Diary

This journal logs investment transactions made in the portfolio. Hopefully it will help me be more rigorous/honest with myself.

January 2019

December 2018

  • Buy XOM.
  • Buy WFC.
  • Sell EMR.
  • Sell ASX:MYO.
  • Buy ASX:WBC. Falling knife territory but very tempting divi yield, valuation etc.
  • My portfolio is getting warped by the equity drops, especially of FTSE. My UK equities position has dropped to 2.4pc under target, and UK and Intl fixed income’s gentle appreciation has seen them float up to 1.4 and 1.1pc overweight. Time for a rebalancing pair of trades:
  • Sell SLXX. I am disenchanted with corporate bonds and this etf is my biggest such holding. I’m reducing my position.
  • Buy ISF. FTSE 100 has dropped below 6700. This feels like a Buy signal. Divi yield is around 4.5pc.
  • Separately I am swapping some SAUS Australia ETF, which accumulates dividends, for XAUS, which distributes them. My fears over whether XAUS is physical or synthetic are outweighed by my greed for control over what I do with the income.

November 2018

  • Sell NWBD/LLPC/ABB1/87PN/BBYB. I remain stubbornly overweight UK fixed income, and am trying to reduce my overweight position to less than 1% of the portfolio. I think it’s time to reduce these direct holdings, which are all bigger than some of my diversified fixed income ETFs. I’ve been reluctant to trade these because the bid/offer spreads are significant but here goes….
  • Buy VUKE. The falls in UK equities, and my successful shift into International Equities, has left UK Equities my most underweight position. I’m nervous of UK equities, and my target allocation at 25% UK Equities makes me nervous in these Brexit-befuddled times, but my target is a target for a reason and I am taking steps to rebalance into UK equities.
  • Buy BA(e). As per my VUKE purchase. Time to buy some UK equities. Can’t get too excited about VUKE, can’t get too excited about any FTSE-100 stocks. But BAe is probably reasonably safe – in a world when the GBP rises or falls, and in any scenario except Corbyn.
  • Buy HSV. I admire Homeserve, and I like, Maynard Paton style, how it is its founder remaining as CEO/large shareholder. They are doing a good job growing the model overseas. Time to take a piece of the action.
  • Sell JNK/PFF. I remain overweight USA Fixed Income. Though I have fallen out of love with JNK/PFF, I have been reluctant to sell them because post MIFID I can’t buy or sell any more – all I can do is close the position. Nevertheless these two instruments, which I have seen as reliable high yielders, have let me down in various ways and it is time to sell. A wider post about my HYP awaits, but the quick summary is that I am unwinding it.
  • Buy BMW/DAI. I’m underweight International Equities, and on a bit of a whim have decided to do something significant about it. I’ve just taken reasonable (read: portfolio average) new positions in these two German car/truck manufacturers. Both are on low P/Es, with high dividend yields. But both have significant debt, so the P/E is misleading. Nonetheless, these are 100 year brands and the dividend yield tempts me. I’m effectively borrowing EUR to buy them; borrowing at 1.5% to buy 5%+ is a reasonable spread.
  • Buy AMZN. A limit order just triggered, signalling AMZN has just dipped below a level I thought (some weeks ago) would represent a buying opportunity. This is quite punchy of me because this holding is already one of my largest single stock holdings. And my US equity holdings are overweight too. However, rules are made to be broken.
  • Buy DOCUsign. These guys IPO’d earlier this year. I am seeing them everywhere these days. Simple tech, done well and sold well. I’ve opened a small position.

October 2018

  • Buy RTN. Yikes. Miserable sector. Leading player, with miserable brands. Patisserie Valerie there to show the Worst That Can Happen. And yet, the acquisition of Wagamamas makes sense; the share price is down 15% taking into account the impending rights issue; I rate the CEO. I’m topping up.
  • Buy XRO. I’m underweight AUS. And XRO has fallen in line with other highly rated unprofitable tech firms. I think it will come back. I’m topping up, significantly.
  • Buy ASY. I’ve liked this one since Maynard Paton put me onto it. Time to top up, to help my underweight UK equities position.
  • Buy BT.A. BT has halved in the last 2 years, and now sports a well-covered 6% divi yield. As an EE (owned by BT) customer I think EE whips its competitors’ backsides, and may be an undervalued asset. New CEO announced today, from Worldpay. Hard to see BT halving, and easy to see it doubling. I’m upping my (very small) position.
  • Buy PSN. Persimmon is down almost 30% from its peak. Divi now 10%+, with strong credibility. Almost whatever happens in UK with interest rates, Brexit, currency etc I believe Persimmon will grow. I’m topping up my considerable position.
  • Buy VFEM. I’ve been underweight International equities already. But in the recent selloff Asia has been harder hit than Europe/USA. The rebalancing continues.
  • Buy VPAX. More rebalancing towards International (Asia).
  • Buy H50E. More rebalancing towards International (Europe). This is only 10% down from peak, so less of a ‘bargain’ than the Asian stuff.
  • Buy HSV. I’m underweight UK equities so am shopping around. Homeserve is a business I’ve admired for years. And owned before, until the Great Liquidation to buy the Dream Home. Its growth momentum remains strong, it has a founder CEO, and it is making an impressive fist of becoming international. Its Checkatrade acquisition worries me but you don’t get return without risk. Not quite sure what price represents value so I will watch and learn.
  • Sell LLPC. A slight tweak to my target allocation a couple of months ago left me overweight in UK fixed income. Time isn’t fixing this, so I need to intervene. I have a direct holding in a Lloyds Bank 9.25% preferred shares which is rather too large for a single holding, and while its price is down and the bid/offer is painful, I’m taking some profits.
  • Sell ISXF. As per the LLPC move, I am intervening to reduce my UK fixed income position slightly. No particular reason to pick this ETF other than that I am generally less in favour of corporate bonds than I was.
  • Sell VUCP. And in line with my UK fixed income reductions, I also find myself needing to reduce my US fixed income positions slightly. I am less in favour of corporate bonds than I used to be so this Vanguard ETF is going to take the hit.

September 2018

August 2018

  • Buy DAI. Daimler is down 30%+ from peak. Rev and profit growth has stalled. But it owns one of the world’s top brands, has a P/E of 6, a dividend yield of 6% (covered 2.4x), global reach, unique technology, etc. Unfortunately, German governance. But a Buy, I reckon, and I’m underweight ‘International’ so this helps.
  • Sell KO. Closing this small position in the ultimate Buffett stock. Hasn’t been a great experience and hardly any millennial I know drink Coke so I think it’s time to bail.
  • Sell VZ. Reasonable dividends but very low growth. Hard to believe in double digit growth. I’m pruning, as I’m a bit overweight USA equities.
  • Buy ALU. Alumasc, a smallcap specialist construction manufacturer, has dropped 10% since I opened my position in January. I’m throwing good money after my badly timed initial investments. I like the underlying thesis, the risk exposure, and (irrationally) the thought I’m buying a meaningful piece of this <£50m cap business.
  • Buy BAe. Topping up my position, due to being underweight and thinking that amidst the Brexit noise the UK’s top defence manufacturer is probably a Buy right now. Nothing more scientific than that.
  • Buy VFEM and VAPX. I am underweight ‘international’ and am breaking out of my Eurozone-philia to increase my exposure to Asia/emerging markets.
  • Buy SAUS. Am underweight Oz and post MIFID this is one of the few ETFs I can readily buy.
  • Buy MEUD. Rebalancing towards ‘international’.
  • Buy VUTY. Am a bit short of US fixed income. And realising I have barely any Treasuries. Time to fix.
  • Buy VUKE. A minor buy to help deploy my a cash influx as per my rebalancing.
  • Buy ASL and SDV. Buys to help deploy cash influx – towards the Aberforth and Chelverton smaller cap investment trusts. Smaller cap was where one of my asset sales came from so re-upping makes some sense.

July 2018

  • Buy WKP. I’ve always liked Workspace Group, and all the recent media fuss about how WeWork is overvalued leaves me feeling that Workspace group is undervalued.
  • Buy FB. Opening a position on the Zuckerberg Faang. It has just dropped 20pc, and lost $120bn of value in the biggest ever one day single company drop. Overreaction? We’ll see.
  • Buy VEMT. Just been reminded of this Vanguard Emerging Markets Gilt (/Govt Bond) ETF. I have generally gone for corporate bonds not treasuries but for some reason am now biting the bullet and going sovereign. And I’m underweight ‘international’ so this one is a good fit.

June 2018

May 2018

  • Buy PG. Just spotted that you can get 4% divi yield with P&G. That is a rare opportunity. I’m opening a small position.
  • Buy DAI. I am underweight ‘international’ (which is mainly Eurozone, in my system). I am open to direct stock picking but struggle to find decent businesses where I trust the governance; Daimler looks like it fits the bill. A global brand, but facing a slight dip currently, hence a P/E of 7 and a div yield of >5%. A long term buy at €66/share.
  • Buy EWN, EIS. Upweighting ‘international’, this time with new positions – in passive tracking iShare ETFs of two countries I visit occasionally: Netherlands (high P/E, diversified global leaders like Phillips, Heineken, Unilever) and Israel (almost ’emerging market’, and no overlap with my current holdings).
  • Buy MEUD. The Lyxor Eurostoxx 600 passive tracker. After monevator’s article about Lyxor’s low-price ETFs, I’m adding this ETF to my core holdings list, and it helps me upweight into International nicely. My private bank had not traded it before, which tells you it’s helping me diversify out of the crowd too (!).
  • Buy AHT. I confess I can’t quite remember why I opened this position but think it was its dividend prowess and solid financials.

Apr 2018

  • Buy T. Back down to $34 – for reasons currently unknown – which puts its dividend yield above 6%. That doesn’t happen very often with this Dividend Champion. I have been a long term – but small – holder in this stock. Very stable share price ($33-$40), very slow dividend growth. But with 6% yield there is, based on the trading range, a better-than-usual chance of a 10%+ total return over the next 12 months.
  • Buy VFEM. Who’s the fool who’s buying Emerging Markets just as Trump kicks off a trade war targeting, erm, Emerging Markets? Me. I’m underweight on ‘International’ and don’t have a preferred source of exposure to just getting the passive holding. Though I am tempted by some of the markets highlighted here: https://thebritishinvestor.com/2018/02/ten-cheapest-countries-cape-ratio-2018/.
  • Buy ALU. Alumasc is a stock tip I saw in January that tickled my fancy; it has fallen from £1.70 to £1.25 and I think, rather than discrediting the stock tip, it represents a buying opportunity. I’m extending my position.

Mar 2018

  • Sell GE. Have held GE for ages, more fool me. Now getting out to get the capital loss before the end of the UK tax year. Might come back in in the the next tax year depending what happens on the mood music.
  • Sell TLS. I’m realising that if I am getting out of VOD then I should get out of TLS, the incumbent Oz telco. Broadly it should be a stable cashcow but with the ‘high speed broadband by fiat’ government interference down under it isn’t plain sailing for them. I’m not close enough to it. I’m off, and getting some of my loss back from the UK government.
  • Sell VOD. Realising that I can’t see any reason to hold Vodafone these days. 5% yield aside, it is not a product I would recommend in the UK (vs EE who as a recent convert from O2 I find to be excellent), and my limited understanding of the business itself centres around the very difficult time it is having in the Indian market. If I want a good telecoms utility I think Verizon is the best blue chip in the space.
  • Buy JUP, SDR. Jupiter fund management and Schroders have been on my mind for a while – since Stockopedia tipped JUP in the new year (at >600p). Recent price dips (to <500p) create a buying opportunity, I think, so I’ve initiated a position in both.

Feb 2018

Jan 2018

  • Buy TW, PLUS, SCS, RPC. Just taking a look at Stockopedia’s StockRank system. Quite a lot of its top-ranked stuff is either hard to trade (microcap etc) or makes me nervous (mining, etc) but I’m going to take a nibble on PLUS500, SCS Group, RPC Group, and Taylor Wimpey.
  • Sell BARC, HMSF. Finally quitting @weenie’s Money Stock League experiment. Picking five random stocks (alphabetically, beginning with B) wasn’t the path to riches, but nor did it do too badly. After two years, weenie reckoned I was up 7% including dividends. I’m keeping BAG, BA. and BAB and selling the other two.
  • Sell ISXF. Further deleveraging, further getting out of corporate bonds.
  • Sell ISF. Swapping some Passive for some Active exposure to UK equities.

Dec 2017

  • Sell VTI. Minor deleveraging trim of this core US Equities position. The only sensible thing to do when reading that S&P500 has got a Sharpe of 3+ in 2017, surely? I am going to crystallise quite a gain here unfortunately.
  • Bought H50E. I am underweight on International Equities, and I keep reading how European equities are ‘relatively good value’. Certainly there aren’t too many direct holdings that appeal to me, so the top 50 ETF works for me.
  • Bought RGL. First nibble here of a Regional REIT, whose yield (7%+) and strategy (non-London commercial warehouses etc) appeal to me.
  • Sell T. Limit order just triggered at $38.
  • Sell SLXX. Mild deleveraging trim to my position. Increasingly I am persuaded of http://www.monevator.com et al.’s argument that the only true bonds are government bonds, which means my corporate bond exposure is uncomfortably large.
  • Sell JNK. Am overexposed fixed income. And becoming increasingly aware of the ‘faux bonds’ quality (i.e. low correlation) of high yield bonds. Good candidates for reducing my position on.
  • Sell PFF. Becoming increasingly aware of the ‘faux bonds’ quality of faux bonds i.e. preferred shares. Good candidates for reducing my position on.

Nov 2017

  • Buy PCLN. Limit order just triggered. Not sure why yet.

Oct 2017

  • Buy T. Limit order at $36 just triggered – I haven’t yet figured out why the stock dipped from $38 to $36 but this is probably a long-term buying opportunity. Fingers crossed….
  • Buy WPP. Being a bit naughty here as I’m overweight in UK but WPP at 3 year lows – which looks too good an opportunity to miss. I bought a few times this month, just nibbling really.

Sep 2017

  • Buy QCOM. I am underweight US equities, and QCOM is on a slight dip. I’m topping up.
  • Buy DIS. As per QCOM – Disney is at the price it was 18 months ago despite some useful growth since then. I’m getting in deeper.
  • Sell TGT. Based on my usual rule of thumb, I should be buying more of Target. Its dividend yield is more compelling than ever. However the reason the share price is down is that the market considers Target to be the next in line to be flattened by the AMZN steamroller. I am minded to agree with the market. I’m trimming my position.

August 2017

  • Buy WPP. I have long had a small holding in WPP, which hasn’t gone very far. With the recent profit warning/correction, the price is down to the level last seen 3 years ago. The business is quite a bit bigger, and despite gloomy global prospects it is the classiest act in this massive sector. I am topping up.
  • Sell ISXF. I am deleveraging, and generally doing this by reducing my fixed income exposure. I’ve set some limit Sell orders on a few and this one just triggered.
  • Sell IAUS. I am overweight Oz equities by 0.5%, about 10% of the total weight, so I am taking profits.
  • Sell JNK. Sell PFF. Similar logic to both of these. Deleveraging, reducing fixed income; these two are among my largest single holdings, so time to trim slightly.

July 2017

  • Bought PCLN. I have bumped against Priceline professionally, admittedly tangentially, and been an admirer. I almost bought six months ago, but decided the P/E was too high. Since then they’ve kept rising, but roughly in line with e.g. AMZN. Now the Economist has just profiled them. Which must mark the top… but it makes various good arguments and leads me to agree that Priceline is in the same league as Amazon, admittedly with a narrower moat. I like owning the clear industry leader and they are one. P/E no higher than normal. Buy.
  • Bought CSCO. Topping up a very small holding, as part of a ‘pruning’ exercise – looking at my smaller positions and either topping up or closing out. CSCO divi yield is near its peak, and from what little I know of the business its prospects of remaining a global leader are good.
  • Sell KMI. Selling out of this position as part of the ‘pruning’ exercise. There is a long story behind this stock but its divi progress has been poor even after a savage ‘reset’ so my sympathy for the stock has just expired.

June 2017

  • Sold JNK. I am nearing quarter end and wanting to continue my deleveraging. Updating my figures shows I’ve slipped from underweight US fixed income to overweight. So I’m selling some of one of my larger holdings, a junk bond ETF.
  • Bought RTN. I am a bit underweight UK equities and have some spare cash in unleveraged accounts, so time to deploy it. RTN is one I am cautiously optimistic about – despite facing UK consumer headwinds I think it will recover to £4 and so at today’s £3.35 it is a speculative buy.
  • Bought LLOY. As above I am underweight UK. Interest rates feel like they are about to start climbing, which will help UK retail banks. Lloyds has a strong CEO and enviable market position. Static share price for years. I’m calling it.
  • Bought TGT. A limit order clicked, when TGT briefly dipped to $50 on the announcement of Amazon buying Whole Foods for $14bn. Target was back at $53 by the time I spotted, which was a 6% same-day return. It’s yielding about 4.6% and while I have long-term nervousness over its growth prospects I am OK holding this bellwether stock for now.

May 2017

  • Sold VTI. Looking to reduce exposure to US stocks, fractionally, and can’t see too many individual equities I want to reduce. So the index will have to do.
  • Sold JPM, MMM. Taking profits, partially, as part of an effort to reduce US equities exposure a smidgeon.
  • Bought BND, VUCP. Trying to get more US fixed income (which is my main underweight exposure right now, by over 1%); some in a GBP account.
  • Bought AGNC. Tiny nibble on this high yield junk REIT, which is one of my smallest holdings (below my minimum holding, in fact).
  • Sold NG. Small holding, held without enthusiasm, as a UK-only equity dividend play. Has risen 15% in a year and faces policy headwinds so in a tiny portfolio cleanup + ‘risk off’ move I am closing out the position.
  • Sold VUKE. Small ‘risk off’ trade to reduce my UK equity holdings (with FTSE-100 above 7500!) in a leveraged account.

April 2017

  • Bought QCOM and TGT on dips. This is counter policy right now as if anything I want to reduce US exposure but the prices look tempting – albeit in TGT’s case the Amazon headwinds are significant. I will need to reduce US equities in other ways soon.
  • Sold PSN. Taking (a few) profits at Persimmon as part of a wider reduce-UK-exposure play.
  • Buy JNK, PFF. Am underweight US fixed income so am topping up my perennial fixed income favourites in a world of miserable yields.
  • Buy TLS, Telstra. Am a bit underweight Oz right now and TLS is on a dip – I’m not quite sure why but broadly I have confidence in Telstra’s ability to preserve its monopoly privileges in the lucky country.

March 2017

  • Further selling of Australian ASX200 ETF. I remain overweight Oz and have been selling my UK-listed iShares ASX200 ETF. I have finally closed this position.
  • Bought TLS, Telstra. This has dipped to recent lows. I see it as a long term safe utility with gently rising dividends so now feels like an OK time to top up. This is one step backwards on my ‘reduce Australian equities’ objective however.
  • Bought VGB, Oz govt bonds. Most of my brokers can’t easily offer Australian bonds so I have been left underweight on them. However my Interactive Broker account can, and by reducing my London-listed equity exposure I can shift into bonds. I’ve taken the opportunity.
  • Bought JNK, BND, AGG. I am underweight US bonds so am topping up.
  • Sold IUSA. I am overweight US equities and really trying to make a determined effort to reduce my margin loan so this is place to go raiding. Unfortunately I am going to be paying capital gains tax on these realisations.
  • Sold NXT. Next is one of my largest unrealised losses. It is in a sector (UK retail) which is down 20-30% since Brexit, so I don’t immediately sense a buying opportunity. I’ve made a significant disposal, as part of capital gains tax planning. If it stays around £40 I will buy back in after >30 days.
  • Sold PSON. A month ago I thought Pearson was a buying opportunity (at £6/share). I now think it is a basket case, and it has risen to £6.60/share. I’m taking profits.
  • Sold BGY. I am overweight International Equities and don’t have many positions I can easily sell. But I’m disillusioned with this high-fee monster so am closing out my position.
  • Bought TGT. Target has taken a beating recently. I am torn between thinking its future is bleak vs Amazon, and thinking that with 45 years of dividend increases I see it as having the discipline to cope. I have made a mild topup.

February 2017

  • Sold Australian ASX200 ETFs. I am overweight Oz, and I am rotating out of unmarginable ETFs (e.g. LSE:SAUS) and into the local marginable equivalent (VAS) and SYD (a long-term holding which is underweight).
  • Sold TP ICAP. My original thesis for owning ICAP was Michael Spencer’s influence and shareholding. The demerger has left me with two subscale holdings. Spencer has sold TP ICAP so I will too. I haven’t decided what to do with the remaining NEX Group holding at this point.
  • Buy Premier Oil 5% 2020. My UK/Fixed Income is underweight, so I have been slowly buying. With bonds down 10% off their (stratospheric) peak it doesn’t feel too uncomfortable either. This Premier Oil note, PMO1, is my latest fixed income direct bond holding. I am slowly accumulating.
  • Sold Schroder Asian Income Maximiser. A rebalancing sell. I don’t often do these, but my ‘International/fixed Income’ is significantly overweight; I have two big holdings here, both with my private bank, which are hard/impossible to sell. This leaves me selling about the only liquid investment I have in this allocation cell, which is this Schroders fund.

January 2017

  • Sold SAUS, bought EWA. I’ve just realised my Australian ETFs aren’t marginally, or at least the ones listed in London and Sydney. IShares’ EWA, in New York, is marginally but comes with USD risk. I’m ok with that and so am rotating out of SAUS and into EWA.
  • Sold ETG, BGY. Taking stock, and looking for ways to reduce USA (and International, to a smaller extent) exposure, I have been drilling into BGY and ETG. These funds have both been a yield traps, with quite high fees. I’ve held both for long enough to see experience triumph over hope. In fairness to BGY it has delivered what I wanted: international equities, stable pricing, high yield – but I no longer want that. Hard to make a case for ETG, as its high ( taxable) yield comes at the opportunity cost of a lot of capital gains.
  • Bought NXT. I have held Next since it was <£20, and seen it get above £70. But it’s not in good odour currently. This week it’s just fallen 20% to £40. It’s revenues are flat/falling and it makes no bones about the lack of growth. But long term it’s a terrific brand, highly cash generative, and decently exposed in a multichannel world (at least for a UK-only business). Its management has long experience and (Brexit support aside) shrewd shareholder-friendly leadership. I think upsides outweigh downsides at £40, and it’s the first single-digit P/E buying opportunity I can remember.
  • Bought PSON. The quarter-end cash has started to accumulate. I need to reinvest. My rebalancing matrix says this means in UK equities. But where to look, when FTSE-100 is at an all time high? Eek. PSON fell on hard times a year ago, and been flat since. Its dividend has been relatively unaffected suggesting management thinks the shareprice woes are overdone; currently its yield is about 6%. Long term it owns some proper businesses and brands, with a lot of US exposure, and I reckon it will turn out alright. I’m not putting much in so haven’t done much more analysis than that.

December.

  • Bought AMGN. AMGN has just increased its dividend by 15%, making about the fifth year of such increases, yet its yield is at a since-IPO high. I haven’t dug into the patent expiry funnel but think it can’t be that bad if the Directors are increasing divis by 15% and I like buying divi-increasers at record high yields. However I am overweight USA so am looking for things to sell as a quid pro quo…
  • … Sell ISA. I am overweight USA and the market is at record highs. I’m not trying to time the market, but want to ‘sterilise’ my purchase of AMGN – so am selling a roughly equal position in my biggest USA ETF.

November

  • Bought RTN. The Restaurant Group is on my accumulate list right now and prices dropped 10% from the last buy. Since this buy prices have fallen a further 10%+. I think this one is a Buy right now.
  • Bought NTEA. I’m underweight on UK fixed income (due partly to market falls but more due to my private banking nightmares – see forthcoming blog); Northern Electric’s bond yields about 5% and isn’t a banking bond, so I’ve added a tiny bit to my position.
  • Bought LLPC. As per NTEA, I’m adding to my UK fixed income position. LLPC because I’m reinvesting the recent ~6% coupon from Lloyds’ bond.
  • Sell BND. I sold a tiny bit of this US Bond ETF, due to worries (borne out in the next few weeks) that the US bond boom may be nearings its sned.

October

  • Sold ISXF. Generally I’m trying to reduce my bond exposure a tiny bit; bonds have had too good a run for too long. This is not big enough a move to count as rebalancing, just a nibble around the edges.
  • Sold HSBA. This was top 10 holding last year , largely due to me buying on dips / catching a falling knife. The more I thought about it and watched other European/Asian banks the less I liked this. With the price back above £6 I’ve been trying to ‘take profits’ (sell at less of a loss!).
  • Bought BGY. I have been a bit low on International Equity; this holding feels like a solid, high yielding candidate, so I’m increasing my position.

September

  • Buy TGT. With S&P at record levels it isn’t easy to find good value right now. But it looks to me like TGT is worth a nibble. It has increased dividends for 48 years, and in the last three years by an annual 16% p.a.. Yet its dividend yield is at an almost record high of 3.5%. It has had issues recently and Amazon’s tanks are on the far reaches of its side lawn; today’s news saw it fire its Chief Digital Officer for not achieving 40% online growth. I’m in.
  • Sell CAT. A ‘dividend contender’ (having increased dividends for 22 years), I am not convinced the trends can continue in the near term. Divi yield is quite low. I see knock-offs of the brand in Asia. And China’s capital boom has bust. It feels like I should rotate from this into something with clearer medium term momentum.
  • Buy DIS. Disney must be about as blue-chip a stock as there can be (notwithstanding its corporate governance shenanigans). And what enormous moats. For such a stock my only real question is what price to buy at. At $93 it is 22% below previous highs of $120. And its dividend yield, while unimpressive at 1.5% (payout ratio of 25%), is approaching historic peaks (except 2009 when it exceeded 2%). I’m buying.
  • Buy PFE. I’m a tiny bit underweight US equities. But they are at record valuations so how to top up needs some thought. I’ve decided to top up my Pfizer holding. I’ve held Pfizer since early 2008, more out of a sense of blue chip duty than with any special knowledge about the company or its sector. It’s returned 10% per year and its dividends have doubled, without me reinvesting any of this dividend stream. The share price has risen significantly too but the yield is 3.5% which is quite high for an S&P stock. Belatedly I’ve invested 60% of my cumulative ever Pfizer dividends back into the stock.
  • Sell ORCL. I was reading Amazon’s latest annual report recently and it strikes me its professional database offering Aurora is probably long term going to do for Oracle what its AWS service has been doing to IBM. I’m not close enough to know otherwise but why risk it. I’ve closed out my ORCL position.
  • Buy MKC. A dip below $100 just triggered a limit order. I am not close to the business but as a leading FMCG provider of branded food/spices/etc this is long term investment.
  • Buy RTN. A new CEO appointment at this multi-brand UK restaurant business has triggered me looking at this business. I’m pretty shocked by what I see. I have to think the new chap will do better and hope this isn’t yet all priced in. I’m buying below £4.

August

  • Buy JNK. Give me the choice between Her Majesty’s finest, and Uncle Sam’s junk and, right now, I’d rather have Uncle Sam’s junk. At least while it fits with my rebalancing requirements.
  • Buy WFC. I am underweight USA, and, given my rotation out of HSBC, my two ‘go to’ USA bank stocks (JPM and WFC) are worth looking at again. WFC’s dividend yield is approaching its top quartile ever levels so I am topping up at $49.
  • Buy H50E. I’m underweight International Equities so looking to top up. Can’t really face any specific direct holdings at the moment but I quite like the HSBC ETF which tracks the top 50. I’m adding to my small holding.
  • Sold HSBC. HSBC nudging £5.40. Delicious.
  • Sold INXG. Index-linked Gilts have, not surprisingly, had a massive lift recently. However I consider my equities portfolio to be a pretty good inflation exposure, and UK gilts not as safe a bet as the market considers. And I’m overweight. So time to reduce.
  • Sold IGLT. Partial sale at £13.80. I am overweight UK fixed income by 2.5% and can’t get my head around bond prices so it feels like a good opportunity to take profits.
  • Sold SLXX, iShares Corporate Bond ETF. This just triggered a limit order at £150. Partial sale. I got into this in January at £130/share, what I thought was top of the market. It’s carried on rising after my sale and sits at £152. I can’t believe it. I remain long on this but will look to continue to reduce my exposure.
  • Sold HSBC. I’ve been in this for a long time (since over £6.00). It’s been languishing around £4.40 for ages despite a divi yield of over 6pc. But recent rally of up above £5.00 feels like a good time to trim exposure; banking stocks make me nervous and HSBC has confirmed its divi isn’t really sustainable.
  • Sold CRE, Creston research. I haven’t been following these guys for a while. But a UK-focused market research firm doesn’t feel like a good place to be post Brexit drop in confidence; research is an easy thing to pull the plug on. I’m closing out my entire position. I’ll recycle a bit of this into something US-based but in general this liquidation is part of a gradual reduction in exposure.

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September 2018: whiplash

The major UK news in September was the Salzburg EU summit, which saw the UK PM become a victim of political whiplash.  This affected the markets, but not entirely predictably.  If you’ve been asleep in September, you’ll struggle to see the ‘surprise’ summit result in the financial charts.

The Trump saga was preoccupied with the Supreme Court last month.  This doesn’t obviously translate into market sentiment, thank goodness.

Image result for whiplash cartoon

Nonetheless, from a UK markets point of view, September had its own form of whiplash.

Taking just the UK, for instance, consider equities (FTSE-100) and sterling. FTSE-100 veered between 7550 and 7250, a swing of 4%. By contrast, the S&P-500 nudged between 289 and 295 – about half as much change in the month. Meanwhile, GBP:USD veered between 1.282 and 1.328, a swing of almost 4% as well.

The FTSE-100 and GBP:USD are correlated, of course.  The USD is the ‘currency of the world’, and FTSE-100 companies mostly are global businesses, trading heavily in USD.  So when the GBP falls, the FTSE-100 goes up – these are the same companies, and valuing them in USD makes in many ways more sense than valuing them in pounds.

But the total swing of the FTSE, measured in dollars, was over 5% in the month.  And back again.  This means any particular snapshot of returns feels very arbitrary indeed. Those of you who ignore month to month movements are definitely on the high ground here.

Anyway, be that as it may, as at the end of September FTSE was up just over 1%.  Sterling itself rose too, about half as much.  And, so it happens, so did the S&P.

2018 09 FIRE v London markets

Bonds, on the other hand, are heading down.  With rate rises firmly on the agenda, the economy ‘booming’ (ish), now isn’t a very bonds-friendly time.  Or at least that is my superficial read on the situation.

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Q3 portfolio review; it’s been a busy summer.

(Republishing an old post which I somehow accidentally deleted)

It’s the end of the third quarter. As the summer comes to an end and we approach harvest season, I am struck by the analogy between farming and portfolio management. I’ve been doing quite a bit of farming in the metaphorical sense. Let’s take a look.

  • Adjusting my business plan. For my portfolio, a key part of my business plan is my target allocation.  As my deleveraging continues, it’s time to revisit my target allocation.  I’ve now reduced the net debt target by 10% of my portfolio value. As I do this I also need a compensating drop in the ‘asset’ part of the balance sheet.  So now I’ve been revisiting the appropriate mix of assets – is the mix of ‘arable’ (equities) and ‘wheat’ (fixed income) still the right mix? Overall as I deleverage, reducing my risk level, I am slightly increasing my target equity exposure. The table below shows the changes, and the resulting new targets are further down this blog post. You can see I’m also, indirectly, increasing my US weighting (to 50%) at the expense of my UK weighting (now 25%).

2017 10 allocation delta FvL

  • Move one of my ‘mortgages’. I have two portfolio loans, and borrow in both GPB and USD. I only recently noticed that with US interest rates on the rise there is now a significant difference between borrowing costs between GBP and USD. My UK bank charges me around 2.50pc for borrowing GBP; my broker charges less than 1.50pc for GBP, but about 2.5pc for USD. By shifting some USD debt into GBP I save. Hence the business plan’s change on cash is all in the USA column.  I am not a forex trader so this is not a bet either way on GBP or USD – it’s just arbitraging the interest rates. Already, I’ve moved around £100k this way, saving me around £1k pa.
  • Selling a ‘field’. To deleverage I need to sell assets. Normally I hate selling. But if the asset is owned by the bank anyway, and I repay the bank with my proceeds, then my net position doesn’t change – only my risk levels and my exposures. The question is what to sell. I’m mostly selling fixed income holdings, as long term I prefer equities and the fixed income was mainly there to smooth returns.
  • Moving a ‘fruit tree’ away from the ‘taxing squirrels’. Some of the work required to manage my ‘farm’ is to reduce fees and taxes. My main effort here has been to shift assets into Mrs FvL’s name, as well as into my Ltd company. She is a basic rate taxpayer and I am a higher rate one. I’ve moved about £30k around in Q3; not as much as I’d hoped but still useful. If this makes 3.5pc and I’ve saved 20pc tax then this is £200 pa. For one quarter’s work this is OK.
  • Paying down the ‘mortgage’. Deleveraging continues, as repay my portfolio loan. I’ve done pretty well in Q3 on this, and have got my loan-to-value ratio down below 25pc. My farm would have to drop in value an unprecedented amount to trigger foreclosure.
  • Topping up the farmer’s wife’s pension. My own pension is big enough to be on track to exceed the Lifetime Allowance. If if my investments do well then the taxman will penalise me. But my wife’s pension still has some way to go. So I’ve topped it up by £5k. In theory, at least ; right now the SIPP provider can’t trace the payment.
  • Off to the market, but to buy not to sell. As usual this little piggy’s assets have been productive, with several of the animals providing me with income. I’ve redeployed these funds into a mixture of ‘arable’ assets (equities such as Disney, WPP, QCom – more details here).

But enough of my farming. How did I finish up in Q3?

Looking back at Q3 the most obvious market developments felt currency-related.  But it is noticeable how equities – particularly US and European equities – rose significantly.  Being long global equities and hedged on the the pound has felt like the right strategy throughout.

In September in particular we saw a big jump in the value of the pound. At the same time, and unrelated (unlike FTSE movements), US/European equities rose significantly too. Fixed income fell slightly – the more so in the UK where foreign investors presumably marked prices down as the currency rose.

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