Well after a good start to January the stock markets turned and headed south. 2 out of 3 companies on the S&P index in the US, beat expectations with their Q4 results. US GDP came in way ahead of expectations at 5.7% for Q4'09. But nervousness about the recovery going forward are what investors focused on. Greece`s debt problems, china tightening monetary policy and some other weak data in the US, made investors more nervous and risk appetite reduced. Investors cut their holdings of shares and commodities.
Turning my attention to my Portfolio, January was a very good performance given the correction in the stock markets. The S&P index fell 5.5% and the FTSE 100 fell 4% in January. My Portfolio only dropped 0.9% on a like for like basis(but increased 1.2% overall, due to savings added from my day to day income, into the portfolio). The defensive positioning of my portfolio (43% cash, and half my shares in defensive UK income) meant that I was not hit too hard by the sell off in miners, oils and cyclical stocks.
Untied Utilities and Severn Trent , up 8% and 6%, helped to offset weakness in other areas. United Utilities is my 3rd biggest holding and see it as a safe, high income share for the long term. My bank holdings rallied at the start of the year but fell back but overall they are up 0.5% on the end of December. I was disappointed with GlaxoSmithKline who dropped 8% in January, more than the market, when they are meant to be defensive.
My worst performer and riskiest holding was Man Group, the hedge fund manager. I only have 0.5% of my portfolio in these. I was up 100% on them at one stage(I bought them at £1.80) but they dropped 41% in the last 10 days to finish at £2.37. This is the risk with holding riskier assets and you can now see why I have been fairly defensive so far in 2010. However I believe this company is undervalued and now has the highest dividend yield in the FTSE 100, at 11.6%. If you invest in this share just remember the risks that come with it.
Other risky assets that fell in the portfolio, were Jupiter China and Aberdeen Emerging markets. Emerging and Asian markets are susceptible to a large correction but over the long term, I believe that China and Asia are the best places to seek out growth, therefore I will hold.
And what about the rest of Q1? Well I have become more nervous about how big this correction will be but on the other hand we could rally up higher by the end of Q1. I do not want to sell holding like Vodafone, Glaxo, National Gird paying yields of 4-6% and still believe that the UK bank earnings for Q4, could surprise on the upside in February.
Therefore I will continue with the same Portfolio mix into February, defensively positioned but also able to take advantage if the stock markets do rally.
Saturday 30 January 2010
Tuesday 26 January 2010
Defensive shares strong again today
LONDON (Reuters) - The leading share index added 0.3 percent on Tuesday, as support for defensive issues, and a modest early rally on Wall Street, offset weakness in heavyweight miners and banks.
At the close, the FTSE 100 index was up 16.54 points at 5,276.85, snapping a four-session losing streak, having earlier reached an intraday low for the year of 5,215.73.
Pharmaceutical stocks were the best blue-chip performers, wanted for their defensive attractions and helped by solid full-year results from Swiss peer Novartis , with GlaxoSmithKline (LSE: GSK.L - news) , AstraZeneca (LSE: AZN.L - news) and Shire (LSE: GB00B0KQX869.L - news) putting on 1.5 to 1.6 percent.
Other defensive issues were also in favour, with cigarette maker Imperial Tobacco (LSE: IMT.L - news) up 2.0 percent, household cleaning goods group Reckitt Benckiser (LSE: RB.L - news) adding 1.4 percent and United Utilities (LSE: GB0006462336.L - news) up 1.1 percent.
Food retailers were wanted too, with J Sainsbury , Tesco (LSE: TSCO.L - news) , and Wm Morrison up 0.7 to 1.3 percent.
At the close, the FTSE 100 index was up 16.54 points at 5,276.85, snapping a four-session losing streak, having earlier reached an intraday low for the year of 5,215.73.
Pharmaceutical stocks were the best blue-chip performers, wanted for their defensive attractions and helped by solid full-year results from Swiss peer Novartis , with GlaxoSmithKline (LSE: GSK.L - news) , AstraZeneca (LSE: AZN.L - news) and Shire (LSE: GB00B0KQX869.L - news) putting on 1.5 to 1.6 percent.
Other defensive issues were also in favour, with cigarette maker Imperial Tobacco (LSE: IMT.L - news) up 2.0 percent, household cleaning goods group Reckitt Benckiser (LSE: RB.L - news) adding 1.4 percent and United Utilities (LSE: GB0006462336.L - news) up 1.1 percent.
Food retailers were wanted too, with J Sainsbury , Tesco (LSE: TSCO.L - news) , and Wm Morrison up 0.7 to 1.3 percent.
Bought Vodafone at £1.34
Hi all,
Just to let you know I have increased my holding in Vodafone at £1.34. They could drop more as the market keeps falling but they are a good long term opportunity and will buy more if they keep going down.
Some tehcnical support on the chart on the black line as well but I am not really looking at the techincal side as much. I`m buying from an investors point of view which I have already explained in previous posts. 5.7% yield (6% on a forward basis), defensive, strong balance sheet and cashflow and it has not participated in the rally from March.
Just to let you know I have increased my holding in Vodafone at £1.34. They could drop more as the market keeps falling but they are a good long term opportunity and will buy more if they keep going down.
Some tehcnical support on the chart on the black line as well but I am not really looking at the techincal side as much. I`m buying from an investors point of view which I have already explained in previous posts. 5.7% yield (6% on a forward basis), defensive, strong balance sheet and cashflow and it has not participated in the rally from March.
Sunday 24 January 2010
Has investor sentiment changed?
Well what a week fellow investors. The bull market took a sudden turn this week and we fell out of the bullish channel we have been in since the rally started. This does not mean we`ll head lower from here but it is worrying.
To answer the question in the blog title, I do not know if sentiment has changed and the bull run is over but I am positioning myself for the downside and upside with a diversified portfolio.
Most of the pain for me came on the drop in Barclays share price, following Obama`s announcement that he would try and limit the banks size and prop trading activities in the US. This would effect the Lehman`s operations Barclays bought and provided the one thing markets hate - uncertainty. For now I still believe banks offer good value over the long term and will continue to hold, despite the uncertainty. Just ensure like me, you do not take big bets on one part of the market.
Fortunately I have the majority of my investments in defensive income shares and these came to the fore last week. As mentioned in the previous blog, water companies such as United Utilities and Severn Trent and Vodafone are seen as defensive, high yield investments. I have shown below their performance vs. miners and Barclays. You can see they went up while the stock market tanked, particularly miners and banks suffered. Miners particularly, I believe will struggle this year after rallying so much last year.
I also have Glaxo, Tesco, National Grid and BP. I also have 2 absolute return funds that deliver small returns in difficult markets such as these. These funds do rely on the fund manager to go long and short on the market at the right time but Blackrock Absolute Alpha has delivered a return of 7% over 2 years, while the stock market has fallen over 30%, so something to consider adding to your portfolio if you are worried about a bigger correction.
I continue to build cash as a % of my portfolio to shelter my balance sheet from these big falls in the stock market. If we see a continued correction in the stock market(at least 10%) I will invest some of this cash into the market.
At the moment we all hope that the stock market will not crash lower but please please please, diversify your portfolio and have a good selection of defensive shares and cash, as well as investing for growth over the longer term.
To answer the question in the blog title, I do not know if sentiment has changed and the bull run is over but I am positioning myself for the downside and upside with a diversified portfolio.
Most of the pain for me came on the drop in Barclays share price, following Obama`s announcement that he would try and limit the banks size and prop trading activities in the US. This would effect the Lehman`s operations Barclays bought and provided the one thing markets hate - uncertainty. For now I still believe banks offer good value over the long term and will continue to hold, despite the uncertainty. Just ensure like me, you do not take big bets on one part of the market.
Fortunately I have the majority of my investments in defensive income shares and these came to the fore last week. As mentioned in the previous blog, water companies such as United Utilities and Severn Trent and Vodafone are seen as defensive, high yield investments. I have shown below their performance vs. miners and Barclays. You can see they went up while the stock market tanked, particularly miners and banks suffered. Miners particularly, I believe will struggle this year after rallying so much last year.
I also have Glaxo, Tesco, National Grid and BP. I also have 2 absolute return funds that deliver small returns in difficult markets such as these. These funds do rely on the fund manager to go long and short on the market at the right time but Blackrock Absolute Alpha has delivered a return of 7% over 2 years, while the stock market has fallen over 30%, so something to consider adding to your portfolio if you are worried about a bigger correction.
I continue to build cash as a % of my portfolio to shelter my balance sheet from these big falls in the stock market. If we see a continued correction in the stock market(at least 10%) I will invest some of this cash into the market.
At the moment we all hope that the stock market will not crash lower but please please please, diversify your portfolio and have a good selection of defensive shares and cash, as well as investing for growth over the longer term.
Wednesday 20 January 2010
Look for sectors left behind by the rally rather than those that led the chart
Hi all, I thought I would now explain my investing strategy a bit further. Generally I am a contrarian investor, looking to invest in shares that are undervalued and unloved by the market.
Generally, I back strong companies, which have strong balance sheets, cash flow and dividend growth. At the moment there are many companies who fall into this band, which have also been left behind by the rally. These are very good investments to back if you are a contrarian and want to cycle your money out of investments near their highs (such as miners) and back into shares still near their lows.
Miners and cyclical stocks have been popping higher, since the March 09 lows but this will not last forever, especially in this current economic climate. These are the shares I am particularly looking at:
My favourites in that list are Vodafone and the 2 healthcare companies, Glaxo and Astra. This is because they are Large cap companies, with very strong cashflow and brands. Vodafone I am especially interested in with 5.7% dividend, twice as much as you get in cash with potential for upside, as the market re-rates this share higher.
Then from the chart below, you can see how much they have been left behind in the ftse 100 rally. So you are going against the trend if you back this defensive mega-cap but that is how you make the most returns in the long run. Vodafone particularly has been a very poor investment now for 10 years and that’s why I am buying more and more now, as I believe they will come back into favour. Added to this, you have its defensive qualities, so if there is a stock market correction, they will not be falling 30% like the miners and retailers.
Generally, I back strong companies, which have strong balance sheets, cash flow and dividend growth. At the moment there are many companies who fall into this band, which have also been left behind by the rally. These are very good investments to back if you are a contrarian and want to cycle your money out of investments near their highs (such as miners) and back into shares still near their lows.
Miners and cyclical stocks have been popping higher, since the March 09 lows but this will not last forever, especially in this current economic climate. These are the shares I am particularly looking at:
My favourites in that list are Vodafone and the 2 healthcare companies, Glaxo and Astra. This is because they are Large cap companies, with very strong cashflow and brands. Vodafone I am especially interested in with 5.7% dividend, twice as much as you get in cash with potential for upside, as the market re-rates this share higher.
Then from the chart below, you can see how much they have been left behind in the ftse 100 rally. So you are going against the trend if you back this defensive mega-cap but that is how you make the most returns in the long run. Vodafone particularly has been a very poor investment now for 10 years and that’s why I am buying more and more now, as I believe they will come back into favour. Added to this, you have its defensive qualities, so if there is a stock market correction, they will not be falling 30% like the miners and retailers.
Friday 15 January 2010
2010 Strategy
Hi all,
I thought I would start off this blog with my strategy and how my portfolio is invested for 2010.
You will see from my investing approach that I am a contrarian investor, seeking value in beaten down and undervalued companies. I am a risk taker but do not take unnecessary risks, that would put at risk my balance sheet & investment Portfolio. I have been through 2 crashes, the dot com boom and bust and the credit crisis and have learnt not to put all your eggs in one basket.
So, going into 2010, I am positioned 43% cash&fixed income, 57% in the stock market. This is fairly aggressive positioning, as I believe stock markets will continue to rise in the 1st qtr of 2010. However, more than half of that 57% is in defensive shares and funds, with strong balance sheets and dividend income. I am slowly becoming more defensive the higher this market keeps going, as there is an increasing risk of a correction.
My strategy is to increase cash as a % of my portfolio through the 1st half of this year towards almost 50%. Partly for tax reasons but also because I feel that there will be a better opportunity to enter stocks lower in the 2nd half of the year.
However, although I am becoming more sceptical about how much further this bull run can go, there is still value in specific companies. This is a “stock pickers market”
I believe the 3 main areas of value in the stock market are
1. UK income shares, which incudes the likes of Vodafone, Glaxo, AstraZeneca, BP, National Grid etc. They have high dividend yields and strong balance sheets and unlikely to cut their dividends.
2. Financials - I disagree with holding only the strong banks and see a-lot of value in RBS and Lloyds. the potential reward is far greater, than the favourite HSBC. This is very high risk and therefore I advise you not to risk too much on of your portfolio in banks. I bought more RBS at 28p(Up 35%) and Lloyds at 50p(up 15%) on the 31st Dec 2008.
3. Commercial and residential property shares - These beaten down stocks, have not taken part in any of the bull run in the stock markets and are attractively priced in the short to medium term. I have recently bought British Land and Taylor Wimpey. I believe the UK property market faces huge headwinds but these 2 companies are still priced at near Oct 2008 levels, where we thought there would be a depression.
So there you go guys theres an small insight into my strategy for 2010. I will talk about individual shares, gold, resources, currencies, bonds, proprty and so on throughout the year.
Just ensure that you do not risk what you cannot afford to lose and stay diversified.
Good luck for 2010
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1"- Warren Buffett
I thought I would start off this blog with my strategy and how my portfolio is invested for 2010.
You will see from my investing approach that I am a contrarian investor, seeking value in beaten down and undervalued companies. I am a risk taker but do not take unnecessary risks, that would put at risk my balance sheet & investment Portfolio. I have been through 2 crashes, the dot com boom and bust and the credit crisis and have learnt not to put all your eggs in one basket.
So, going into 2010, I am positioned 43% cash&fixed income, 57% in the stock market. This is fairly aggressive positioning, as I believe stock markets will continue to rise in the 1st qtr of 2010. However, more than half of that 57% is in defensive shares and funds, with strong balance sheets and dividend income. I am slowly becoming more defensive the higher this market keeps going, as there is an increasing risk of a correction.
My strategy is to increase cash as a % of my portfolio through the 1st half of this year towards almost 50%. Partly for tax reasons but also because I feel that there will be a better opportunity to enter stocks lower in the 2nd half of the year.
However, although I am becoming more sceptical about how much further this bull run can go, there is still value in specific companies. This is a “stock pickers market”
I believe the 3 main areas of value in the stock market are
1. UK income shares, which incudes the likes of Vodafone, Glaxo, AstraZeneca, BP, National Grid etc. They have high dividend yields and strong balance sheets and unlikely to cut their dividends.
2. Financials - I disagree with holding only the strong banks and see a-lot of value in RBS and Lloyds. the potential reward is far greater, than the favourite HSBC. This is very high risk and therefore I advise you not to risk too much on of your portfolio in banks. I bought more RBS at 28p(Up 35%) and Lloyds at 50p(up 15%) on the 31st Dec 2008.
3. Commercial and residential property shares - These beaten down stocks, have not taken part in any of the bull run in the stock markets and are attractively priced in the short to medium term. I have recently bought British Land and Taylor Wimpey. I believe the UK property market faces huge headwinds but these 2 companies are still priced at near Oct 2008 levels, where we thought there would be a depression.
So there you go guys theres an small insight into my strategy for 2010. I will talk about individual shares, gold, resources, currencies, bonds, proprty and so on throughout the year.
Just ensure that you do not risk what you cannot afford to lose and stay diversified.
Good luck for 2010
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1"- Warren Buffett
Wednesday 13 January 2010
Why throw cash away?
So my 1st blog of the year will 1st focus on helping you understand the importance of cash and making the most of it.
Many people blame being too busy at work or forget, for reasons why they do not manage their money correctly. However this is what banks rely on! I bet many of you are in bank accounts and ISA’s paying 0.5% or below.
If you have £30,0000 in a standard savings account at 0.5% interest and move it to one paying 2.5%, you will earn an extra £600 for no work whatsoever. It honestly takes 10 minutes to do.
Then there are the ISA allowances in the UK. Whatever you do, you must use all of your yearly allowance. It is £3600 this year and £5000 next tax year. Saving tax will become so important over the next 10-15 years as the government increases tax rates, to recover from the credit crisis.
Here are the 2 instant savings accounts I see as the best at the moment:
Santander direct ISA Issue 3 – 3% AER, 2% bonus rate for a year. Move ISA in one years time
Santander eSaver Issue 2 – 2.5%, with 2% bonus rate. Move savings in one years time.
After one year, I`ll be moving my money out of these accounts to the best paying ones.
One last tip is make sure you apply to move your ISA, 6 weeks in advance, as it takes about that amount of time to move it. You don’t want to lose 2 or 3% interest over 6 weeks.
My next blog will talk about my Investment Portfolio! This is where the real money can be made.
Many people blame being too busy at work or forget, for reasons why they do not manage their money correctly. However this is what banks rely on! I bet many of you are in bank accounts and ISA’s paying 0.5% or below.
If you have £30,0000 in a standard savings account at 0.5% interest and move it to one paying 2.5%, you will earn an extra £600 for no work whatsoever. It honestly takes 10 minutes to do.
Then there are the ISA allowances in the UK. Whatever you do, you must use all of your yearly allowance. It is £3600 this year and £5000 next tax year. Saving tax will become so important over the next 10-15 years as the government increases tax rates, to recover from the credit crisis.
Here are the 2 instant savings accounts I see as the best at the moment:
Santander direct ISA Issue 3 – 3% AER, 2% bonus rate for a year. Move ISA in one years time
Santander eSaver Issue 2 – 2.5%, with 2% bonus rate. Move savings in one years time.
After one year, I`ll be moving my money out of these accounts to the best paying ones.
One last tip is make sure you apply to move your ISA, 6 weeks in advance, as it takes about that amount of time to move it. You don’t want to lose 2 or 3% interest over 6 weeks.
My next blog will talk about my Investment Portfolio! This is where the real money can be made.
Tuesday 12 January 2010
Introduction
Welcome all,
This blog is dedicated to helping you work towards financial freedom, through investing and trading over the short, medium and long term and managing your portfolio effectively.
Financial education and the management of money has been completely overlooked in the education systems across the world. This is why many people end up poor, even though they have “good” jobs.
If you were to put the same effort you do in your career into managing and building your own balance sheet, you will eventually become financially free.
This is what I learnt early on as an accountant. Why am I managing someone elses balance sheet, when it is my balance sheet that matters in the long run? So from an early age, my focus has been on building my own balance sheet and portfolio of assets, that will eventually mean I have my own income and not rely on working 60/70 hours a week for a monthly salary.
I run my own Portfolio of investments and will let you know how I invest to make money and some of the many ideas I have. However I am not a tip sheet, I will just give you ideas and my own thoughts on how I invest my own money, where I see value in the stock markets and so on. I am still learning like everyone but it is through my mistakes that I have learnt most.
I hope you enjoy this blog and let me know your thoughts!
This blog is dedicated to helping you work towards financial freedom, through investing and trading over the short, medium and long term and managing your portfolio effectively.
Financial education and the management of money has been completely overlooked in the education systems across the world. This is why many people end up poor, even though they have “good” jobs.
If you were to put the same effort you do in your career into managing and building your own balance sheet, you will eventually become financially free.
This is what I learnt early on as an accountant. Why am I managing someone elses balance sheet, when it is my balance sheet that matters in the long run? So from an early age, my focus has been on building my own balance sheet and portfolio of assets, that will eventually mean I have my own income and not rely on working 60/70 hours a week for a monthly salary.
I run my own Portfolio of investments and will let you know how I invest to make money and some of the many ideas I have. However I am not a tip sheet, I will just give you ideas and my own thoughts on how I invest my own money, where I see value in the stock markets and so on. I am still learning like everyone but it is through my mistakes that I have learnt most.
I hope you enjoy this blog and let me know your thoughts!
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