Shares for the future: building a forever portfolio

After decades of active investment, our companies analyst ponders his future and discusses changes to his stock ranking system.

Many years ago, before my life was delineated by crises - the pandemic, and the great financial crisis - I met Dr John Martin at his home somewhere in the home counties.

I cannot remember which home county, it might have been Oxfordshire or Berkshire because I drove south west from Cambridge, but fortunately I wrote down what Dr Martin told me.

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It was February 2005 and, believing there is much to be learned from readers of my articles, many of whom are more experienced investors than me, I had gone to interview him for a profile that was subsequently published here on interactive investor.

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Learning from our elders and betters

By the time I met him, Dr Martin had been retired for 16 years.

He was not a medical doctor. His doctorate was about the corrosion of aluminium alloys, and he had worked most of his life as a metallurgist at the Atomic Weapons Research Establishment at Aldermaston.

As a side hustle, he had traded aluminium and zinc. At first, he drew moving averages by hand but, as computers became available, he adopted them. First a Commodore Pet, then an Amstrad.

Trading commodities did not always go his way, and he came to regard it as gambling, but he had spun £1,500 into about £30,000 by the time he retired, which, combined with a payout from a life insurance policy of £189,000, would fund his retirement (along with a modest annuity he was compelled to take under the terms of the policy).

If the numbers are modest compared to the amounts we are told we will need to retire, remember Dr Martin retired over 30 years ago in 1989 and, anyway, he was not going to fund his retirement conventionally.

He had declined to contribute to what is often regarded as a gold-plated pension, a public sector defined benefit scheme that would pay him an income for life, when he was offered it in 1952. Instead, he chose the life insurance route and the freedom to spend or invest a large lump sum when it matured.

Unconventional choices

He chose to invest the lump sum in shares that he believed would pay rising dividends, which would provide his income. True to form, he had developed a system, incorporating moving averages to time his trades and borrowing from the fundamental strategies of investors like Jim Slater, to decide the 50 or so growing businesses he would track and trade.

Although he had graduated to a PC, he was still using SuperCalc, a close relative of the first spreadsheet program VisiCalc, to manually input share prices every day. The day I spent with him the system printed out four trades, all buys: Close Brothers, Man, Liontrust Asset Management and Whittard of Chelsea.

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Now 16 years into his retirement, he was living comfortably off dividend income, and his retirement pot had grown from just over £200,000 to just under £500,000.

If Dr Martin is still with us, he is over 90 years old. I like to think he is, and still feeding prices into his computer (or perhaps just using a feed). Perhaps his retirement pot is worth £1 million now, but the reason I am retelling this story is only partly because I think it deserves to be retold.

Reaching 55

I have been thinking a lot about my conversation with Dr Martin because I have been thinking a lot about retirement, not, I hasten to add, because I expect to retire soon, but because I turned 55 in April.

I did not give much thought to this milestone as it approached, but then people started sending me letters. The Pensions Advisory Service invited me to have a chat, and my pension providers bamboozled me with guides explaining my options now that I am free to take a tax-free lump sum from my Self Invested Personal Pensions (SIPP), or indeed start drawing money from them.

Coincidentally, I buy shares with the intention of holding them for at least 10 years, which means I am currently thinking about investments I will still want to hold when I am 65. Maybe I will be thinking about retiring then...

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Back when I was 39 and quizzing the venerable Dr Martin, I was slightly incredulous of his decision to be fully invested in shares. The conventional wisdom was, and probably still is, to reduce one's allocation of shares in favour of bonds as you get older. 

His reply was also incredulous, “Don't you think that is because they are talking about people who really do not wish to do anything? They just want a safe haven for their money, so they go into bonds. It is perfectly reasonable to do. But I have devoted 30 years to trying to find a system that works. I am not going to abandon that just because I should be in bonds.”

As a fellow system designer, now perhaps 20 or 25 years into my journey, I find myself thinking more and more about Dr Martin’s words and how I might change things when I retire.

My vision, perhaps fanciful, is that I will have spent so long searching for good long-term investments that I will be able to freeze my portfolio on retirement day and the shares will be of such quality that they will keep growing (over the long term) and provide for me.

Decades of active investment will have put me in a position that I can, in a sense, go passive.

Decision Engine

Since the last update, just over a month ago, I have added one new company to the Decision Engine and re-scored three existing constituents. The new company is Advanced Medical Solutions (LSE:AMS), and the old favourites are Anpario (LSE:ANP) and the potters: Churchill China (LSE:CHH) and Portmeirion (LSE:PMP).

As usual, the highest scoring shares are at the top of the table. All of the shares in the table are probably good long-term investments, but those ranked 7, 8 and (rarely) 9 are most attractive judging by my criteria of profitability, risk, strategy, fairness and price.

The stock market is also continuously rerating shares, which impacts the price, a component of each share’s score.

I need to have another look at Bloomsbury (LSE:BMY) which flounders at the bottom of the table. I usually deem shares scoring 4 or less unattractive, but I must have been in a bad mood when I scored the publisher. It has published its annual report and it would surprise me if I did not give it a higher score when I re-evaluate it shortly.

To see how I scored any particular share in the Decision Engine table, click on the company name.

Richard Beddard is a freelance contributor and not a direct employee of interactive investor

Richard owns shares in many of the shares in the Decision Engine.

For more information about my scoring and ranking system (the Decision Engine) and the Share Sleuth portfolio powered by this research, please read the FAQ.

Contact Richard Beddard by email: richard@beddard.net or on Twitter: @RichardBeddard