I created a UK small cap stock portfolio about a year ago, and I thought it was time to give you an update on how it's doing, what stocks I bought, what stocks I sold and why, and also how I'm maintaining the portfolio. Also, I've created a new portfolio of stocks in companies involved in copper mining, which was part of my market crash shopping list, so I'll talk about that too. This video is sponsored by Stockopedia, which provides easy-to-use research tools that save you time, help you act decisively, and improve your success rate in stock markets. Let's begin with how I built the portfolio. The goal here is to create a UK stock portfolio, but to restrict the universe of stocks to ones which I like best at the moment. So, firstly, these are small caps, small companies in the UK which were exposed to the UK economy. Also, even though the UK is a cheap market as a whole, I want stocks which, even in the UK market, are relatively cheap. However, I do want certain criteria as to the quality of the companies in terms of earnings.

growth. For example, I also want to restrict the stocks to ones which are not tanking right now in terms of price but also in terms of earnings where there's some kind of turnaround story as well. Now, I used a system called Stockopedia to create the portfolio because it has rankings for UK stocks of those criteria. So, there are quality, value, and momentum rankings for every stock in the UK. So, by looking at the intersection of those three factors, we can hopefully combine all of those good qualities of a stock and the idea that quality beats junk, cheap beats expensive, and then finally that leaders beat laggards. Now, I created the portfolio about 10 months ago as I make this video, so we're almost at a year now, and these are the current stocks in the portfolio. Now, they're changing all the time for reasons which I'll discuss in a moment, but when you look at these criteria, they're not static. The fortunes of companies and their stocks changes over time, of course it does, and the portfolio has to update to reflect those.

changes but notice that it's been a little while since I rebalanced the portfolio. But the weights are roughly equal; they're roughly equal monetary amounts of all the stocks in the portfolio. So, I have no particular favorites. I just buy the ones which satisfy my criteria and which come up on top of the rankings. I've also shown you the return of these stocks in another column here, and you can see that some of them have done pretty well, some not so well, some I've recently bought, so they haven't had much time to do anything. But overall, the return I've had so far is 25% based on the money I put in and the money I've taken out. So, that's not annualized; it's the return I get on my invested money. Now, it's always worthwhile comparing your returns against some kind of benchmark, and in this case, I think it's probably appropriate to compare it with a UK small cap index. And here, I've shown you the return of the MSU UK small cap index.

tracker Cs, and you can see that that's up by about the same amount as my portfolio, maybe a little bit less. But over this period, over which I've had the portfolio, you can see that small caps have beaten the large-cap indices. So, for example, the FTSE 100 is only up by about 40% over the same period. But the reason why I created the portfolio in the first place was that there was no small-cap value quality momentum-tilted portfolio. I had to create my own bespoke portfolio. So, have I beaten the market? Well, not by much, and that's why I put this portfolio in my fund portfolio, which is just 10% of my total investments. And in fact, this portfolio is just a fraction of that. If I was really confident I could beat markets, then my fund portfolio would be much larger. The core of my investments, 90% of them, go into a single global stock fund, which I hardly ever touch. So really, this portfolio is just about having fun, as the name suggests, and also learning. I really enjoy the cut and

thrust of the equity market and just reminding myself that I can't choose stocks now as part of that Learning Journey. I had a nasty experience with a very illiquid stock called JayZ Capital Partners, where the difference between the buying and selling price was absolutely huge. So, since I created the portfolio, that's been taken out of it. And you'll notice that there's a column on the right-hand side of this slide which shows you the bid-offer spreads for the individual companies which are now in my portfolio. And I've got a criterion that ensures they're not too large. So, for example, the top stock, Panafrican Resources, the difference between the buying and selling price is 33%, all 33 basis points. And in fact, the most illiquid stock in the portfolio currently is one I've just added, which is IG Design, where the difference between the buying and selling price is 2.6%. The reason why you have to care about that is that this sets a kind of threshold for how much the stock has to

go up in order for you to make money. If the bid-offer spread is 10%, well, it has to go up at least by that amount in order to make a profit. So, I've certainly learned my lesson about liquidity and bid-offer spreads. I've also learned my lesson about diversification across different sectors. When I first created the portfolio, I didn't really check which sector each of the stocks was in. But then, in retrospect, and looking at Stockopedia Naps portfolio, I decided that it would make sense just to have two stocks from each sector. So, here you can see the portfolio I've currently got broken down in those pairs of stocks. Now, what you'd expect to see is high correlation within a sector and less correlation between sectors. And in a market drawdown, when stocks fall, you can be really happy that you have diversified across all sectors because the defensive sectors really come to your aid. And in an up market, you'll be glad you've got exposure to some of the more growthy type stocks which benefit.

from these surges upwards. So, in total, I've got 12 stocks, and there are two from each sector, so I cover six sectors. Now, it's one thing creating a portfolio; it's another thing maintaining it. And one of those choices is whether you rebuild annually or fine-tune regularly. Let's see what that means now. When I first created the portfolio, my plan was that I'd just let it run for a year, and then, of course, some of the stocks would no longer be highly ranked based on my criteria. Some would become expensive, or their quality would fall, or they'd lose their momentum. And then what I'd do would be a huge rebalance of the portfolio, where most of the stocks would be removed, and an entirely new crowd of stocks would be put in. Then I'd wait for another year, and I'd repeat the process, so every rebalance would be a huge change. Now, one reason why you might want to do it that way is that it requires very little maintenance. Every year, you just have to do some rebalancing. However, because this is my

fun portfolio. I wanted to have a little bit more fun with it, and I decided to do it slightly differently. This was based on a presentation given by Ed Croft, who's a CEO and founder of Stockopedia. The slide itself is based on research by Kristoff Ranhofer on when to buy and sell a stock according to its ranking in the market. Because an alternative to having these huge changes once a year is to fine-tune the portfolio as you go along. Think of it like sailing a ship around the world. You can either dock every year and fix everything, or you can make small adjustments to the rigging and the overall structure of the ship as you go along. But then the question comes: when do you sell a stock? What is it that decides when you sell? Now, as I said, I use a stock rank system from Stockopedia, such that if it's got a very high stock rank, that's when I buy the stock. But when should I sell? Well, according to this research, a reasonable thing to do

is to sell when the stock hits the 70th percentile on the way down. That gives the stock long enough for the market to realize it's good and for the stock price to go up. And it doesn't wait too long to sell it once its fortunes start to change and its fundamentals start to deteriorate. Now that percentile is not set in stone. You can see it's a little bit above 70%, maybe it's more like 75% here. But the basic idea is you buy when the stockopedia stock rank is high and you sell when it falls to about 75 or maybe even lower. So based on this new way of maintaining the portfolio, let's talk about the changes I've made, starting with financials. So here's what JZ Capital Partners looks like on stockopedia as I make the video. Notice the Red Arrows here show you when the stocks stock rank started to fall, and that was in July of 2024. Now the slide here says sold, which I kind of did from

the view of the portfolio. In fact, I just removed the stock from my portfolio. I'm still waiting to sell it. Another financial stock, which is Jupiter Asset Management, which is a big fund manager in the UK, that also started to see its stock rank deteriorate. And so, I sold it at about the same time as I did JZ Capital Partners. So, that meant that I needed to buy two financials in order to fill those gaps. The first one, which I bought, is a kind of bespoke fund management house, which essentially other fund managers outsource their operations to. So, Polar Capital creates the portfolios, maintains them on behalf of other fund managers and institutional investors. The other financial, which I bought, was International Personal Finance. And this is a company which provides credit to people, but also insurance products. Now, both of those stocks had high stock ranks, and that's the reason why I bought them. And that's because the combination of value, quality, momentum for them was particularly high, and they're small caps. Now, let's turn to changes which I made in the basic material sector. Here there

was just one stock where the stock rank had started to deteriorate, and that was Brickability. Now, its stock rank fell to 85, and that was the point at which I sold it. The stock I replaced it with was IG Design. So, here is IG Design as it looks on Stockopedia, just so you can see how the tools look. The important bit that I focus on are these stock ranks in the top right based on quality, value, and momentum. You can see that IG Design scores pretty highly on all three. If you combine those and rerank all the stocks in the UK, you can see I've got a UK focus here. Then, it comes out as the 99th percentile, so this definitely qualifies as what Stockopedia would call a superstock. Now, when I'm looking at stocks, I use this screening page, which has my criteria on it. You can see the criteria here up at the top. The quality rank has to be greater than 50, so does the value rank, and the momentum rank, and the market cap has to be between 100.

million. So, it screens out the absolute tiddlers, and it also has to be less than a billion, and that's in Sterling. Furthermore, I don't want liquid stocks. I don't want to repeat the experience I had with JayZ Capital Partners. So, the spread has to be less than 500 basis points or 5%. And then, I sort by stock rank, and I find the best stock from each sector. So, this is how I find the ones where the stock rank is starting to fall. I just find the stock which has the highest stock rank in that sector which satisfies my criteria. Now, views of Pension Craft got a special offer from Stockopedia. If you're interested in trying it out for yourself, you get 25% off your annual subscription. And if you click on the link below, you can see Ed Croft describing how to use the platform in his own words. So, if you do want to try it out yourself, just use the link in the description below or use the promo code PC25 at checkout. Oh, and that comes

with a 14-day free trial and a 30-day money-back guarantee, no questions if you're not fully happy with the product, as long as you do that within 30 days of your first payment. Now, I mentioned I bought a copper portfolio, so let's look at that now. Now, the reason for buying copper was that firstly, copper prices had been tanking. So, I talked about it in my market craft shopping list video recently, and of course, the longer-term trend that we're seeing at the moment is a move to renewable energy, which is very copper-intensive. So, short-term, we've got a crash in copper pricing due to worries about China, plus over the long term, we've got a big demand increase, which we'd expect from this transition. Combine the two, and I think there's an opportunity here to buy copper. Now, the way I've chosen to get the exposure is via companies which mine copper. Now, in that market crash video, I talked about six stocks which I thought would fit the bill in terms of mining a lot of copper.

here you can see them against the price of copper, and you can see that some of them are very correlated to Copper. Indeed, the price of copper here is shown in yellow, and the individual stock prices are the other lines that you can see. Notice also the big fall in copper prices, not a collapse by any means, but it certainly has fallen from its peak. The dashed yellow line that you can see is when I built my copper miner portfolio. Now, this is slightly different from the portfolio construction which we saw previously because here I'm buying a particular sector, so it is a concentrated portfolio, and to some extent, I don't have much choice in which stocks I buy. They have to have some of their revenue, a significant amount, coming from selling copper which they've mined. So, I can still use the stock ranks here, but in a slightly different way. So, here are those six stocks, and I've shown them in Stockopedia, and I've highlighted their stock ranks, and they do vary quite widely. So, for example, Southern Copper.

has a stock rank of 80, whereas Glenor has a stock rank of just 32. So, what I've chosen to do here is to weight the stocks according to their stock rank. A bigger stock rank means a bigger weight. For example, Southern Copper has a stock rank of 80, and that means that it gets about a quarter of the allocation in the portfolio. Whereas Glenor, at the bottom of the table, makes up only 9% of the portfolio. Now, these stock ranks change over time, as we've seen, and instead of taking these stocks out of the portfolio altogether, I'll just change the weight slightly. And because they're very liquid stocks, the bid-offer spreads tend to be pretty tight, so those rebalances aren't as expensive as they would be for small caps, say. So, I've only just started with that portfolio. There isn't much to see in terms of returns. It's up 2% as I make the video, but in future updates, I'll certainly discuss it. So, that's where I am with my small-cap value.

quality momentum portfolio and my copper portfolio. I hope that's been helpful for you, not to copy what I do, but to see how I do it. Think about your diversification, think about how you choose your stocks, be very disciplined in how you manage your portfolio, and if you don't have much faith that you can beat the market, you can certainly dial down the allocation which you've got to these single stock portfolios. But it certainly is a lot of fun, and I've certainly learned a lot by doing it, and I thought I could help you by sharing my experience. Now don't forget our offer from Stockopedia. You get 25% off your annual subscription. Just use our promo code, which is PC25, at the checkout, or use a link in the description below. And as always, thank you for listening.

Portfolio Update: Revamping My Fun Portfolio

My name is Ramin Nakisa and I started PensionCraft in 2016 as I felt strongly that I wanted to teach people how to invest well for themselves so they could stop making costly mistakes and losing their money through having to pay unnecessarily high fees.

Before starting PensionCraft, I worked in investment banking as a strategist and I was a frequent contributor on CNBC and Bloomberg TV. I have written two books about finance and investment: one for professional investors and one that explains how to buy and sell volatility using exchange-traded products.

I publish a new video on YouTube every Saturday and you can join me for a live Q&A on the 1st Thursday of every month at 7pm UK time.

If you want to learn how to become a better investor then why not join our friendly membership at pensioncraft.com?


Portfolio Update: Revamping My Fun Portfolio

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