2 defensive high income tips

Hi all,

Some recovery on the Dow Jones and Ftse. A risky rally and some relief short term. However if you are like me and want to shore up your portfolio, with defensive high yield shares, then these are 2 I suggest.

Scottish and Southern

Scottish & Southern Electric are one of the biggest electricity providers in Europe and the UK. They are a defensive high yield company (7%). Yes they are susceptible to the economy but everyone needs electric and I believe these worries are priced in at the moment. As you can see from the chart, they are still holding the support line I have drew just above £10, for 2 years now.



RSA insurance

Again this company like SSE above is holding at the support line in the chart below. They are considered quite a safe investment in the insurance industry, with a high yield at approx 7%. Of course they are not as safe as the drug companies or water companies but I think that this is a good opportunity to enter if you do not already have them. I would spread your risk and buy Aviva yielding 8% as well.

Remember these are investments for the long term and one big risk is they cannot sustain their dividend levels if there is any further deteriation in their business vs. say Glaxo and AstraZeneca where their dividend is pretty much safe and growing.

Keep your nerve

Hi all,

Fear continues to dominate market direction. Officially we are in a "correction", which many define as 10% or more decline from the peak. Unfortunately the sentiment is so negative, that we could continue to go lower, if the Dow loses 10,000 and the FTSE 5000.

My strategy has not changed however. I am drip feeding funds into the market as we go lower. My latest additions are the following:

1. Averaged down on BP@£5. Continue to believe that BP is being oversold but I understand that is impossible to "catch a falling knife", therefore I will add more positions as we head lower. I will wait for £4.50 before thinking about buying another trench of BP.

2. Topped up in Newton Higher Income fund. This fund is paying at least 7% income at the current price and is invested in Big blue chips, that should do well from the global economic recovery and the weak £.

This is going to be a tough couple of months but remember Warren Buffets famous quote - “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.

Buying on dips

Hi all,

Sorry for not updating for a couple of months. I am going to start updating my blog at least weekly going forwards.

It’s been a tough couple of weeks on the stock markets, as the 10% correction has hit us hard, with Greece and Europe concerns dominating the news.

My strategy of being fairly defensive positioned and increasing my cash position to 45% at the end of Q1, has benefited me a lot by reducing how much I lost in the sell off. I sold Skandia global best ideas (which was overexposed to miners/banks), half of my ftse100 tracker at 5775 and Aberdeen Emerging Markets. My portfolio is up by 2.5% YTD(without income) vs. the Ftse100 which has a YTD return of -3%. This is not amazing return but I hope that the stock market may pick up later in the year

This has enabled me to drip feed funds into the market at lower prices and I have reduced my cash position by 5% to 40% as I have invested in what I see as good assets at knock down prices. I have bought the following,

1. Doubled up on BP @£5.70. Unfortunately I bought too early but will consider adding even more into such a good long term opportunity. They currently yield 7.3% and are in the top 3 dividend payers on the ftse100 now. I think the fears of the oil slick are overdone.

2.I bought Aviva @£3.05, down 20% over 30 days. They yield over 7% and have not participated in the rally since the low last year. Short term they could continue to suffer but the fears are overdone that they are overexposed to the PIIGS (Portugal, Italy, Ireland, Greece and Spain).

3. AstraZeneca @£ 28.65 – another defensive asset, yielding over 5%. In uncertain times such as these, investing in a company with a strong balance sheet, dividend growth and strong brand, seems like a good bet. I already have GlaxoSmithKline, so these 2 defensive assets are now a key part of my Portfolio.

4. Fidelity China special situations @£1 offer price - Bought this into the sell off in China. China will be the Worlds biggest economy in 20years time, and I want to increase my exposure to their growth. (I already have Jupiter China)

Therefore my strategy remains the same going forwards to “buy on dips” into defensive, high yielding companies, with strong balance sheets. But also to hold onto my investments in Banks, commercial property and other “dogs”, that are undervalued if you look at the longer term recovery story over the next 5 years. And finally to invest in the high growth economies such as China, for long term growth, as the West struggles to come out of its huge debt problems over the next decade.

Remember that it is key not to keep all your eggs in one basket, hence why I have a diversified strategy, with no more than 5% of my Portfolio in one asset.