Saturday 31 December 2011

2011 FTSE close.

FTSE 100 @ 5572.28, +5.51 (+0.10%)

Well thats 2011 just about done with apart from celebrating the coming of a New Year. 

Markets staged a little flurry of positive momentum at the end but not enough to return the FTSE or major European indices to positive annual territory. 
Not really unexpected I guess and about all that Europe could expect after many months of "can we fix it, yes we can" but ultimately producing very little of substance. 
Perhaps the EU can limp along with the Euro long enough for the world's major economies to fix themselves and bring some relief to the EU with it. 
At present the rock (of debt), and the hard place (zero growth), is proving a puzzle within the puzzle of EU bureaucracy and political positioning.
Italy's recent short and medium term bond issues gave the country a little relief from a critically rising cost of borrowing but only time will tell if this is a stabilizing point or just a temporary relief.

Amazingly US markets have finished up for the year despite the confusion of mixed data coming from various sources and the debate around US debt levels.

As things stand my portfolio has also held up surprisingly well with a gain of 11.67% for 2011 which I will look at in a little more detail during the December update.

FTSE100 @ 5572.28, -6.68% (against 31 Dec 2010 - 5971.01)
Merchant Adventurer's Index @ 1411.8, +11.67% (against 31 Dec 2010 - 1264.2)

Not quite what my hopes and dreams are made off but I have to say it is a very satisfactory performance against a backdrop of significant turmoil. 

Unfortunately, with so much uncertainty and confusion still around us, it looks like 2012 will likely be another year of wildly swinging confidence and emotions and I can't see too much momentum building up until the 3rd, or possibly 4th quarter. 
Even that would be dependent on no material economic shocks between now and then which could then provide a floor of stability as current company and sovereign strategies mature.

But, as we are standing at the start of a New Year we should look forward and find some positives. After all, it is entirely possible that if the worst hasn't happened yet then it might not, so let me wish you all a

Happy New Year (and lets hope its a prosperous one).

Related posts:

Friday 23 December 2011

FTSE short of Christmas cheer this year.

Not too much to cheer about in the run-up to christmas although markets have at least managed to chain together a couple of days of gains (or one and half at least!).

Thankfully with everything in the portfolio managing to stay in the blue for the last couple of days the portfolio has bobbed along just behind the FTSE100 for December so far.

One interesting thing to note across the pond today was the S&P 500 index managing to rejoin the DJIA and the Nasdaq100 in the blue for the year so far.

                       23/12/11                                    31/12/10      52 week low
S&P 500         1261.67 (+3.97, +0.32%)          1257.64           1099.23
DJIA              12255.40 (+677.89, +5.86%)    11577.51         10655.30
Nasdaq100    2281.53 (+63.67, +2.87%)        2217.86           2038.22

Interesting when compared to the FTSE100 anyway, which continues to be well below the level it started the year at:

FTSE 100      5512.70 (-387.24, -6.56%)         5899.94          4944.44

When you add in that the FTSE100 is only 1.8% above its 31 Dec 2009 level of 5412.88 it appears that the FTSE100 has taken 2 steps back (almost no growth in 2 years) compared to the US indexes which have, arguably, only taken 1 step back (no growth this year) or, in the case of the DJIA actually moved ahead.

Quite a marked difference really and one I am surprised at given the weakness in the US economy, its own debt problems, and the still very real contagion risk from EU sovereign debt.

Given that recent momentum has been led by Wall St it continues to underline an outside chance that markets may still be led out of their gloom by a strengthening US economy.

Closer to home my portfolio is holding onto a relatively handsome 2011 gain of 9.76% but continues to feel exposed given the lack of collective conviction (never mind a solution) from the EU. 

There is still another 2 and half days of festive trading before we ring in the New Year but let me take this opportunity to wish you all a very Merry Christmas and a "prosperous" New Year.

Wednesday 21 December 2011

Apple: Cheap at 11.4 times 2012 earnings?

Apple @ $395.95, +$13.74 (+3.59%)

Well, strange to say it but, depending upon your outlook for 2012 and any effect on the company's fortunes, Apple is starting to look ridiculously cheap on just 11.4 times 2012 earnings.

This would be dependent upon modest earnings growth of 26%. Modest by Apple standards anyway where growth has ranged between 36% and 82% per annum over the last 5 years. 
So depending upon the company's products and sales retaining some resilience to global recessions, and to gathering rivals in Google/Android/Samsung/HTC/Nokia/Microsoft/RIM et al, 26% growth and 11.4 times earnings suggests quite a bit of caution in the price.

There are heaps of pressures not least of which are the hordes of Google Android products, and 4th quarter results disappointed despite a 28% increase.
Globally, the technology supply chain has also come under pressure this year with natural disasters in Japan and Thailand hitting the supply of key components with Intel the latest company to warn of sales being restricted by supply.

However, that being the case then investors in ARM and Imagination Technology should be more than a little concerned with forecast P/E's of 51.5 times (20% growth implied) for ARM and 49.7 times (-1% growth implied) for Imagination. 
Effectively this reads that if these companies were to channel all of their profits into dividends it would take 51.5, and 49.7 years for shareholders to receive a return equivalent to their original investment. Assuming that the company's profits remain flat and that the share price doesn't appreciate (or fall) of course. 
So both companies need to maintain significant growth in earnings for the next few years at least just to maintain their current share price and for earnings to bring the rating back to a more reasonable level.
Strangely, the fortunes of both companies are now heavily entwined with the growth in mobile computing/smartphones, so their valuations do seem massively disproportionate when compared to Apple which is effectively creating the markets for their products (Apple along with Intel are significant shareholders in Imagination).

Back to Apple then, which on any recent measure, looks ridiculously cheap. Its first quarter results should benefit from christmas and an extra week in the period so depending upon supplies it could add an impetus to the share price when the numbers are reported.


Earlier posts:
- Shares update: Apple's third quarter results.
- Apple 2nd quarter update - profits up 95%!
- Apple update: Ipad 2!   
- Is Android a reason to invest in Google?
- Globally Diversified Technology, Growth, and Hedge portfolio!!!

Monday 19 December 2011

Round 2: 1967 and all that!

Quite amusing listening to the Chris Evans Breakfast show this morning which included a bit of a time travel slot and an extract from 1967 with the UK's second application to join the then "Common market" being rebuffed.
The amusing element came from it being France blocking the UK's application to join based upon the weakness of its economy, a balance of payments deficit, and the role of sterling as a world reserve currency. 

Doesn't seem like much has changed since 1967 then.

This was the second such veto by France and it has been latterly recorded as being politically motivated, particularly so in the case of President Charles de Gaulle.
  
Related articles:
- http://astheysawit.com: 1967: Europe 

Sunday 18 December 2011

GE Update: Double digit earnings growth in 2012!

Well, quite a few articles doing the rounds suggesting that the US might be the place to be invested in for 2012 but then again it seems that anywhere would be better than the Eurozone.
GE is also getting quite a bit of press suggesting that a comfortable increase to the dividend might take place which could give it a 5% yield v. a share price of $16.61.
This would be largely dependent upon GE Capital paying the parent company a dividend which is up for debate amongst investors as its probability (http://www.thestreet.com: General Electric Dividend Yield May Top 5% in 2012: Analyst (Update 1).).


Elsewhere, more fundamental, and more probable is the recent communication by the company's CEO, Jeff Immelt, that GE is looking to achieve a double digit increase to earnings in 2012, against sales growth of 5%, as it shifts focus to material costs, reducing development lead times and reducing exposure to Europe.

All sounds positive and it is good to hear the CEO of a major, major company like GE coming out and talking up the company's prospects over the next 12 months despite all the despondency and inadequacy around Europe's politicians to take a leading step in any direction other than one that satisfies their personal goals.


Anyway, brought into the portfolio in September in place of a poorly performing Cisco, the investment in GE is currently up by 11.8% with a further 0.8% coming from a first dividend, 12.6% in total. Not too shabby for 3 months ownership and could be plenty to look forward to if the CEO's confidence is anything to go by.


Related articles:
- http://www.reuters.com: GE sees 2012 profit up by double-digits

Thursday 8 December 2011

1 year old blogger!

Well, well, it was my birthday yesterday. As a Blogger I am now 1 year old having written my first post on the 7th December 2010:- Into the unknown - my very first blog! 

A nice surprise really as I had no real expectations when I set out to diary my experiences or if anybody would be interested in reading them.
It has certainly been a much more emotionally draining year than I would have anticipated given the potential pile up that the markets and the EU seems to be flirting with.

In the last 12 months I have:
- "published" 194 posts
- had 6,905 page views
- had so many nationalities viewing that it made me question that there are so many countries, but there is and the top 6 are as follows:
           United Kingdom
      3,045
           Germany
                 1,230
           United States 
            931
           Singapore
                  287
           Russia
                       138
           Netherlands
               101

- gained 2 followers
- published 18 comments from readers and well wishers.

Despite the market's upheavals the portfolio is holding up pretty well (November 2011: Portfolio Update. ) albeit with a seemingly constant risk of implosion should the European Union disunite in an uncontrolled fashion.

Anyway I wanted to say a big thank you for reading my posts and keeping me focussed on writing and investing. 
I am always open to suggestions and comments so keep them coming and roll on my 2nd birthday.

Thursday 1 December 2011

November 2011: Portfolio Update.

Another month that saw the full gamut of emotions being spun through like a rollerdeck.

The EU continues to be mired in infighting and paralysis by bureaucracy whilst seemingly unable to grasp the full scale and danger of the situation around them which itself seems to deteriorate on a daily basis.

Across the pond the US also demonstrated that internal politics and self interest are still significant hurdles to overcome before they can move beyond the impasse in their own budget deficit reduction discussions.

However, Central Banks appear to have temporarily heartened markets yesterday with moves to improve dollar liquidity amidst fears of a new credit crunch. I re-iterate temporarily!

Back in my portfolio there weren't too many noteworthy performances during November with most either shooting themselves in the foot (step forward William Hill and their internal coup), or being dragged down with markets generally.

IG completed their recent journey of guidance upgrades with a trading statement yesterday confirming that, due to market volatility, revenues this year will be in the region of £193m representing a year on year increase of 23%.
R-R bounced around but finished the month more positively following new orders and further actions intended to manage risk in their pension funds.
National Grid also managed to finish the month on a positive note despite going ex-dividend to the tune of 13.93p but this months highest riser was Morrisons with a monthly increase of 6.55% following broker upgrades.

As mentioned the biggest boost in November came as recently as yesterday afternoon with the surprising intervention by a group of the world's central banks which was seen as a statement of intent and kick-started markets significantly although it wasn't enough to give the FTSE100 a positive month as it finished down 0.7%, at 5505.42.

More encouragingly my portfolio (measured by the Merchant Adventurer's Index) did finish up on the month, by 0.55%, with dividend contributions coming from Morrisons; Centrica; Aviva and BAe.

Year to date the MA Index is showing a gain (with all dividends retained) of 9.75% whilst the FTSE100 is still down by 7.8% excl. dividends.



Merchant Adventurer's Index







Forecast 1 month YTD 23 mnth

Price % holding Div. yield % gain % gain % gain
R-R 729.00p 31.81% 2.39% 3.77% 17.01% 50.78%
National Grid 624.50p 18.14% 6.29% 1.13% 12.93% 15.06%
Aviva 311.70p 7.49% 8.62% -8.54% -13.00% -10.96%
Inv. Perp. High Inc. *** 492.41p 6.63% 3.90% -3.09% 4.01% 16.54%
BP 460.75p 4.45% 3.85% -0.05% -1.03% 5.85%
Apple ** $382.20 4.10% 0.00% -3.59% 17.71% 100.90%
IG Group 481.80p 3.37% 4.51% 3.37% -5.53% 60.14%
Morrisons 322.00p 2.68% 3.35% 6.55% 20.33% 27.26%
BG Group 1358.50p 2.62% 1.10% 0.15% 4.82% 24.63%
Centrica 301.80p 2.50% 5.05% 1.72% -8.99% -4.44%
William Hill 202.10p 2.49% 4.68% -6.44% 18.39% 18.19%
SSE 1315.00p 2.39% 6.07% -2.16% 7.35% 14.26%
Microsoft ** $25.58 2.21% 2.54% -3.15% -8.98% 5.57%
Vodafone 172.20p 2.20% 7.46% -0.38% 6.87% 6.87%
General Electric ** $15.91 2.18% 3.08% -5.79% 3.62% 3.62%
Tesco 405.20p 2.14% 3.83% 0.86% 1.57% 1.57%
BAE Systems 273.70p 1.80% 6.80% -1.05% -17.06% -14.27%
Cash
0.81% 0.00%











100.00% 4.13%






1 Month YTD 23 Mnth
Virtual Portfolio gain (incl. Divs)

0.55% 9.75% 38.75%
FTSE gain (excl. Dividends)

-0.70% -7.80% 1.71%
- 1 month gain   5544.22 - 5505.42




- YTD gain         5971.01 - 5505.42




- 23 month gain 5412.88 - 5505.42











Transactions:





07/11/2011 Divs Morrisons @ 3.17p per share


16/11/2011 Divs Centrica @ 4.29p per share


17/11/2011 Divs Aviva @ 10p per share


30/11/2011 Divs BAE @ 7.5p per share









Notes: 





*     US Dividends are adjusted for exchange rate and 15% withholding tax
**   Sterling : Dollar exchange rate = £1: $1.5699 as at 30/11/11

*** Invesco Perpetual Accumulation units (Dividends re-invested). Yield shown is based upon most recent payments.

Visually the chart continues to illustrate a strong profile similarity between my portfolio and the FTSE100 but interestingly the very marginal month on month difference seems to have been enough for the portfolio to outperform the main index in the current environment.

Click to enlarge, back to return.

As at the end of November the cumulative YTD difference (with my portfolio up 9.75% and the FTSE100 down by -7.8%) is a widening 17.55% (9.75 minus -7.8%).

Over 23 months the gap is now 37.04%.

I am really encouraged by the portfolio's performance, particularly given the extreme economic backdrop of this year.

But, whilst we continue to contemplate (with a tangible fear) what seemed unimaginable just a few years ago it is impossible to be comfortable and I continue to be very wary going forward.
Nightmares such as credit crunches, bank runs and major banking failures, state bankruptcy, failure of the Euro, and a break-up of the EU, have either happened or continue to be a highly possible risk.

Looking ahead, on a domestic front, December and January already look set to bring a seasonal chill to a dismal year in the form of high street losers with many retailers already raising concerns given an unseasonably mild start to the winter.

Whilst internationally and domestically, there is also still the debt and credit crunch hangover to resolve before confidence and an element of stability will return to stock markets.

But, given we are now entering December I am still hopeful for a profitable year overall.


Links to Portfolio updates:
October 2011: Portfolio Update
- May 2011: Portfolio Update
- April 2011: Portfolio Update