Venture: Portfolio and Track Record

Issue 123;

Founded in September 2023, ByteTree Venture is coming up for three years old. It has captured the gold bull market, the surge in energy, Chinese tech, UK value, Japan, the Asian rebound, blockchain, payments, space technology, and more. What brings these ideas together is that, at their start, they were early trends that each offered good value.

In 2023, many UK small-caps were chronically undervalued. I kept coming across them, and other deeply undervalued companies, and was frustrated that we had no outlet for a stream of good ideas. Venture was created to provide an opportunity to identify interesting stocks that were too small, or perhaps too risky, for the Whisky Portfolio in ByteTree’s The Multi-Asset Investor. We had great early success.

The following year, I introduced more international stocks into the Whisky portfolio, while Venture went much further. Venture has become our most international service, and since last year, it has become the actionable output from ByteTree Global Trends.

Global Trends is our in-house system that tracks where global momentum is flowing. It dates back to 2001, a time when Rashpal Sohan and I were experimenting with similar ideas. We both worked for HSBC, but had different jobs, in different buildings, but kept in touch through Robin Griffiths. It is funny how we have reconnected years later to finish the job we started.

Global Trends is having a major upgrade and will be leaps and bounds ahead of what we have today. It helps us spot trends before the crowd, and it has worked very well. There has been a huge development behind the scenes, which we hope to demonstrate in the near future.

Venture was deliberately a tip sheet, as opposed to a portfolio. It started that way because it was more informal; a list of interesting ideas as opposed to a structured investment process. A portfolio is not only a list of stocks but is also diversified, meaning it should perform well in good times and demonstrate resilience in bad ones.

Several clients have asked me about Venture’s track record, and the answer is that there isn’t one. I publish individual stock performance, which is excellent, but as the list grows, it becomes hard to grasp. This is the way stockbrokers operate. They cover stocks with buy, hold and sell ratings, but there is no easy way to compare Goldman Sachs against Morgan Stanley, for example. To do that, you need portfolio performance, which fund managers have, and brokers don’t.

I have decided that the time has come to express the performance of ByteTree Venture as a portfolio. That means not just buy and sell prices with dividends, but also weights. Since Venture has generally held around 30 stocks, occasionally more, I set the buy weight at 3% across the board. It would be unfair to claim a higher weight in a stock that did well, and a lower weight in one that did poorly, so 3% for all is fair.

As with all ByteTree Portfolios, the initial capital was set at £100,000, meaning that 3%, or £3,000, would be invested in a new idea. A year later, when the portfolio was worth (say) £120,000, the new idea would be invested with £3,600, as 3% has increased. I have used the entry and exit prices as recorded and included dividends. It means that during the first year, while the idea list was being built, the Venture Portfolio suffered from heavy cash drag in a rising market. The 30^th idea was published in July 2024. Using these fair assumptions, I have recreated Venture as a portfolio.

Venture vs World Index

The cash drag led to a slow start, but as the portfolio became invested by mid-2024, it started to pick up. By late 2024, I had outstayed my welcome in UK small-caps and embraced more international stocks.

The best performance followed the shift to global stocks in early 2025, while embracing ByteTree Global Trends. Today, the portfolio holds 13% in cash, unintentionally, but that is the outcome of the exercise.

For me, the penny dropped when I realised that, despite not trying to build a diversified portfolio in Venture, it had developed naturally. By applying our investment process each week, looking for value and momentum ideas, the passage of time delivered diversified sector and geographic exposure quite naturally. Venture is still heavily exposed to materials and financials, but that has worked well.

Venture Asset Allocation

The shift from a global value and momentum tip sheet to a global value and momentum portfolio won’t change very much at all. I suppose, at heart, after all of these years in finance, I prefer to think like a fund manager rather than a broker. Brokers brag about their best trades, while fund managers quietly measure their long-term performance. 

I don’t have the stomach to add microchips at today’s lofty prices, but I am very keen to boost exposure to commodities. That is where we can find value and momentum in spades, and it is an asset class that can thrive when the bond market is in turmoil.