Portfolio update for January

If you believe the brokers and the media, the markets are a frenzy of activity – and they've been at it again this week. It's little  wonder – that's how they encourage us to trade stocks and read the news.

But the number one advantage you can give yourself in the sharemarket is to think long term, and too much of a focus on the daily to'ing and fro'ing will draw your focus towards the short term.

Ignoring the noise

Smart investing means ignoring all the noise and only making changes to your portfolio when you can make a convincing case to do so. After buying stocks that provide a margin of safety, you've got to allow them that margin within your portfolio – and not sell after small rises or on the tiniest whiff of bad news.

Since our Equity Growth and Equity Income portfolios opened for investment almost three years ago, we've switched about a quarter of their value each year into different stocks, to give an average holding period of about four years. With a typical sale amounting to a few per cent, it's not uncommon to have a month where we do nothing at all, and so it was in January.

Domain (ASX:DHG) came close, when we upgraded it to Buy after its price tumbled following the resignation of chief executive Antony Catalano. But the opportunity was fleeting and it was back above our Buy price within a day. Still, it's a high-quality business and we're hopeful that it will come back into range.

Flush with cash

With cash weightings of 9% and 6% in our Equity Growth and Equity Income portfolios, respectively, we're in a position to make some investments without selling anything.

That said, several of the portfolios' holdings are trading close to (or even slightly above) our Sell prices, including Flight Centre (ASX:FLT), which rose 15% in January and has now returned 72% (including dividends) since we bought it for both portfolios a year ago.

Macquarie Group (ASX:MQG) is another that's hanging by a thread, after a 4% rise in January put it 82% ahead (again including dividends) since we invested two years ago.

January also saw a 25% bounce in iCar Asia (ASX:ICQ), although the stock is still down 62% from where we bought it.

At the other end of the pile, Navitas (ASX:NVT) slumped 14% in the month, after a disappointing result from its University Partnerships business, which now looks unlikely to show any growth in the current financial year. The stock is still up 8% (including dividends) since we bought it eight months ago and we remain comfortable with the stock – although the earnings base looks somewhat smaller than we'd hoped.