It is an important practice to properly review your stock investment portfolio on a regular basis and ask yourself questions like: "Why do I own shares of Monadelphous Limited (ASX: MND) at its current share price?" For me, this is just before the end of the financial year because it helps me with my tax planning. I would recommend doing something similar annually, bi-annually or every quarter when results are announced.
During this year's review, I found myself asking the question: "Do I still want 'in' at the current Monadelphous share price?" This is a very personal question so it is important to define who I am as an investor and my investment strategy.
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My share investor profile
- Demographic: Generation Y
- Investment time horizon: 50 years +
- Investing experience: High
- Risk tolerance: Very high
- End goals: Join the Financial Independence Retire Early (FIRE) movement and go travelling. Pass on a legacy to my kids.
My share investment strategy
Because I have so long to invest and minimal financial commitments, I am able to be an ultra long-term, aggressive growth investor. My strategy is to build a highly diversified portfolio of quality growth companies with a lot of risk yet massive multi-bagger potential. I invest funds into the market on a monthly basis (or as close to as possible).
So, at the current Monadelphous share price, should I keep owning shares?
Monadelphous is a share that I bought at the start of my investing career. At the time there was an increase in capital expenditure in the materials sector and Monadelphous was benefitting as a result. My investment was also benefiting with a gain of up to 28% (excluding a healthy dividend) within a few years. Unfortunately, that all changed and I'm currently sitting on an annualised total return of about half of what the S&P/ASX 200 Index (ASX: XJO) has achieved. The Monadelphous share price is $12.70 at the time of writing.
In general, I'm not a massive fan of the resources sector because there is no real pricing power. Often the lowest cost producer wins, but there is still direct commodity price risk. But, because I was so keen on diversifying at the time, I felt I needed some exposure to the sector. Monadelphous seemed like a great shot because not only was it exposed to capital expenditure during boom times, but it had a strong and growing maintenance business to soften the cyclical nature of the industry.
With many more years of investing under my belt, I now have a very diversified portfolio. Further, I know that so long as I am comfortable with my sector allocations I don't need to be invested into everything out there. Monadelphous like Challenger Ltd (ASX: CGF) doesn't fully align with my investment strategy, so I have to ask myself if I should hold or sell. Right now, I'm not sure.
Foolish bottom line
Writing your investing reasons down is extremely important. It allows you to understand what you were thinking at the time, without any hindsight bias. This makes it a powerful tool for making buy or sell decisions with your shares. Additionally, it provides a great resource for educating yourself as an investor.
Investment strategies and goals will change so a point of reference is crucial. Invest based on your own personal circumstances and goals at that point in time.
