I`m still not yet able to share Warren Buffets enthusiasm for the future of the US stock market but I still believe that stocks are the better asset class to hold, whether or not there is a double dip or weak growth in the global economy. Government bonds are at yielding at near 30 year lows, at 2%, cash is no better but still shares can give you a yield of 5-6%, even with the latest rally.
Vodafone are a good example. I tipped them on this blog at £1.32. They are now £1.60 and their dividend is over 5%. that’s a total return of 26% currently, 12 times what you would get in cash!
One of my best tips on this blog is AVIVA, they are up 34% since I tipped them at £3.05. With the dividend on top, it’s near 40% return.
As we have seen my biggest mistake was BP. I have managed to reduce my avg buy price to £4.50 and still optimistic that they are undervalued and will sit tight for the long term. The oil spill was what I call a "black swan" event. It happens to every investor and this is why you need a strategy, to be able to cope with disasters like this.
This is why I never hold more than 5% in one investment, so in the unlikely event that BP had gone bust, I would have still had 95% of my Portfolio remaining.
YTD the investment portfolio is up 7.5% vs a 3% gain on the FTSE100. A couple of disappointing investments such as BP and absolute return funds, have held back the performance of my Portfolio but there is still 3.5 months of the year left and many of my holdings still look undervalued and overlooked by "Mr. Market"
GlaxoSmithKline, AstraZeneca, BP, Vodafone (the Big safe blue chips) particularly have further to run in my view....
Good luck all!
Monday, 13 September 2010
Friday, 20 August 2010
BP and Severn Trent/Imperial Tobacco update
Hi all,
Although I don`t generally do this, I have resorted to some short term trading in BP, to bring my average buy price down. I sold some of my £4.22 holdings for break even a few weeks ago and have now just re - bought at £3.79. So I have 2 lots under £4 but offset against the ones I bought at £5.68 and £5, my average is £4.30. Although this was not the original plan, I am happy to hold BP for the long term at that price, looking for £5 again next year.
Severn Trent is now £12.85, from £13.41 when I sold. I am very happy I took some profits in the Portfolio. Never be scared to take profits, even on a good asset such as Severn Trent. Imperial Tobacco look good value and holding above the £18 support line currently, even as the market falls. A very good defensive asset to hold in times like these.
The world markets are very weak at the moment, as fears of a double dip continue to persist. My view is that equities, especially high yield ones look too cheap relative to other assets such as govt bonds, cash or property. Even with a double dip scenario, I think defensive companies such as GlaxoSmithline, AstraZeneca and National Grid with yields of 5-6.5% will outperform cash(with rates unlikely to go up anytime soon)
Just make sure you have a diversified Portfolio and "hold at least your age in cash". That is the absolute minimum weighting I would have in cash because you never know what black swan event is round the corner. Then if the market tanks further from here, I you will have cash remaining to buy into further weakness and average down your holdings for the long term.
Although I don`t generally do this, I have resorted to some short term trading in BP, to bring my average buy price down. I sold some of my £4.22 holdings for break even a few weeks ago and have now just re - bought at £3.79. So I have 2 lots under £4 but offset against the ones I bought at £5.68 and £5, my average is £4.30. Although this was not the original plan, I am happy to hold BP for the long term at that price, looking for £5 again next year.
Severn Trent is now £12.85, from £13.41 when I sold. I am very happy I took some profits in the Portfolio. Never be scared to take profits, even on a good asset such as Severn Trent. Imperial Tobacco look good value and holding above the £18 support line currently, even as the market falls. A very good defensive asset to hold in times like these.
The world markets are very weak at the moment, as fears of a double dip continue to persist. My view is that equities, especially high yield ones look too cheap relative to other assets such as govt bonds, cash or property. Even with a double dip scenario, I think defensive companies such as GlaxoSmithline, AstraZeneca and National Grid with yields of 5-6.5% will outperform cash(with rates unlikely to go up anytime soon)
Just make sure you have a diversified Portfolio and "hold at least your age in cash". That is the absolute minimum weighting I would have in cash because you never know what black swan event is round the corner. Then if the market tanks further from here, I you will have cash remaining to buy into further weakness and average down your holdings for the long term.
Wednesday, 11 August 2010
Another Defensive asset added
As soon as I sold Severn Trent I moved the money into Imperial Tobacco at £18.01.
You can see on the chart there is strong support at £18. It has a yield of 4.6% and is seen as very defensive. A re-rating such as the one that happened on Severn Trent, looks likely on this share over the next 6-12 months. They have been struggling so far this year and I thought this was a good time to enter, with the worries about growth effecting risk appetite among investors. They are likely to build stakes in more defensive shares that are undervalued such as this share.
You can see on the chart there is strong support at £18. It has a yield of 4.6% and is seen as very defensive. A re-rating such as the one that happened on Severn Trent, looks likely on this share over the next 6-12 months. They have been struggling so far this year and I thought this was a good time to enter, with the worries about growth effecting risk appetite among investors. They are likely to build stakes in more defensive shares that are undervalued such as this share.
Tuesday, 10 August 2010
Sold Severn Trent for 40% profit
This week I sold Severn Trent for £13.40 for 40% profit(as well as the final dividend). Bought at £9.60.
Although I believe they are a good long term investment, they have risen so much so fast and can see other shares that are now better value currently. The dividend is still good on Severn Trent but the capital gain might be limited unless there is a bid approach.
Although I believe they are a good long term investment, they have risen so much so fast and can see other shares that are now better value currently. The dividend is still good on Severn Trent but the capital gain might be limited unless there is a bid approach.
Monday, 9 August 2010
Buy low, sell high
Hi all, sorry I have not updated the blog for a while. It was a tough time in the correction. The FTSE 100 at one point was -18% since the start of the year, close to a becoming a technical bear market. Since the low in May we have bounced back strongly.
I have continued to buy on dips and increased my appetite for risk the lower we went. I added more BP to the Portfolio at £3.40 averaging down my other buys. I misjudged how bad the oil leak was and to be honest not happy with how BP communicated the situation. But now, I am where I am and still believe they are undervalued and will hold them for the long term and wait for the dividend to be restored.
However all my other buys into the dip are looking good. Aviva are up 27%, AstraZeneca up 14%, BT up 22%. I am also still doing very well on other high income shares in 2010, Severn Trent(+24% YTD) and United Utilities(+18% ytd).
My UK bank holdings are also doing very well and driving gains in the portfolio. Lloyds is up 50%, RBS up 76%, Barclays up 15%
Some of the shares struggling and holding back the Porfolio, are Glaxosmithkline (-14% YTD) and surprisingly Tesco (-7%). I think both of these are undervalued significantly and will bounce back. My 2 absolute returns & bond funds are holding back the portfolio’s gains as well. My Chinese and Japan funds are also not doing well so far this year but are good long term prospects.
However as I have always said, make sure you have a diversified Portfolio. Although the total gain in my Portfolio is lower than if I just invested in high risk stocks like the banks and miners, I am aiming for consistent profitability over the long term. As Warren Buffet says, rule no.1 Never lose money, rule no.2 – Never forget rule no.1
The stocks, bonds and shares Portfolio is up 5.5% YTD vs a 1% gain in the S&P 500 and 0.5% on the FTSE 100. I am happy with this given that BP is taking 1.0% points off my portfolio currently. On top of this I estimate my income will be around 3% at the moment, which would equate to 8.5% in total return for the full year. I am hoping that by the year end I can increase the 5.5% capital gain up to about 7% to give me a 10% gain overall in 2010.
Of course a lot of this depends on how the stock market does for the rest of the year. Forecasts vary from 4000 to 6000 on the ftse100. My estimate at the start of the year was 5800. I still believe equities are a better asset class to have your money than in cash or govnt bonds and will buy on dips into further drops in the stock market.
I have continued to buy on dips and increased my appetite for risk the lower we went. I added more BP to the Portfolio at £3.40 averaging down my other buys. I misjudged how bad the oil leak was and to be honest not happy with how BP communicated the situation. But now, I am where I am and still believe they are undervalued and will hold them for the long term and wait for the dividend to be restored.
However all my other buys into the dip are looking good. Aviva are up 27%, AstraZeneca up 14%, BT up 22%. I am also still doing very well on other high income shares in 2010, Severn Trent(+24% YTD) and United Utilities(+18% ytd).
My UK bank holdings are also doing very well and driving gains in the portfolio. Lloyds is up 50%, RBS up 76%, Barclays up 15%
Some of the shares struggling and holding back the Porfolio, are Glaxosmithkline (-14% YTD) and surprisingly Tesco (-7%). I think both of these are undervalued significantly and will bounce back. My 2 absolute returns & bond funds are holding back the portfolio’s gains as well. My Chinese and Japan funds are also not doing well so far this year but are good long term prospects.
However as I have always said, make sure you have a diversified Portfolio. Although the total gain in my Portfolio is lower than if I just invested in high risk stocks like the banks and miners, I am aiming for consistent profitability over the long term. As Warren Buffet says, rule no.1 Never lose money, rule no.2 – Never forget rule no.1
The stocks, bonds and shares Portfolio is up 5.5% YTD vs a 1% gain in the S&P 500 and 0.5% on the FTSE 100. I am happy with this given that BP is taking 1.0% points off my portfolio currently. On top of this I estimate my income will be around 3% at the moment, which would equate to 8.5% in total return for the full year. I am hoping that by the year end I can increase the 5.5% capital gain up to about 7% to give me a 10% gain overall in 2010.
Of course a lot of this depends on how the stock market does for the rest of the year. Forecasts vary from 4000 to 6000 on the ftse100. My estimate at the start of the year was 5800. I still believe equities are a better asset class to have your money than in cash or govnt bonds and will buy on dips into further drops in the stock market.
Monday, 7 June 2010
Portfolio update
Hi all,
Here is the latest update on my Portfolio. 2010 year to date(as at 7th june), my share Portfolio is down 0.9% on a like for like basis, if you include cash and look at my total Portfolio, the loss is 0.5%. This is ignoring income. The FTSE 100 is down 5.3% at its current value of 5115, so at the moment although my Portfolio has not risen so far this year, at least I have not lost much. At least the income continues to come in from my defensive high yield investments which will help “average up” my low income on cash.
Aviva is doing well since I bought at £3.05 as per the blog, up 7%. My water stocks are the strongest performers, Severn Trent and Untied Utilities are up 12% so far this year. RBS is my best performer up 45% YTD.
My worst investment so far in 2010 is BP (down 26% YTD). However at the start of the oil spill, I was underweight in BP, only 2% of the Portfolio. This was because they were rising very fast and I was worried about oil prices falling in a stock market correction, hurting BP. However it was a 1/1000 event, the deep water oil spill, that has caused the dramatic decline in the price. As we have headed lower, I bought at 5.70 thinking the leak would be capped quickly. Unfortunately things got a lot worse. As the price continued to collapse, I have added more at £5 and £4.20. This has brought my weighting in BP, to a hefty 5%, the maximum allocation I will risk in one investment.
My simple approach is to buy when others are fearful, hence the increased risk taken on BP. I don’t understand why people wait till the market is doing really well and start buying shares. I might buy too early but the fear of missing out is too great for me, to wait.
On my general strategy, overall I am still cautious and still overweight in defensive income shares but still have growth shares and funds for the longer term. I am worried about a further pull back in the stock markets but will continue to invest into this dip, for the long term.
Here is the latest update on my Portfolio. 2010 year to date(as at 7th june), my share Portfolio is down 0.9% on a like for like basis, if you include cash and look at my total Portfolio, the loss is 0.5%. This is ignoring income. The FTSE 100 is down 5.3% at its current value of 5115, so at the moment although my Portfolio has not risen so far this year, at least I have not lost much. At least the income continues to come in from my defensive high yield investments which will help “average up” my low income on cash.
Aviva is doing well since I bought at £3.05 as per the blog, up 7%. My water stocks are the strongest performers, Severn Trent and Untied Utilities are up 12% so far this year. RBS is my best performer up 45% YTD.
My worst investment so far in 2010 is BP (down 26% YTD). However at the start of the oil spill, I was underweight in BP, only 2% of the Portfolio. This was because they were rising very fast and I was worried about oil prices falling in a stock market correction, hurting BP. However it was a 1/1000 event, the deep water oil spill, that has caused the dramatic decline in the price. As we have headed lower, I bought at 5.70 thinking the leak would be capped quickly. Unfortunately things got a lot worse. As the price continued to collapse, I have added more at £5 and £4.20. This has brought my weighting in BP, to a hefty 5%, the maximum allocation I will risk in one investment.
My simple approach is to buy when others are fearful, hence the increased risk taken on BP. I don’t understand why people wait till the market is doing really well and start buying shares. I might buy too early but the fear of missing out is too great for me, to wait.
On my general strategy, overall I am still cautious and still overweight in defensive income shares but still have growth shares and funds for the longer term. I am worried about a further pull back in the stock markets but will continue to invest into this dip, for the long term.
Wednesday, 2 June 2010
The dangers of going against the herd
Well I have to hold my hands up here and admit that my BP investment has not gone to plan. Going against the herd can often be very risky but also lucrative over the long term. BP is now down 36% from its peak just before this oil crisis.
However I still believe that this investment can come good. I have therefore averaged down on BP again at £4.20. I would have rather waited for the March 09 bear market low of £4 or even £3.68 which was the Lehman Oct 08 low. If we get towards £3.68, I will have to consider one more entry, as I believe by this point, bidders will be circling BP. There are already rumours Shell and Exxon will be tempted to swallow BP.
This has now become quite a big bet that BP can still turn the situation around, cap the leak and continue to pay its high level of dividends, despite the huge costs of the cleanup.
But the key rule as ever is not to risk too much on one investment. Good performers such as AstraZeneca, Severn Trent and United Utilities, are offsetting the current weakness of BP in my Portfolio.
But just remember this; the key to making money in stocks is not to get scared out of them. Many people have sold out of the stock market through fear, just at the time when it’s better to be adding good quality shares to your portfolio. I can guarantee that if this market starts to recover again, all the analysts will come out saying buy shares, after they have gone up 10%!
However I still believe that this investment can come good. I have therefore averaged down on BP again at £4.20. I would have rather waited for the March 09 bear market low of £4 or even £3.68 which was the Lehman Oct 08 low. If we get towards £3.68, I will have to consider one more entry, as I believe by this point, bidders will be circling BP. There are already rumours Shell and Exxon will be tempted to swallow BP.
This has now become quite a big bet that BP can still turn the situation around, cap the leak and continue to pay its high level of dividends, despite the huge costs of the cleanup.
But the key rule as ever is not to risk too much on one investment. Good performers such as AstraZeneca, Severn Trent and United Utilities, are offsetting the current weakness of BP in my Portfolio.
But just remember this; the key to making money in stocks is not to get scared out of them. Many people have sold out of the stock market through fear, just at the time when it’s better to be adding good quality shares to your portfolio. I can guarantee that if this market starts to recover again, all the analysts will come out saying buy shares, after they have gone up 10%!
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