Sunday, 1 January 2012

December 2011: Portfolio Update.

Well the final score on the door for the year is an 11.7% gain after finding a further dividend received from Tesco in the portfolio. 
As mentioned in my quick summary yesterday (2011 FTSE close.), it is a very satisfying performance given the backdrop of turmoil and uncertainty which has seen the FTSE100 finish the year down 6.68% on its 31 Dec 2010 milestone of 5971.01.
A gain of 11.7% (which includes 3.84% of dividends) means that the portfolio has outperformed the FTSE 100 by an impressive 18.38% (11.7% - (-6.68%)). 
Even discounting dividend gains this would be 14.54%.

By virtue of their weighting the biggest gains came from R-R and National Grid but for different reasons.
R-R recovered from last years A380 - T900 problems with:
- a joint acquisition, with Daimler Benz, of a sector leading diesel manufacturer in Tognum
- the realisation and restructuring of its interest in IAE (Rolls-Royce update: IAE stake sale and new joint venture.)
- a new joint venture with UTC to develop engines in the 120 - 200 seater range.
National Grid seemed to give investors a relatively safe haven with its UK monopoly, inflation linked profits, and generous dividend policy.

Elsewhere, Apple, Morrisons and William Hill contributed steady gains whilst 2 of the recent newcomers: GE and Vodaphone, have also managed to make noticeable contributions since their addition.

In the disappointing corner were:
- Aviva which gave up the strong gains from the first half of the year amidst EU sovereign debt concerns, particularly Italian bond concerns;
- William Hill which after putting on good gains seemed to shoot itself in the foot with internal turmoil and politics at its Israeli based operation.
- BAe and Centrica both continue to disappoint with little momentum in the share price for the last couple of years other than a steady deterioration.
For comparison purposes I also note the headlines declaring Neil Woodford's return to the top of the pile in his sector ( Neil Woodford back as top dog - the best income funds of 2011 and what they invested in).
The article declares that the flagship "Invesco Perpetual High Income fund had a total return of 6.19 per cent from the start of 2011 to 21 December".
Interesting that my own holding of dividend re-invested Accumulation units shows a full year advance of 8.51%.
More interestingly (and unintentionally), the article details 6 shared holdings with my portfolio which are: Vodaphone; BAe; Rolls-Royce; BG; Tesco; and Centrica.
But, I also note that one of his biggest sales was National Grid.

Famously, the fund also has large holdings in Pharmaceuticals and Tobacco (of which I have none as yet) and these appear to have driven the fund higher this year.
I have continued to keep a holding of High Income units in the portfolio (despite being disappointed by them) but it continues to be on watch and should I add a Pharma or Tobacco company then it is highly likely that I will sell them. Unless of course the fund returns to its previous out-performance.

Looking forward, the forecast yield (if maintained of course), on the portfolio has risen to 4.06% which I see as a foundation for portfolio gains in 2012.
Merchant Adventurer's Index

Forecast 1 month 2011 24 mnth

Price % holding Div. yield % gain % gain % gain
R-R 746.50p 32.00% 2.33% 2.40% 19.82% 54.40%
National Grid 625.00p 17.83% 6.29% 0.08% 13.02% 15.15%
Aviva 300.80p 7.11% 8.93% -3.50% -16.04% -14.08%
Inv. Perp. High Inc. *** 513.74p 6.80% 3.73% 4.33% 8.51% 21.59%
BP 460.50p 4.37% 3.85% -0.05% -1.09% 5.79%
Apple ** $405.00 4.31% 0.00% 7.07% 26.03% 115.10%
IG Group 476.90p 3.27% 4.56% -1.02% -6.49% 58.51%
Morrisons 326.20p 2.67% 3.31% 1.30% 21.90% 28.92%
BG Group 1376.50p 2.61% 1.08% 1.32% 6.21% 26.28%
William Hill 202.80p 2.45% 4.66% 0.35% 18.80% 18.60%
General Electric ** $17.91 2.43% 2.74% 13.74% 17.86% 17.86%
Microsoft ** $25.96 2.39% 2.33% 9.98% 0.10% 16.11%
Centrica 289.30p 2.35% 5.27% -4.14% -12.76% -8.40%
SSE 1291.00p 2.31% 6.18% -1.83% 5.39% 12.17%
Vodafone 178.90p 2.25% 7.18% 3.89% 11.02% 11.02%
Tesco 403.45p 2.09% 3.84% -0.43% 1.14% 1.14%
BAE Systems 285.10p 1.85% 6.53% 4.17% -13.61% -10.69%
0.91% 0.00%

100.00% 4.06%

1 Month 1 Year 24 Mnth
Virtual Portfolio gain (incl. Dividends)

1.78% 11.70% 41.21%
FTSE gain (excl. Dividends)

1.21% -6.68% 2.94%
- 1 month gain   5505.42 - 5572.28

- YTD gain         5971.01 - 5572.28

- 24 month gain 5412.88 - 5572.28


08/12/2011 Divs William Hill @ 2.9p per share

13/12/2011 Divs Microsoft @ 10.81p per share

20/12/2011 Divs BP @ 4.47p per share

23/12/2011 Divs Tesco @ 4.63p per share


*     US Dividends are adjusted for exchange rate and 15% withholding tax
**   Sterling : Dollar exchange rate = £1: $1.5537 as at 30/12/11

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

Picking up the graph the profile of my portfolio's performance has maintained a strong similarity to the FTSE100 but small incremental differences in favour of the portfolio has allowed it pull ahead.
Over 2 years the portfolio is now showing a gain of 41.2% whereas the FTSE100 is up just 2.94% over the same period.

Click to enlarge, back to return.

Looking ahead, Tuesday sees everything start all over again and January might also herald a good start to the year for the portfolio with dividends coming in for R-R, National Grid and Vodaphone.
But, beyond that it looks like 2012 is going to be another difficult year with much the same rhetoric about inflation, the Euro, and sovereign debt doing little to allay fears.

I am still considering next steps for 2012 but seem likely to maintain a similar strategy, albeit with a little housekeeping should the opportunity arise.
There also looks to be an ongoing opportunity to further diversify into US markets and should the Euro ever appear to better reflect current events then I am sure that I can find a place for some large cap Europeans as well.

So, a steady, satisfactory 2011. Lets hope that a benign 2012 will provide further gains.

Related article:

- May 2011: Portfolio Update
- April 2011: Portfolio Update


  1. Hi MA,

    Just a quick one to say happy new year. Market commentators are becoming more vocal about Greece bombing out of Euro, have you got a stratergy should the euro change in some way?

  2. Hi ritsut,
    happy new year to you also. Having stewed on your question I have tried to address it in the next post:

    Best regards