my portfolio and no dividend from one company will exceed 20% of my total dividends (special dividends excluded).
Whether you are a long-term investor, short-term investor, trader or a gambler the same principles apply. Some professional gamblers use the Kelly formula:
K= (((B+1) x P)-1)/B
Where,
K= the amount to be risked from your total capital at any time,
B= the ratio of the amount won on a winning bet to the amount lost on a losing bet,
P = the probability of a winning bet.
Professional traders may follow Dr Alexander Elder's rule of limiting any single trade to 2% of your trading capital, which he calls "protection from sharks" and the 6% rule (stop trading for a period, for say a week or the rest of the month, if your total losses exceed 6% of your trading capital), which he calls "protection from piranhas".
The point is that it is important to develop your own set of rules that you are comfortable with, to protect your capital. If professional gamblers and traders are careful with their own capital, we as investors should certainly take time over portfolio and risk management.
My reason for selling the balance of Fenner is due to the low yield of 2.6%, with a likely growth for the foreseeable future of around 6-7%. I have invested the proceeds in topping up my investment in Unilever with a 3.8% yield and an expected dividend growth of 5-6% and topped up Bhp Billiton with a 4.2% yield and dividend growth of 6% plus the expectation of special dividends, as they fulfil on their promise to ration capex and return additional cash to shareholders.
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