A small series of winning trades have transformed this Fool's portfolio.
Twelve months ago, the market was a very different place. There were huge fears among investors that a disorderly breakup of the eurozone was imminent. Shares, from across a number of sectors were on sale, offering great yields. The FTSE 100 (UKX) was 12% lower than it is today.
With interest rates on cash deposits so low, I decided to move £4,600 from a cash ISA into my broker's Self-Select ISA. I expected to make a return on shares that beat what I was getting on cash. I never expected this would be the start of a run of investments that would see the original £4,600 turn into more than £15,000.
Here is how I did it.
One year ago, BP (LSE: BP) was still dusting itself down following the Gulf of Mexico crisis. The company was paying its shareholders a dividend again. Altough the payout was small, it was expected to quickly increase.
I spent all of the proceeds from my cash ISA to buy shares in BP at 381p in August 2011.
I expected that I would hold the shares for a long period, collecting a respectable dividend along the way. However, volatility in the markets presented an opportunity for me to sell BP shares in late November for 431p each. That equated to a 13.1% return in just three months. Even better, the period I held for qualified me to receive a dividend on the BP shares that I had purchased in August.
Robert Wiseman Dairies
Within a week of the BP sale, while running some investment filters, I came across shares in Robert Wiseman Dairies.
To some investors, this was just the type of company that should be avoided. Profits had been falling in recent years. Margins were thin and had also been falling. However, a large dividend was promised and people always need milk, right?
I telephoned the company to get a copy of their annual report in hard copy to help me better understand Robert Wiseman's prospects. I was convinced that although margins were low, milk processing was a cyclical business. Provided milk was still required, a margin improvement could more likely be secured if your customers really believe you might walk away from negotiations.
Robert Wiseman Dairies was a contrarian investment opportunity. In the first week of December, I bought 2,046 shares at 253p each. Six weeks later the company received a takeover offer at 390p. I took profits immediately, selling in the market for 388p.
Just two days after selling my Robert Wiseman Dairies shares, a fellow Fool suggested I take a look at shares in electrical contractor T Clarke. The shares promised a big yield and looked an excellent play on broader economic recovery.
Fortunately, one day in mid-January the shares fell 5%. This gave me an opportunity to buy 20,000 shares at 39p a share. Shares in T Clarke recovered and I sold in May for 50.85p per share, qualifying for a 2p per share dividend along the way.
Taking the proceeds from the T Clarke sale and a dividend from Robert Wiseman Dairies, I bought shares in SOCO International (LSE: SIA) in May. I was a little disappointed with the progress the company reported in their trading statement and sold just four days later on 18 May for a 4% profit.
At this time, I already owned shares in bookmaker Sportingbet (LSE: SBT). However, one night in May I was up past midnight researching shares. I came across a story in the Australian Telegraph that their government was expected to legalise in-play betting. I knew that this development would significantly increase the profitability of Sportingbet. Better still, the shares were already cheap.
The next day, Sportingbet shares opened lower. Either the market had not digested the news, or my analysis was wrong. During the day the price of Sportingbet shares began to tick upwards. I decided to steel myself and buy as many shares as I could. I took the proceeds from the SOCO International sale, added the £400 dividend received from T Clarke and bought 37,770 shares in Sportingbet at 29.18p.
Positive trading news, followed by persistent bid speculation pushed Sportingbet shares past 40p -- valuing my recently purchased stake at over £15k. I believe that there is scope for the shares to be priced significantly higher still. The consensus is for Sportingbet to make 4.4p in earnings per share in 2013. If the mooted Australian changes come about I expect that this would be closer to 5p. By my logic, that puts a fair value for Sportingbet shares at around 75p.
If I can maintain this rate of return on my investments, that £4,600 will have been transformed into £1 million in another four years time. If you want to learn more about how returns like this can be made then check out the free Motley Fool report "10 Steps To Making A Million In The Market". This report will be delivered immediately to your inbox and is 100% free.
He avoided techs in the dotcom bubble and banks in the credit boom. But just where is dividend expert Neil Woodford investing today? All is revealed in this free Motley Fool report -- "8 Shares Held By Britain's Super Investor".
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> David owns shares in Sportingbet and SOCO International.