February 2014: Portfolio Update

Okay, so its been sometime and I have a little catching up to do with changes, movements etc.

February was notable for the execution of the Vodafone rights issue with the new share distribution, Verizon shares, and special dividend to follow next month.

The regular Vodafone dividend was received along with dividends from Apple, IG and a nice first contribution from Imperial Tobacco.

Quite a significant pullback can be seen in my portfolio following the disappointment in Rolls-Royce seen in January's, and my portfolio has now shown a two months decline of 5.6% year to date v. the FTSE 100's steadier performance.

Representing 29.77% of my portfolio Rolls-Royce has contributed significantly over the last few years and I have actually taken the recent fall as an opportunity to add a few more shares to the mix.

Supermarkets also continue to underperform and I am now seriously considering the paradigm shift towards discounters and convenience stores that analysts are proclaiming.

My view has always been that this shift would reverse as the economy improves so it is a test of my nerves.

Merchant Adventurer's Index
			Forecast	1 month	YTD	38 mth
	Price	% holding	Div. yield	% gain	% gain	% gain
R-R	999.00p	29.77%	2.32%	-14.70%	-20.18%	52.18%
National Grid	834.50p	15.11%	5.09%	5.77%	5.90%	50.90%
Aviva	473.60p	11.44%	3.39%	6.43%	5.31%	40.17%
BP	504.40p	6.04%	4.79%	5.52%	3.35%	11.34%
Apple **	$526.19	5.77%	2.09%	3.20%	-7.53%	23.30%
Vodafone	252.30p	5.21%	4.34%	11.15%	6.46%	33.27%
IG Group	633.00p	4.68%	3.74%	1.12%	2.76%	32.65%
William Hill	397.60p	3.73%	3.19%	19.76%	-1.07%	115.88%
Imperial Tobacco	2437.00p	2.81%	5.22%	9.63%	4.23%	7.88%
BAT	3250.00p	2.54%	4.53%	11.45%	0.37%	-3.11%
General Electric **	$25.47	2.04%	2.58%	-0.49%	-10.40%	55.52%
Microsoft **	$38.31	1.94%	2.32%	-0.60%	0.93%	27.80%
BAE Systems	410.90p	1.69%	5.01%	-4.22%	-5.54%	24.52%
Centrica	319.00p	1.65%	5.54%	2.57%	-8.25%	-3.80%
SSE	1403.00p	1.59%	6.25%	7.35%	2.41%	14.53%
Morrisons	235.30p	1.22%	5.47%	-1.96%	-9.85%	-12.07%
BG Group	1088.50p	1.31%	1.70%	6.51%	-16.11%	-16.01%
Tesco	329.20p	1.08%	4.48%	2.87%	-1.54%	-17.48%
Cash		0.39%	0.00%
		100.00%	3.55%
				1 Month	YTD	38 mth
Virtual Portfolio gain (incl. Dividends)
- 1 month gain   2040.58 -	2019.42			-1.04%
- YTD gain         1644.62 -	2019.42				-5.60%
- 38 month gain 1264.20 -	2019.42					59.74%
- 50 month gain 1000.00 -	2019.42					101.94%
FTSE gain (excl. Dividends)
- 1 month gain   6510.44 -	6809.7			4.60%
- YTD gain         5897.81 -	6809.7				0.90%
- 38 month gain 5971.01 -	6809.7					14.05%
- 50 month gain 5412.88 -	6809.7					25.81%
Transactions:
06/02/2014	Div	Vodaphone @ 3.53p per share
17/02/2014	Div	Imp.Tobacco @ 81.2p per share
17/02/2014	Div	Apple @ 152.82p per share
19/02/2014	Buy	Rolls-Royce @ 1006.02p
24/02/2014	Sell	Vodafone @ 252.3p
24/02/2014	Buy	Vodafone @ 252.3p
24/02/2014	Buy	Verizon @ $46.23 / £27.61
25/02/2014	Div	IG Group @ 5.75p per share
Notes:
*     US Dividends are adjusted for exchange rate and 15% withholding tax
**   Sterling : Dollar exchange rate = £1: $1.67448 as at 28/02/14

Disappointing to see the chart given the pullback in my portfolio.

Click to enlarge, close to return

So a disappointing start to the year and quite a few concerns that I need to keep an eye on.

National Grid switched on!

National Grid 889.5p

Hmm a bedrock of my portfolio. National Grid appears to riding the crest of an analyst induced wave at the moment to a point where, on 16.2 and 15.4 times earnings (1 and 2 year), they feel a little inflated given the increasing prospects of the economy and the pressure being applied to the BoE to look at cooling the London centric housing market.

Any higher than the current price (without the foundation that time and earnings would give it), into the 900p range, and I would suggest it is in the kind of inflated acquisition price range that utilities are often taken out at by companies/pension funds looking for secure predictable bond like investments for the very long term!

Analysts seem to be quietly promoting NG for its quiet utilitarian qualities and distance from current political debate, which gives a perceived security to its inflation linked dividend.
On that basis I expect the shares to come back to the low 800p range, which makes it tempting to trade from the top then back in at a lower price should my thinking be correct.
Something that I have done with National Grid in the distant past!

I certainly wouldn't want to to be adding at this price although the forecast 5% dividend yield does still suggest there is value at the current price..hmm a disparity I think.

But, trading in and out would go against my philosophy of the past few years and possibly tempt me back into the short term trading mentality of much of the markets, a behaviour I have fought strongly to remove from investment strategy.
Funny if the share price was to have stayed within that low 800p price range I wouldn't even have considered trading them for what is ultimately a small margin even considering that if overbought at 889.5p they could then be oversold to say.... 741p which could give 20% ignoring the ex dividend date of 4th June.

Anyway, I've looked at it, I've made myself aware of it, and my expectation that NG will fall back in the short term, and will try to stick to my philosophy of working to a longer term horizon than the market's analysts and traders.