Free to read: the Invest-ability portfolios year-end review

How a focus on quality helped our portfolios beat the best managers in 2022

Having looked at private investors’ year-end reviews earlier this week, it’s time for me to review the two model portfolios we run at Invest-ability. The first is the Atlantic Portfolio focused on quality shares from both sides of the Atlantic, with a skew towards US shares. The second is the UK Quality Shares portfolio which does exactly what it says on the tin.

Phil’s live Sipp, our third portfolio, is obviously going with him and my own is a work in progress – and I am in no hurry to buy much at all given the state of the markets, although have taken a position in a rather pedestrian FTSE 100 focused investment trust.

The portfolios are unchanged since the last update at the end of October, but I’ll be using this review as an opportunity to think about ways to improve them. Having fully taken over their management I will in future report performance and changes at the start of each month once the month-end figures are in. I’ll include the benchmarked performance in our weekly market summaries, and will no doubt be writing lots about the shares they contain.

The results are in

The model portfolios were set up to illustrate the thought behind building and managing share portfolios, and how the company analysis we produce feeds into this process. Analysis alone does not make for successful investing – the true art, after all, is in putting the pieces together, in some respects a bit like doing a jigsaw without a picture.  

The ultimate aim of both portfolios is the same – to generate portfolio growth above the market and a selection of fund benchmarks by investing in shares that meet certain quality criteria such as profitability or return on capital.  You can read the rationale behind the portfolios here.

In 2021, both portfolios largely delivered on this objective, comparing favourably with our selected benchmarks and reflecting our view that, in recent years at least, the US has been a happier hunting ground for investors than the domestic market.

The Atlantic Portfolio generated a total return of 24.6% last year thanks to some judicious tinkering and strong performances from Intuit, Microsoft, Costco, Croda and YouGov. Nevertheless, that slightly lagged its index benchmarks, the S&P 500 and the Nasdaq 100, and I’ve looked in more detail here about where the drag on perfomance came from and where possible improvements could be made.

The UK Quality Shares portfolio beat its benchmark, the FTSE All-Share, delivering a 20.6% return with Diploma, Auto Trader, Ashtead and Croda leading the way. After such a good year it seems churlish to suggest there’s always room for improvement – but I’ve dug into the performance here to see if a bit of “meddling” might bring a further boost in 2022.

The Atlantic Portfolio vs benchmarks – Total Return data for discreet periods to 31/12

Source: SharePad, *Since inception on 20/10/2017

UK Quality Shares Portfolio vs benchmarks – Total Return data for discreet periods to 31/12

Source: SharePad

Investability subscribers can click on the links below to read detailed write ups of what went well, what went badly, and what might come next for both portfolios:

If you aren’t a subscriber and want to read on, you can find out more details here.

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