Thursday, 25 October 2012

Portfolio Update October 2012

Another update to talk my own book on my current personal positions and the why I hold them. I like to think of my portfolio as a way to outperform cash so Im looking for total returns and the key is capital preservation.

SBRY: I topped up some SBRY in June which was a great decision. Since then the stock as gone vertical up 60p to £3.50. Sainsburys is way ahead of Tesco in terms of store quality and home delivery and its outperforming both Tesco and Morrisons. It now looks fairly valued to me unless bid rumours start to resurface but Ill continue to collect my healthy dividend yield and reinvest.

Pandora A/S: I sold out of this completely a few months back around the 80DKK mark. Its since managed to trade a bit higher but I don’t think there is a lot of value left there since reliable female sources inform me the brand is very yesteryear.

RSA: This stock still just looks cheap to me as it’s a good franchise, internationally diversified and it throws off cash. Risks for this are obvious; it is a European financial in a mega low rate environment so could get blown around by further chatter regarding the glacial unfolding of the euro area collapse. It is also a global insurer so all kinds of catastrophes pose a risk to medium term underwriting results. Still enjoying collecting my dividends and reinvesting this one.

BBd/B: This stock has continued to language below $CAD  4 per share which is a shame. Hence I’m nursing a small loss here but this still looks like a solid industrial to me which actually makes things that people, companies and governments need.

ABX: I bought into Barrick Gold during July at $36 and $33 per share because it frankly looked very cheap for a mega cap miner albeit it one suffering from a lack of momentum in the gold price. Since then the stock has done well off the back of QE and I continue to like its exposure to gold as most of the mines are in locations which are not politically dangerous or difficult (mines in Nevada rather than South Africa).

FGP: I bought some FirstGroup shares the day after their bid on the west coast mainline was cancelled. I take the view that not winning that bid was a good thing as they had overpaid. Since then I’m nursing a small loss on these shares as FGP continues to languish. The issue is FirstGroup is a relatively weak company financially (it probably needs to raise capital) and managerially (the CFO is actually called “Tim O’Toole”!).  However FGP is also very cheap and suffocating under a weight of negative newsflow. Looks to me like it could easily pickup a bit from here with bad news priced in. But not my idea of long term fundamental holding.

MAYG: I bought shares in May Gurney after their profit warning in September as the stock looked cheap at 4x fwd P/E (it still does; 6x fwd P/E with a 5% yield) with low financial leverage and the bad news seemed well priced in. An intraday drop of >40% seemed like an overreaction to what was basically some poor management decisions. I bought into the shares at £1.32 and £1.20. I wish id been available to trade on the 12th September when these shares bottomed at 99p. Since then we had a favourable trading update for H1 (quelle surprise) and the stock has picked up. Again not my idea of long term fundamental holding but it looks good on a ‘special situations’ basis.

These kind of stocks can sometimes be very attractive especially small caps like MAYG or hot issue darlings who disappoint like Pandora as all the institutional money dumps them at the same time shutting the gate on a bolted horse leaving some pretty obvious value on the table for investors who don’t have to answer to any client but themselves. This is an arena where individual investors can easily beat the market because the market is herding. Forget about high frequency traders the long term fundamental value is what matters here.

Performance has been good and I’m measuring on a period of around 18 months since April 2011 during which time my total return has been 24% to date. My only realised loss was 6% on a short platinum ETF. I have had a dividend yield of 1.6%, realised gains of 16.9% and unrealised gains are currently 5.6% overall. The biggest contributor to my returns has been Pandora where I saw gains of more than 65% overall across my sales.

Current unrealised gains:


Current unrealised losses:

BBd/B and FGP

Caveat: Clearly I have a financial interest in these investments and this post relates solely to my personal investment positions. It is in no way a solicitation to buy or sell these investments nor does it constitute advice to do so.

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