Continuing fears over Greece (and the potential domino effect on countries that make up the Euro) and an undercurrent of concern that the US recovery may be stalling seems to be the order of the day. Mix it well with succession problems at the IMF, sprinkle on a pinch of some disappointing company updates, and a dash of the doldrums and....... voila - a short term, retreating market.
Despite a retreat of 0.76% in May the portfolio is still showing a year to date gain of 3.99%.
Despite a retreat of 0.76% in May the portfolio is still showing a year to date gain of 3.99%.
I am actually quite pleased with the virtual portfolio's performance year to date, even more so when pitched against the FTSE which is back in negative territory year to date with its heavy weighting towards commodity and banking stocks.
Breaking the 3.99% down a little: the year to date contribution from dividends is just 0.35% which leaves 3.64% of capital gain.
Its probably fair to say that I still feel the market is exposed to bad news through this next few months but that this is a typical short term weakness or, at best, market consolidation (taking a breather).
Its probably fair to say that I still feel the market is exposed to bad news through this next few months but that this is a typical short term weakness or, at best, market consolidation (taking a breather).
I have to remind myself at this stage that if I didn't have a positive view on the long term prospects for global economies and markets then I shouldn't be investing in shares at all.
But, I am investing, therefore, I have to keep that long term view at the forefront of my thinking and ensure that short term volatility driven by sentiment and fear doesn't detract me from my strategy.
That isn't to say that there isn't weaknesses in my portfolio to be concerned about. There are a couple of investments that need to be looked at as their prospects and outlook seems to have changed.
That isn't to say that there isn't weaknesses in my portfolio to be concerned about. There are a couple of investments that need to be looked at as their prospects and outlook seems to have changed.
On a year to date basis: Microsoft and Cisco have underperformed quite a bit.
Microsoft doesn't look as bad on a complete picture with a -2.92% fall overall (and it has yielded dividends).
But Cisco is now -24.36% overall with a mob of analysts and market watchers thinking that management has taken its eye off the ball. Competitors appear to have caught up with its technology which is proving to be a challenge to the margins and premium that Cisco has historically been able to command.
This is being compounded by a reduction in customer spending, which is hopefully a short term issue but it remains to be seen whether Cisco can retain its profitability in this more competitive environment. 3 quarters of disappointing updates suggests that it has some work to do and I need to consider whether the funds invested in Cisco might be better deployed elsewhere.
But Cisco is now -24.36% overall with a mob of analysts and market watchers thinking that management has taken its eye off the ball. Competitors appear to have caught up with its technology which is proving to be a challenge to the margins and premium that Cisco has historically been able to command.
This is being compounded by a reduction in customer spending, which is hopefully a short term issue but it remains to be seen whether Cisco can retain its profitability in this more competitive environment. 3 quarters of disappointing updates suggests that it has some work to do and I need to consider whether the funds invested in Cisco might be better deployed elsewhere.
Cisco was a "picks and shovels" investment in the growth of the internet, networks and smartphone traffic but doesn't seem to working out as planned. Funny thing is I can't think of many picks and shovel investments that I have made that have worked out, so there might be a lesson there for me.
Going back to Microsoft, the company appears to be suffering by comparison to Apple and Google with many suggesting that it has lost its innovative edge amid speculation that its market position is also under threat as its rivals challenge its previously default operating system.
Going back to Microsoft, the company appears to be suffering by comparison to Apple and Google with many suggesting that it has lost its innovative edge amid speculation that its market position is also under threat as its rivals challenge its previously default operating system.
However, Microsoft is certainly not on the same speculative valuation as its rivals (very little froth) and remains a cash cow with an abundance of technological resources and a market leading position on PC's and services to business.
Both investments are also being compounded by general concerns over the US economy and the resulting weakness of the dollar against sterling.
Both investments are also being compounded by general concerns over the US economy and the resulting weakness of the dollar against sterling.
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Looking at the chart of performance relative to the FTSE100:
So, still going reasonably well but a couple of investments that I need to keep a closer eye on and might need pruning.
Links to previous Portfolio updates:
- April 2011: Portfolio Update
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