Well I had made my mind up not to be involved with the upcoming Royal Mail IPO on the basis that it appears to be an unwieldy business with significant hurdles to address in terms of inefficiencies, the lack of assets, and increasing competition.
The fact that it can be difficult to forecast when a letter will be delivered i.e 1st class v. 2nd class v. reducing services doesn't really suggest a reliable service reputation.
Throw in a pensions black hole, and union activity and it would seem to be a task where the company has not found a financial equilibrium to stand on its own two feet yet, and not all stakeholders are pulling in the same direction.
But, then little doubts start sneaking in, such as: the pensions black hole being taken on by the government/tax payers, the parcel delivery business being the company's big opportunity, a seemingly well thought of CEO with a sense of what it might take to be competitive and the chance of a high payout ratio dividend.
Lastly could the advisors really know enough (or not), to price the IPO at an attractive level.
Whilst there is increasing competition, I assume the Royal Mail retains some protection of its delivery infrastructure in the form of licenses.
So whilst it might seem that there could be a short term opportunity (if priced to sell), and a long term carrot of a good ratio of dividend payouts, I'm struggling to be excited about its prospects at this stage.
The big opportunity being touted is the parcel delivery side of the business, given the rise in internet shopping, and it may be that the Royal Mail needs to compete for these contracts as well.
I notice that Amazon now delivers for M & S Outlets, and very efficiently too.
I hope that employees do take up the issue and keep them, as shared ownership starts an important step towards the sharing of goals as well as profits.
As long as excessive executive remuneration does not derail this of course.
But, for a business which appears to be so reliant on its staff numbers, perhaps a co-operative type of structure would serve better than either public or private ownership. Unfortunately, this would require a management/employee buyout.
Longer term, I guess that if some of the issues can be ironed out, and the Royal Mail can maintain its relevance as a utility-like delivery infrastructure, then it could become an attractive takeover proposition, but I'm not sure if I am ready to invest in the IPO beyond a little flutter, and I'm not sure if I will do that, so will probably be a vaguely interested bystander.
I also wonder how long it will be before the company drops its Royal Mail title for RM, or RMail or something else?
Related article links:
- https://royalmailshares.service.gov.uk: About the Royal Mail Share Offer
- http://www.moneyobserver.com: Royal Mail IPO could be over-subscribed
- http://www.sharesmagazine.co.uk: Royal Mail IPO: The essential details
Wednesday, 25 September 2013
Tuesday, 10 September 2013
August 2013: Portfolio Update.
So markets continue to fluctuate through August ending in a monthly move of -3.14% in the FTSE100 and -2.22% in my own portfolio.
Lots of dividends flying in though including my big one from National Grid.
And, as discussed in my last post (July 2013: Portfolio Adjustment (for new funds).), I have now added new funds to the portfolio and this month recorded the purchases made using both these and existing portfolio funds.
In terms, of purchases, I've previously mentioned a top up to Apple (but was undecided about adding these in isolation), but I've also added:
- RSA following the saga of Aviva's cut dividend and uncertain prospects.
- Imperial Tobacco, a top up following the purchase earlier this year (April 2013: Portfolio Update.)
- British American Tobacco, my preferred sector candidate to Imperial Tobacco (April 2013: Portfolio Update.)
- BP a top up on weakness.
In the main you can probably guess that, with the exception of Apple, all are above average dividend payers with Imperial Tobacco, and BP having the most to gain should they stage a recovery.
Clearly I have also used the current market uncertainty as a window of opportunity for such as British American Tobacco.
Lots of dividends flying in though including my big one from National Grid.
And, as discussed in my last post (July 2013: Portfolio Adjustment (for new funds).), I have now added new funds to the portfolio and this month recorded the purchases made using both these and existing portfolio funds.
In terms, of purchases, I've previously mentioned a top up to Apple (but was undecided about adding these in isolation), but I've also added:
- RSA following the saga of Aviva's cut dividend and uncertain prospects.
- Imperial Tobacco, a top up following the purchase earlier this year (April 2013: Portfolio Update.)
- British American Tobacco, my preferred sector candidate to Imperial Tobacco (April 2013: Portfolio Update.)
- BP a top up on weakness.
In the main you can probably guess that, with the exception of Apple, all are above average dividend payers with Imperial Tobacco, and BP having the most to gain should they stage a recovery.
Clearly I have also used the current market uncertainty as a window of opportunity for such as British American Tobacco.
Returning to my portfolio William Hill hit a speedbump as the threat of new UK taxation looms on the horizon to address offshore bases.
Most other shares wallowed with the markets as the threat of action against Syria increased.
But Vodafone rose as emerging rumours became confirmed that talks between Vodafone and Verizon Communications were ongoing over a deal on Verizon Wireless (Vodafone: "Deal or no deal" on Verizon Wireless!)
Following the deal, I've also topped up my holding in Vodafone which will show in my September Update.
| Merchant Adventurer's Index | |||||||||||
| Forecast | 1 month | YTD | 32 mth | ||||||||
| Price | % holding | Div. yield | % gain | % gain | % gain | ||||||
| R-R | 1112.00p | 31.23% | 1.98% | -5.36% | 27.30% | 78.49% | |||||
| National Grid | 742.50p | 13.88% | 5.68% | -5.65% | 5.62% | 34.27% | |||||
| Aviva | 386.80p | 9.65% | 4.01% | 4.26% | 3.70% | 14.48% | |||||
| William Hill | 415.20p | 4.02% | 2.83% | -14.74% | 26.05% | 125.44% | |||||
| Apple ** | $487.05 | 5.96% | 1.99% | 5.57% | -2.53% | 23.33% | |||||
| IG Group | 568.00p | 4.34% | 4.18% | -1.73% | 26.22% | 19.03% | |||||
| BP | 446.20p | 5.52% | 5.29% | -1.06% | 4.18% | -1.50% | |||||
| General Electric ** | $23.09 | 2.06% | 2.83% | -7.20% | 14.80% | 52.34% | |||||
| Centrica | 385.90p | 2.06% | 4.50% | -1.30% | 15.68% | 16.38% | |||||
| BAE Systems | 435.10p | 1.85% | 4.66% | -2.44% | 29.15% | 31.85% | |||||
| SSE | 1563.00p | 1.83% | 5.65% | -0.76% | 10.23% | 27.59% | |||||
| Microsoft ** | $33.40 | 1.88% | 2.46% | 2.75% | 30.40% | 20.40% | |||||
| Vodafone | 206.25p | 1.70% | 4.97% | 4.17% | 33.54% | 28.00% | |||||
| Morrisons | 290.20p | 1.55% | 4.40% | 0.42% | 10.34% | 8.45% | |||||
| BG Group | 1227.00p | 1.52% | 1.46% | 3.37% | 21.19% | -5.32% | |||||
| BAT | 3255.00p | 2.62% | 4.45% | -2.96% | -2.96% | -2.96% | |||||
| RSA Ins.Grp | 118.60p | 1.36% | 5.40% | 0.25% | 0.25% | 0.25% | |||||
| Imperial Tobacco | 2132.00p | 2.54% | 5.44% | -3.78% | -5.62% | -5.62% | |||||
| Tesco | 366.55p | 1.24% | 4.13% | -0.12% | 9.09% | -8.11% | |||||
| Cash | 3.17% | 0.00% | |||||||||
| 100.00% | 3.44% | ||||||||||
| 1 Month | YTD | 32 mth | |||||||||
| Virtual Portfolio gain (incl. Dividends) | |||||||||||
| - 1 month gain 1999.55 - | 1955.19 | -2.22% | |||||||||
| - YTD gain 1644.62 - | 1955.19 | 18.88% | |||||||||
| - 32 month gain 1264.20 - | 1955.19 | 54.66% | |||||||||
| - 44 month gain 1000.00 - | 1955.19 | 95.52% | |||||||||
| FTSE gain (excl. Dividends) | |||||||||||
| - 1 month gain 6621.06 - | 6412.93 | -3.14% | |||||||||
| - YTD gain 5897.81 - | 6412.93 | 8.73% | |||||||||
| - 32 month gain 5971.01 - | 6412.93 | 7.40% | |||||||||
| - 44 month gain 5412.88 - | 6412.93 | 18.48% | |||||||||
| Transactions: | |||||||||||
| 28/03/2013 | Buy | Apple @ £2.96149 | |||||||||
| Div | Apple @ 169.89p per share | ||||||||||
| 28/03/2013 | Buy | RSA Insurance Group @ £1.16983 | |||||||||
| 24/05/2013 | Div | RSA Insurance @ 3.9p per share | |||||||||
| 07/08/2013 | Div | Vodafone @ 6.92p per share | |||||||||
| 16/08/2013 | Div | Imperial Tobacco @ 35.2p per share | |||||||||
| 19/08/2013 | Div | Apple @ £1.6564 per share | |||||||||
| 21/08/2013 | Div | National Grid @ 26.36p per share | |||||||||
| 22/07/2013 | Buy | Imperial Tobacco @ £22.127 | |||||||||
| 21/08/2013 | Buy | Brit.Am.Tobacco @ £33.270977 | |||||||||
| 22/08/2013 | Buy | BP @ £4.36331 | |||||||||
| Notes: | |||||||||||
| * US Dividends are adjusted for exchange rate and 15% withholding tax | |||||||||||
| ** Sterling : Dollar exchange rate = £1: $1.549644 as at 31/08/13 | |||||||||||
Looking at the chart it still looks like a rising trend albeit one that looks a little undecided at the moment as to where its next direction might be.
But with Syria, oil prices, uncertainty over quantitative easing and interest rates, its probably not too surprising.
But there are tentative signs of European recovery, and both the UK and US look stronger in their prospective recoveries, if data is to be believed.
 |
| Click to enlarge, close to return. |
My portfolio is still below the mid May peak but it still seems right to consolidate things with a round or two of dividends before once again looking towards future prospects and share prices.
My forecast yield has fallen quite a way over the last year but that is almost (you know who you are...Aviva!), entirely down to share price gains this year ahead of actual earnings being reported and catching up with speculation.
But despite some headwinds to weather I remain reasonably optimistic about the future and happy with the way things have gone so far with my portfolio.
Related Posts:
- Vodafone: "Deal or no deal" on Verizon Wireless!
- July 2013: Portfolio Adjustment (for new funds).
- July 2013: Portfolio Update.
- 20 May 2013: Portfolio milestone.
- April 2013: Portfolio Update.
- March 2013: Portfolio Update.
- February 2013: Portfolio update.
- January 2013: Portfolio Update.
- December 2012: Portfolio Update (2012 Year-end).
July 2013: Portfolio Adjustment (for new funds).
OK so I have talked about adding new funds to my portfolio and I've finally sat down and looked at the mechanics of doing so.
In a nutshell, I've been monitoring my portfolio as an index which is the obvious thing to do given that I am benchmarking myself against an index, in this case the FTSE 100.
In doing so I put my starting valuation as the base and made that 1000 then each month this has incrementally adjusted in line with the change in valuation.
However, adding new funds results in a change to the valuation and, of course, a change to the index number which is not what I want.
So I have had to take a view on Unit Trusts which constantly adjust for inflows/outflows of monies, and changes to the funds overall valuation, but still maintain a linear performance measure.
Doing so required a small step back in time to my starting index base of 1000 (1999.55 as at 31 July), and taking a lead from the Unit Trust Industry converted this into 1000 units with a value of 1.
If this was GBP then £1000 would buy 1000 units of £1 each.
Then as at the 31st July each unit would be worth £1.99955 so putting £1000 in at this time would only buy 500.1125 units at a unit value of £1.99955.
In this way, the unit price and performance measure is maintained but there would now be additional units issued which when added to the original units would give a greater overall fund valuation.
This would also work both ways should there be a removal of units from a fund.
Obviously there is a little timing difference as I have made the adjustment at a month end but as the funds have been used on direct purchases then the individual investment gains/losses/dividends will be aggregated into portfolio as I enter them in August's Portfolio Valuation.
Pre-adjustment as at 31 July 2013 (July 2013: Portfolio Update.)
| Merchant Adventurer's Index | ||||||
| Forecast | 1 month | YTD | 31 mth | |||
| Price | % holding | Div. yield | % gain | % gain | % gain | |
| R-R | 1175.00p | 35.57% | 1.87% | 3.62% | 34.52% | 88.60% |
| National Grid | 787.00p | 15.86% | 5.40% | 5.50% | 11.95% | 42.31% |
| Aviva | 371.00p | 9.98% | 4.30% | 9.12% | -0.54% | 9.81% |
| William Hill | 487.00p | 5.08% | 2.43% | 10.43% | 47.84% | 164.42% |
| Apple ** | $452.53 | 4.79% | 2.14% | 14.30% | -9.55% | 22.39% |
| IG Group | 578.00p | 4.76% | 4.11% | -0.34% | 28.44% | 21.12% |
| BP | 455.00p | 4.55% | 5.21% | 0.00% | 7.11% | -0.59% |
| General Electric ** | $24.37 | 2.39% | 2.68% | 5.25% | 23.70% | 64.16% |
| Centrica | 391.00p | 2.25% | 4.43% | 8.61% | 17.21% | 17.91% |
| BAE Systems | 446.00p | 2.04% | 4.56% | 16.45% | 32.38% | 35.15% |
| SSE | 1575.00p | 1.99% | 5.58% | 3.41% | 11.07% | 28.57% |
| Microsoft ** | $31.84 | 1.98% | 2.41% | -7.70% | 26.91% | 17.18% |
| Vodafone | 198.00p | 1.76% | 5.20% | 5.32% | 28.20% | 22.88% |
| Morrisons | 289.00p | 1.67% | 4.43% | 10.31% | 9.89% | 8.00% |
| BG Group | 1187.00p | 1.59% | 1.54% | 6.08% | 17.23% | -8.41% |
| Imperial Tobacco | 2206.00p | 1.40% | 5.28% | -3.25% | -3.81% | -3.81% |
| Tesco | 367.00p | 1.34% | 4.13% | 10.88% | 9.23% | -8.00% |
| Cash | 1.01% | 0.00% | ||||
| 100.00% | 3.34% | |||||
| 1 Month | YTD | 31 mth | ||||
| Virtual Portfolio gain (incl. Divs) | ||||||
| - 1 month gain 1893.90 - | 1999.55 | 5.58% | ||||
| - YTD gain 1644.62 - | 1999.55 | 21.58% | ||||
| - 31 month gain 1264.20 - | 1999.55 | 58.17% | ||||
| - 43 month gain 1000.00 - | 1999.55 | 99.95% | ||||
| FTSE gain (excl. Dividends) | ||||||
| - 1 month gain 6215.47 - | 6621.06 | 6.53% | ||||
| - YTD gain 5897.81 - | 6621.06 | 12.26% | ||||
| - 31 month gain 5971.01 - | 6621.06 | 10.89% | ||||
| - 43 month gain 5412.88 - | 6621.06 | 22.32% | ||||
Post adjustment as at 31 July 2013.
Note that the period performances remain the same but that there is a change to the cash weighting and the individual portfolio weightings but, that the overall 100% is maintained
| Merchant Adventurer's Index | ||||||
| Forecast | 1 month | YTD | 31 mth | |||
| Price | % holding | Div. yield | % gain | % gain | % gain | |
| R-R | 1175.00p | 32.27% | 1.87% | 3.62% | 34.52% | 88.60% |
| National Grid | 787.00p | 14.39% | 5.40% | 5.50% | 11.95% | 42.31% |
| Aviva | 371.00p | 9.05% | 4.30% | 9.12% | -0.54% | 9.81% |
| William Hill | 487.00p | 4.61% | 2.43% | 10.43% | 47.84% | 164.42% |
| Apple ** | $452.53 | 4.35% | 2.14% | 14.30% | -9.55% | 22.39% |
| IG Group | 578.00p | 4.32% | 4.11% | -0.34% | 28.44% | 21.12% |
| BP | 455.00p | 4.13% | 5.21% | 0.00% | 7.11% | -0.59% |
| General Electric ** | $24.37 | 2.17% | 2.68% | 5.25% | 23.70% | 64.16% |
| Centrica | 391.00p | 2.04% | 4.43% | 8.61% | 17.21% | 17.91% |
| BAE Systems | 446.00p | 1.85% | 4.56% | 16.45% | 32.38% | 35.15% |
| SSE | 1575.00p | 1.81% | 5.58% | 3.41% | 11.07% | 28.57% |
| Microsoft ** | $31.84 | 1.79% | 2.41% | -7.70% | 26.91% | 17.18% |
| Vodafone | 198.00p | 1.59% | 5.20% | 5.32% | 28.20% | 22.88% |
| Morrisons | 289.00p | 1.51% | 4.43% | 10.31% | 9.89% | 8.00% |
| BG Group | 1187.00p | 1.44% | 1.54% | 6.08% | 17.23% | -8.41% |
| Imperial Tobacco | 2206.00p | 1.27% | 5.28% | -3.25% | -3.81% | -3.81% |
| Tesco | 367.00p | 1.22% | 4.13% | 10.88% | 9.23% | -8.00% |
| Cash | 10.19% | 0.00% | ||||
| 100.00% | 3.03% | |||||
| 1 Month | YTD | 31 mth | ||||
| Virtual Portfolio gain (incl. Divs) | ||||||
| - 1 month gain 1893.90 - | 1999.55 | 5.58% | ||||
| - YTD gain 1644.62 - | 1999.55 | 21.58% | ||||
| - 31 month gain 1264.20 - | 1999.55 | 58.17% | ||||
| - 43 month gain 1000.00 - | 1999.55 | 99.95% | ||||
| FTSE gain (excl. Dividends) | ||||||
| - 1 month gain 6215.47 - | 6621.06 | 6.53% | ||||
| - YTD gain 5897.81 - | 6621.06 | 12.26% | ||||
| - 31 month gain 5971.01 - | 6621.06 | 10.89% | ||||
| - 43 month gain 5412.88 - | 6621.06 | 22.32% | ||||
Right with that finally sorted I need to get August's Update adjusted for the new purchases and posted.
- July 2013: Portfolio Update.
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