Wednesday 10 December 2014

Filling up on BP.

BP @ 404.25p, -1.70p (-0.42%)

The long running saga of BP's return to acceptance and a place amongst its peers continues.
However, with the recent surrender in the barrel of a price of oil from around $115 to the present $65 (a 5 year low we are told), perhaps the detailed assessment of its assets and global footprint, along with its divestment program (to make recompense for the Gulf of Mexico tragedy), might put it in a strong position to address a lower oil price.
I say lower, but it really doesn't seem that long ago that the price of a barrel of oil was firmly stuck at $25 and I recall BP using a surplus of profits (from anything over $25), to buyback shares.

Today also saw BP begin to communicate its strategy to the end of the decade (www.bp.com: BP Presents Upstream Strategy to Investors), along with the announcement of a cost cutting and restructuring program to meet the outlook for a lower oil price (www.reuters.com: BP to spend $1 billion on hundreds of job cuts, restructuring).

Anyway, that being the case, and the resultant bombing out of the oil and energy resource sector (surely a short term reaction), I am taking the opportunity to add to my holding in BP, in the hope that this is a near bottom in the price of oil and sentiment towards the sector. Although repairing sentiment to BP remains a longer work in progress and perception.

It goes without saying that I am assuming that the near 6% yield can be maintained and add to my returns in the coming year.

The transaction does also help to reduce the cash portion of my portfolio to around 5.2% (7.57% as at my November 2014: Portfolio Update.).

Monday 8 December 2014

November 2014: Portfolio Update.

So heading into Christmas and the year end milestone, my portfolio finds itself still in negative territory for the year having hit its recorded all time high at the end of last year.
A difficult year or one of consolidation where it has, to date, ranged from -5.60% down to -0.34% down in the year.
The truth is probably somewhere between the two, and a mixture, as some sectors and company specifics have clearly under-performed with R-R the notable impact upon my portfolio. 
Pleasing then that despite a -32.68% performance in the year to date of R-R, my portfolio is just -1.64% down against its all time high, leaving it in with a chance of finishing in positive territory should there be a year-end rally in markets and sentiment.
It does feel like I have taken my eye of things a little this year, or at least stepped back from things, and coupled with my longer term strategy, I have to admit to being a little slow in topping up my portfolio with new or existing holdings which leaves me with around 7.5% cash. 
But, there has been one addition this month, that being Banco Santander. Its main attraction being its dividend (less 21% Spanish withholding tax), but also for a long running recovery in its national, european, and south american markets.
There has been quite a lot discussed around the dividend but it has been maintained through a difficult time, and has a little support through the option of a scrip in place of cash. Which, as long as the share price has support, helps reduce the liability of actually paying cash out of assets, albeit with a dilution of entitlement due to an increase in shares in issue.

Anyway back to the update and, as mentioned my portfolio is still down, by -1.64% in the year to date, despite a 2.22% increase in the month.
This is still down on the resurgent FTSE which recorded a 2.69% increase to finish -0.39% down

Dividends came in from Verizon, Aviva, Centrica, Apple, IG, and Barrat's, so it was a useful month for dividends with Aviva, and IG the notable contributors.
There were also some useful share price gains around the 10% mark from Apple, Vodafone, IG, Imperial Tobacco, and Banco.
Along with a disappointing drop in BG of -13%, as it took a one-two hit on pay for its new CEO, and a continuing fall in the oil price affecting the value of its assets.



Merchant Adventurer's Index
Forecast
1 month
YTD
47 mth
Price
% holding
Div. yield
% gain
% gain
% gain
R-R
842.50p
22.39%
3.02%
-0.06%
-32.68%
28.34%
National Grid
930.00p
15.02%
4.66%
0.43%
18.02%
68.17%
Aviva
508.00p
10.95%
3.78%
-2.50%
12.96%
50.35%
BP
420.20p
4.49%
5.93%
-6.41%
-13.90%
-7.24%
Apple **
$118.93
8.72%
1.40%
12.49%
56.59%
108.80%
Vodafone
233.95p
2.35%
4.86%
12.86%
-7.27%
-7.27%
Verizon **
3233.62p
1.55%
3.73%
2.84%
16.51%
16.51%
IG Group
677.50p
4.47%
4.22%
12.73%
9.98%
41.97%
William Hill
335.00p
2.80%
3.79%
-7.07%
-16.65%
81.89%
Imperial Tobacco
2960.00p
3.05%
4.74%
9.18%
26.60%
31.03%
BAT
3794.50p
2.64%
4.15%
6.98%
17.19%
13.13%
General Electric **
$26.49
2.02%
2.66%
4.84%
-0.26%
73.12%
Microsoft **
$47.81
2.31%
2.01%
4.02%
34.81%
70.70%
BAE Systems
481.10p
1.76%
4.34%
4.88%
10.60%
45.79%
Centrica
284.60p
1.31%
6.38%
-5.92%
-18.15%
-14.17%
SSE
1640.00p
1.66%
5.48%
2.56%
19.71%
33.88%
BG Group
900.20p
0.96%
2.27%
-13.44%
-30.62%
-30.54%
Barrat Dev.
460.30p
1.51%
3.09%
9.91%
28.77%
28.77%
Banco Santander
577.50p
2.47%
6.24%
8.76%
5.83%
5.83%
Cash
7.57%
0.00%
100.00%
3.47%
1 Month
YTD
47 mth
Virtual Portfolio gain (incl. Dividends)
- 1 m gain          2058.40 -
2104.11
2.22%
- YTD gain        1644.62 -
2104.11
-1.64%
- 47 m gain       1264.20 -
2104.11
66.44%
- 59 m gain       1000.00 -
2104.11
110.41%
FTSE gain (excl. Dividends)
- 1 m gain         6546.70 -
6722.62
2.69%
- YTD gain        5897.81 -
6722.62
-0.39%
- 47 m gain       5971.01 -
6722.62
12.59%
- 59 m gain       5412.88 -
6722.62
24.20%
Transactions:
03/11/2014
Buy
Banco Santander @ 545.71p per share
05/11/2014
Div
Verizon @ 29.12p per share
15/11/2014
Div
Centrica @ 5.10p per share
17/11/2014
Div
Aviva @ 5.85p per share
17/11/2014
Div
Apple @ £1.7586 per share (est)
18/11/2014
Div
IG Group @ 22.4p per share
20/11/2014
Div
Barrat Dev. @ 7.1p per share
Notes: 
*     US Dividends are adjusted for exchange rate and 15% withholding tax
**   Sterling : Dollar exchange rate = £1: $1.5645 as at 28/11/14
***  Banco Dividends are adjusted for exchange rate and 21% withholding tax
**** Sterling : Euro exchange rate = £1: $1.25643 as at 28/11/14




Click to enlarge, close to return.




Chartwise is much the same as it has been albeit with a much stronger trend with both indices bouncing along in a channel just below the 2013 year-end position.

But also appearing to maintain some link to the longer term trend. 
I am not conversant with technical analysis but the trend and the channel would appear to be narrowing and forming some kind of pinch point which I'm sure the more proficient technical analysts would suggest could mark a break-out of the current channel but that could be one of of two ways, up or down.
Hopefully, if the long term trend is intact then this could be a break upwards but we shall have to wait and see.

Click to enlarge, close to return.

So December to come and the end of 2014. December has already seen a little movement up, which would be nice if it can continue and give me a positive year, but if it doesn't then I will hope for opportunities to reduce my cash holdings as we start to look towards 2015.

Tuesday 4 November 2014

October 2014: Portfolio Update - "Press"cient Release!

Wow!
Can't believe that!

So, I wrote a small section on Rolls-Royce in my earlier portfolio update, October 2014: Portfolio Update., and published it at 12:24pm (an amended time following my correction for an omission), where I put forward a view on the effectiveness of the key executives and the company's previously successful financial disciplines.

Then, I notice a Sharecast article by Oliver Hall, and first published at 14:11, Rolls-Royce replaces CFO and makes 2,600 job cuts.

Seems there is something in the ether!

Related Posts/Article Links:
www.sharecast.com: Rolls-Royce replaces CFO and makes 2,600 job cuts
October 2014: Portfolio Update

October 2014: Portfolio Update.

OK so thats the dreaded October out of the way, but it has left a small amount of company specific carnage in its wake with the profit warning from Rolls-Royce which I was not looking forward to seeing at this period end update
However, even with a -12.55% fall in  the month, from what had amounted to being around 25% of my portfolio, the overall fall in the month of -1.88% feels like an escape.
The wider picture tells me that Rolls-Royce has now lost -32.64% this year though and that is hugely disappointing and suggests that the current leadership are potentially not the right men at the top.
The change of Chairman, CEO, and CFO in recent years suggests a detachment from the successful strategy and financial discipline that has propelled the company to its current position. 
The strong cashflow and available finances that have subsequently flowed have also masked what now looks like a deterioration in disciplines as new faces in controlling positions have not come up to speed fast enough, and this is now becoming visible.
So whilst the company continues to look strong with strong ongoing prospects, the decision making on protecting the balance sheet, and cash flow seems to have gone a little awry of late in a company that has historically maintained a clear focus on its future strategic goals and the best route to move towards them.
In short the available riches of recent years appears to have resulted in apathy and deal making.

Elsewhere, dividends were slim this month with just one coming in from GE.
But, Apple has surged 9.04% in the month following a good set of iPhone 6 figures.
BG Group also fell by -8.94% and whilst my hand hovers over the sell button, a new, highly regarded CEO, Helge Lund (credited with transforming the Norwegian state owned Statoil), has come in, so there may yet be light at the end of the tunnel for those with patience.

My more recent addition of Barratt Developments also performed well with a 5.76% gain in the month.

In summary then, my portfolio is down -1.88% in the month, and 3.78% year to date, and continues to lag the FTSE 100's performance of -1.15% in the month and -3% year to date.

But, putting that in context and in a more positive light, -3.78% year to date is also just -3.78% down from my portfolio's all time closing high achieved on the 31 December 2013.


Merchant Adventurer's Index
Forecast 1 month YTD 46 mth
Price % holding Div. yield % gain % gain % gain
R-R 843.00p 22.91% 3.02% -12.55% -32.64% 28.41%
National Grid 926.00p 15.28% 4.68% 4.28% 17.51% 67.45%
Aviva 521.00p 11.48% 3.68% -0.57% 15.86% 54.20%
BP 449.00p 4.90% 5.55% -0.88% -8.00% -0.88%
Apple ** $108.00 7.92% 1.54% 9.04% 39.21% 85.62%
Vodafone 207.30p 2.13% 5.48% 1.62% -17.84% -17.84%
Verizon ** 3144.26p 1.54% 3.76% 2.25% 13.29% 13.29%
IG Group 601.00p 4.06% 4.76% 1.01% -2.44% 25.94%
William Hill 360.50p 3.08% 3.52% -2.57% -10.30% 95.74%
Imperial Tobacco 2711.00p 2.85% 5.17% 1.76% 15.95% 20.01%
BAT 3547.00p 2.53% 4.43% 1.87% 9.54% 5.75%
General Electric ** $25.81 1.97% 2.73% 2.48% -4.86% 65.12%
Microsoft ** $46.95 2.27% 2.05% 3.02% 29.60% 64.10%
BAE Systems 458.70p 1.72% 4.55% -2.61% 5.45% 39.00%
Centrica 302.50p 1.42% 6.00% -1.79% -13.00% -8.78%
SSE 1599.00p 1.65% 5.62% 3.36% 16.72% 30.53%
BG Group 1040.00p 1.14% 1.97% -8.93% -19.85% -19.75%
Barrat Dev. 418.80p 1.40% 3.39% 5.76% 17.16% 17.16%
Cash 9.75% 0.00%
100.00% 3.39%
1 Month YTD 45 mth
Virtual Portfolio gain (incl. Dividends)
- 1 month gain  2097.83 -  2058.4 -1.88%
- YTD gain        1644.62 - 2058.4 -3.78%
- 46 month gain1264.20 - 2058.4 62.82%
- 58 month gain1000.00 - 2058.4 105.84%
FTSE gain (excl. Dividends)
- 1 month gain  6622.72 - 6546.7 -1.15%
- YTD gain        5897.81 - 6546.7 -3.00%
- 46 month gain5971.01 - 6546.7 9.64%
- 58 month gain5412.88 - 6546.7 20.95%
Transactions:
29/10/2014 Div Gen. Electric @ 11.43p per share
Notes: 
*     US Dividends are adjusted for exchange rate and 15% withholding tax
**   Sterling : Dollar exchange rate = £1: $1.59815 as at 31/10/14


And the chart illustration of performance over the last 46 months. 

Click to enlarge, close to return.
I'm not really a technical investor but the recent sharp downturn is now clearly on the long term trendline, and unless it bounces/turns upwards sharply, looks in danger of breaking what has been a strong trend of growth in my portfolio.

So, it continues to be a tough year for my portfolio, but having trimmed Tesco, and Morrisons (and clearing some of my negativity), and adding new funds to the incoming dividends, I am now looking to add those funds back into the market which might yet see a year end rally. 
And, whilst this year now looks to be one of, at best, consolidation, I am already looking beyond 2014 to next year.
To that effect I made my first re-investment yesterday adding Banco Santander to the fold, and this will show in November's Update.

Until next month...


Previous Posts:
September 2014: Portfolio Update
August 2014: Portfolio Update
July 2014: Portfolio Update.
June 2014: Portfolio Update.
May 2014: Portfolio Update.
April 2014: Portfolio Update.
March 2014: Portfolio Update.
2013 Dividends profiled.
February 2014: Portfolio Update
January 2014: Portfolio Update
December 2013: Portfolio Update.

Tuesday 21 October 2014

Royal Mail still in the post!

Royal Mail @ 432p

Strange that the Royal Mail flotation is no longer being sounded in the House of Commons as a political football now that the share price is much closer to its supposed discounted launch price.
Once again its use by Labour, seemingly demonstrates that they have little understanding of markets themselves and would use any little thought out opportunity to influence voters minds with something that, it could be said has subsequently backfired and been quickly resigned to yesterdays news, as quickly as the company's prospects appear to have been deflated.

As ever, with these things, and particularly where politicians are concerned, the first question following such headlines and statements, should always be "what's in it for them?"
That answered you can at least consider what they are saying with a little more balance.

The fact remains that the issue unexpectedly recalled the hype of earlier privatisation issues, along with an over subscribed small investor proportion being scaled back and leading to greater demand in the short term.
Like any market, the number of buyers over sellers, dictates the price, and I suspect, market makers boosted this in the short term as they came on board to maintain liquidity of a new issue, providing a further boost.

Either way, and for a time, it seems that the value of Royal Mail got ahead of itself despite a gloomier wider economy, and as such, the price of the issue should never have been used for the target practice that followed.
Instead the debate should always have been about whether or not it should have been privatised given the use of state owned industry to maintain employment levels during a recession.

Most investment cases involve speculation as to future prospects, are sold on the positives, and are usually in an overbought or oversold situation, which can be influenced by company news and/or wider market and economic sentiment.

Anyway, as things stand, at the current price, the Royal Mail stands at a current historic valuation of 21.4 time earnings, and a yield of 2.4%, albeit the actual yield has been determined from just a 60% of a full year return.
The current valuation and share price, taking into account rapid growth (if you can believe it), falls to 13.2 time earnings and a 4.9% yield for the current year!

So even at this price these kind of growth multiples and speculation put the company into a high growth category, which still seems hugely risky given the competition for parcel delivery from its customer, Amazon, and other more established postal names.
I bought a suit from Marks & Spencers last year, which was efficiently delivered (almost tracked up the motorway), by Amazon!

That kind of growth multiple is also comparable to maturing technology companies such as Google and Apple, giving further food for thought perhaps. 
However, the investment case for Royal Mail has always been its dividend, so at 4.9% for next year v. some of the original investment case suggesting 6% for the current year (for income seekers), it still seems overpriced and therefore in risk of falling back to its offer price.

So my earlier question remains: Royal Mail IPO: first class or second class!
Only time and markets will tell.

Earlier related posts:
Royal Mail IPO: first class or second class!