2024 Year in Review: +12% Performance plus the Best, the Worst, and the Puzzling Shares

The streak continues with 4 years in a row of outperforming the FTSE All-Share. Some surprises in terms of what drove the performance... DLG, PAY, OTB, SYS1, SSTY, EAH, SCE, ASHM, PHNX, PGH, SPSY

Jan 08, 2025

Performance Summary of The Boon Fund

2024 Year : +11.8% vs +5.7% (FTSE All-Share Benchmark)

Performance over the last 4 years:

I’m fairly pleased with how 2024 turned out, as at the end of June I was trailing behind and underperforming, in some cases by as much as -6 percentage points (pp). So to end the year +6pp up vs benchmark meant a barnstorming H2 performance to dig myself out of the hole.

My target is to outperform the FTSE All-Share by 5-10pp each year. This was achieved in 2024, as well as in all three years prior, to make it four years in a row. You can see the beauty of compounding outperformance, even over a short 4 year period, as my total return has been +67% compared to +22% of the FTSE All-Share.

Furthermore, I’ve delivered double-digit returns every year for four years - I’ll be super pleased if I can continue this forever, even if I don’t beat the benchmark in some years.

While The Boon Fund hasn’t gone through a full economic cycle that includes a deep recession and a big market decline, I would say that the last three years in itself has been a strong test, especially as it included a high inflation environment and the great struggles of the AIM index (-39% 3yr), of which many of my shares are listed on. I’m happy with my performance, having well outperformed through these three challenging years (2021-2024) AND also outperformed too in a one good year for the market (2021).

Drivers of outperformance

What can I credit the H2 performance to? One key thing was that I had taken a sabbatical from full time work from April onwards. During that time, I was able to spend more time on analysing and researching companies. In some weeks, I was spending 25-35 hours on shares; not that far off a full-time job. Compared to previously, when I was spending maybe 5-8 hours a week in total.

However, as you will see from the Best and Worst performing shares below, many were bought in 2023, so I cannot give full credit to the fact that I spent more time actively managing my portfolio.

Nor did more time spent looking at shares mean more trading activity; the average number of transactions I did in 2024 was the lowest in the four years at 29 transactions (buy & sell) in total. This is barely just over 2 trades a month. The three years prior (2021-2023) had 51, 36, and 33. I am definitely holding onto shares for longer, and running a more concentrated portfolio.

Looking through the list of Best Performers below, they all adhere to the four key pillars of what I look for to invest. All of them took more than 6 months to re-rate in terms of value, which suggests that potentially I’m investing a bit too early. But better to be early than to miss out, I think… as long as I can still realise value within my goal of a 1-2 year horizon.

Looking through the list of Worst Performers below, one trend is my susceptibility to investing in “blue-sky” type of exciting situations. I need to be better at having patience to wait for companies to demonstrate a proven ability to scale supply and demand, before jumping in. Luckily, my biggest percentage loss (Surface Transforms at -81%) was a small position, and my other two biggest losses in absolute terms were limited to less than -30%. This I take solace from, that my selection and sizing process has meant that none of my largest positions has suffered catastrophic losses during the year.

I now deep dive into my Best 5 Performers, my Worst 3 Performers, and some of the shares that have had a Puzzling Performance during 2024.

Best Performers

» Direct Line Group #DLG $DLG.L +65% return

Lots of drama with this share in 2024. I bought in Mar23, on the hypothesis that it was a strong brand and decent enough balance sheet, and that the one-off headwinds and factors were very fixable. This proved to be largely the case, albeit the fix and improved performance has taken a bit longer than usual to show up in the results and share price. Two industry players decided to pounce on the disconnect between share price and the underlying momentum in improving performance. Ageas made a bid earlier this year at c230-250p, and was beaten back by the board. Frustratingly, I saw big gains from my 152p entry, only for it to fall back to the 160p mark after the bid rejection.

Luckily, Aviva came in with a better offer, now accepted, and I took the opportunity to sell out at 250p, for a very nice +65% gain in just over 18 months.

» Paypoint #PAY $PAY.L +45% (excluding chunky dividends!)

Paypoint was also a 2023 vintage, bought in June 2023 at 442p and sold out just a year later in Jun-Jul 2024 between 610p and 660p. Annoyingly, the shares ran up further to 800p, so I lost out on another chunky gain.

My hypothesis was that the market was valuing it as a legacy declining business rather than a monopoly-like platform with a big moat and solid growth from new products and services. Over the year, more investors cottoned on to the story as the company managed to grow new revenues and profits faster than the legacy business decline.

I sold out as I believed the company would be hitting a soft patch of trading, and wanted to lock in gains. Unfortunately, the market continued to chase up the price, but the subdued outlook / softness has now been announced and the share price has pulled back to 740p from 800p. So I was a bit too early with my view, and should have held on for another month or two before selling out to maximise my gains. This illustrates one of my key weaknesses, which is selling too early and missing the positive momentum to the top. I missed out on similar with Costain and Mcbride in 2023 for example, selling out way too early while the SP continued to increase.

» On The Beach #OTB $OTB.L +31% return

As I mentioned in my Nov24 Monthly Post, I have started a new role with the company so I sold out not wanting to have no liquidity during trading blackout periods. While my gains here were pretty decent, I was unlucky to make the decision to sell for non-valuation reasons at 166p, as the shares have now risen to 250p after the FY results. This would have resulted in an almost +100% gain from my entry point of 127p.

» System1 #SYS1 $SYS1.L - still hold, +110% in 2024

I’ve held System1 in past years (2021-2022) but bought back in in Nov24 at 190p. Top-sliced some in Feb24 at 408p (again, selling too early!) and it reached a high of 780p and now trading at 620p.

For me, this share epitomises the unreasonably bearish sentiment that UK markets have towards fast-growing tech companies. They have a proven product with a unique moat, that is fixed cost in nature and high gross margins. They have a huge growth runway in a big market (USA) where they have already won many blue chip clients. Quarter after quarter of the right financial numbers and strong growth percentages.

If this was listed in the USA, the PE ratios will be in the 50x to 100x range. Here in the UK, it is trading at 25x. I don’t think we will ever see US valuations here, but I hope that SYS1 either it gets a takeover offer, or investors start to cotton on and this gets to the 1000p range from the current 620p share price.

» Safestay #SSTY $SSTY.L +56%

This was a small holding, so the absolute contribution to total gains was small. However, still a sizeable gain in just over 20 months from Jan24 to Oct25. My original hypothesis included a hope that they would be able to rapidly expand their hostel beds inventory through franchise or management contracts. This has started, but management also got distracted by buying and setting up new owned & operated hostels as well. Trying to do two different strategies, they have split their resources and not made meaningful progress in either. I wait and see if management wisely decide to stick to one or the other, going forwards. Decided to take my gains here. Think this could drift back down to sub-20p from the current 25p.

Worst Performers

» Eco Animal Health #EAH $EAH.L -28%

This was a frustrating holding, as at one point in my holding, it was a +47% gain but then had a crash. I bought in for two main hypothesis, one was for a recovery play in the main revenue & profit centre, and the other was for their new product portfolio, which I thought was getting zero value attributed to it.

The one big risk with this investment came true, causing the share price to collapse. The markets were just about happy to tolerate the huge cash burn on the blue-sky new product development, as the bread-and-butter business was churning out enough profits to cover the NPD cash burn.

However, a shock profit warning came. And while the company was not in any immediate danger of running of cash, the share price collapsed. Investors were already lukewarm on EAH, and with this new bearish news, I think many investors exited.

I decided to hold on as I could see the longer term value. However, I also threw in towel a month or so later as I suspected that the profit warning was not going to be the last. This didn’t come to pass, the next trading update was in-line, and the shares have recovered a bit from the 64p I sold at to 70p.

For now, I’m monitoring for share price weakness and a further profit warning. The new product portfolio won’t have any tangible news to announce until Q2-25 or Q3-25 at the earliest, so there are no positive catalysts for a share price re-rating yet.

» Surface Transforms #SCE $SCE.L -81%

Took a HUGE loss here on this blue-sky share. Exited at 6.5p, but a good decision as now they are at 0.4p. My key mistake here was not being critical enough and investigating whether the company could build a scaled manufacturing capability for its new product, ceramic brake discs.

Sure, the product was good and had lots of clients signed up for the next few years. Yes, they had done some manufacturing already and some of their products have been bought and used successfully.

However, the big question I failed to ask before investing was whether they could go from producing small quantities to producing large quantities. It turns out the answer is a resounding no. Despite numerous fundraisings to throw money at fixing the manufacturing problem, it is still un-fixed. Can they fix it? If SCE ends up surviving and they can demonstrate over a 6-12 month period of profitable and scaled manufacturing production, then I think it would be a good buy back in.

This reminds me of another company that went through similar issues: Accsys. I’m not monitoring this company, as they have fixed their manufacturing and scaling issues. However, they have a new problem now, which is soft demand… not what you want when you’ve just scaled up production capacity!

» Ashmore #ASHM $ASHM.L - still hold, -25% in 2024 (excluding dividends)

My hypothesis here was that their solid balance sheet as well as the strong brand and owner-run business meant that they would be able to weather the storm until Emerging Markets investing became fashionable again. I expected this to be within 12 to 18 months from my purchase (Jun23).

It is now 18 months. There was a false dawn in the Aug-Oct24 time period, where Emerging Markets sentiment looked to be turning, with big institutions and also private investors contributing to positive flows into EM assets.

However, Trump’s election was the catalyst for that all to be disrupted, with his talk of tariffs on the whole world. The surging US equity markets, as well as a slower rate of Fed rate cuts, means there is a lot of compelling reasons to invest in USA, and not in ROW at the moment.

I am well aware that my hypothesis here all rests on some macro-economic changes. Which isn’t my usual style. Otherwise I’d be playing the FX markets or the oil markets instead of bottoms-up investing in UK shares. I’m torn between selling out, or hanging in there. So far, the comfort of the three Ashmore strengths I mentioned (balance sheet, brand, owner-manager) has won in the battle going on in my head.

I think a key lesson here is to avoid shares where the fortunes of a company is too far out of the hands of management. Sure, every company has part of their destiny exposed to factors outside their control. But when is it too much out of management’s control? Other companies that springs to mind where the fortunes are largely dictated by outside factors include Rio Tinto and Gresham House Energy Storage Fund. In the former, the demand and price of iron ore in China dictates their fortune. In the latter, demand and rates set from their sole customer, National Grid.

Meanwhile, I sit and collect the 10% yearly dividend from Ashmore; so far it has been useful to make a dent in my capital losses.

The Puzzlers

» Phoenix Group #PHNX $PHNX.L - still hold, -3% (excluding dividends, c10% yearly)

I’ve been a holder for almost three years now (since Feb22). Plenty of chunky dividends means that I’m in profit overall, but still frustrating that the capital gains have not arrived.

My hypothesis here is two-fold. The first is that there would be a wave of pension buy-outs (Bulk Purchase Annuities to use industry jargon). This has started, and Phoenix has done well, but has not caused the share price to re-rate.

The second is that their cashflow visibility for the years ahead are very solid, given that their products are long-term, insurance-like, and has a high degree of modelling predictability. The cashflow projections support the current yield (10%+). I was expecting that this would cause the dividend yield to compress to c7-8%, thus giving a strong capital gain.

Both hypothesis has played out, but the share price has not moved. I am probably missing something, so unless something changes soon, I am likely to throw in the towel and move on. I was happy to hold PHNX while I still had spare cash to deploy in the Boon Fund, but when I start to run out of dry powder I will be looking to recycle my PHNX cash into other holdings.

» Personal Group #PGH $PGH.L - still hold, -0% in 2024

The shares have done nothing in 2024, despite very strong progress operationally. Client numbers have grown, and their main insurance division is growing very briskly in terms of policies sold and revenues. In addition, their new products such as their benefits tech platform Hapi, has shown strong growth too. So far, so good for my initial investment hypothesis.

So when will this re-rate? Probably will take a while, as this is a share that has a low profile with many investors. The couple of investment hypothesis that made me invest in May24 still holds, and typically it takes a few financial reporting cycles (ie 12-24 months) for the markets to see the operational progress being reflected in financial progress. The same happened with On The Beach and Paypoint.

So I have quiet hopes that PGH might be a solid gainer in H1-25, and be a key driver for outperformance for the year ahead!

» Spectra Systems #SPSY $SPSY.L - still hold, +3% in 2024

Another share where the company has made solid operational progress in 2024, yet the share price reaction has been muted. They have now secured a BIG contract, which assures profits and financial stability for the next few years.

On top of that, they’ve bedded in a very key strategic acquisition (Cartor), and launched a new product (polymer banknotes) into market. The first opportunity for new contracts will come in early 2025. All it takes is one contract or two, as they will be BIG £ and will be LONG (at least 5-10 years, in line with cycles of banknote development).

However, I’m not really sure investors will ever warm to this share enthusiastically, unless they diversify their client base away from central banks. That is because use of banknotes globally is on the wane, and the company has some pretty big client concentration risks with just a few central banks.

Still, every time I run the ruler again over Spectra, I come to the same conclusion that it doesn’t take much for this to increase to over 350p fair value from the current 240p. If they manage to crack the polymer banknote market next year, then we’re talking 2x, 3x multiple of the current share price. Meanwhile, there is little downside, given their long contractual revenues as well as the big bumper sensor contract they have for the next few years.

So that’s it! A wrap up of my 2024 performance. And a reflection on The Good, The Bad, and The Puzzling.

My next post is probably going to be about Macfarlane, my most recent buy in Dec24. I still haven’t gotten around to writing up an in-depth article about my investment hypothesis in it!

Meanwhile, I asked AI to generate a greeting card image for all of you lovely readers, wishing you a prosperous and profitable 2025… here is what I got….! AI for me is still not investible, yet.

The Boon Fund