Monthly Investments – Top ups

Posted on by
Reply

Regular monthly post on what I’ve “topped” up with inbound cash to the relevant pots via my monthly reinvestment (at low costs).

ISA:

  • LLOY – Lloyds Bank
  • AV. – Aviva
  • MRCH – Merchants Trust

SIPP:

  • DLG – Direct line group
  • FUEQUI – Fundsmith Equity
  • SSON – Smitson Investment Trust
  • FCSS – Fidelity China Special Situation Plc
  • CGXXQ – LF Miton European Opportunities
  • M1UB29 – Lindsell Train Japanese Equity Sterling Hedged Inc
  • PCOMKT – Merian UK Smaller Companies Fund Acc
  • SSE – SSE Plc
  • MER – Mears Group
  • Cash

As mentioned – I try to keep all my investments to a target, Mears is new as previously blogged about, so is always on top-up duties. I need to wind down the overall fund top-ups to half the monthly top-ups and add some new companies to the SIPP pot, SSE re-added as the price has dropped significantly, so it was eligible due to the averaging down. Vanguard top-ups are now also required in SIPP as the percentage has dropped below the 25% target.

I’ve also added a monthly cash top-up to allow more dynamic market moves without needing sales over the year ahead. I have missed out on a couple of items I predicted, and without a small “trading” reserve in the SIPP I can’t take advantage of these situations.

ISA wise Next month I expect to remove LLOY (unless it drops to 60p or less) in favour of SKG (as Lloyds is becoming too high a percentage of the ISA). (MRCH will remain as it’s a growing element to add to the fund). I am considering stopping AV. top-ups for moment as although price is attractive, I may have better gains elsewhere.

SKG & FCIF – update

Posted on by
Reply

After the announcement of a wind-up nearly at time of post of last post…

I ended up selling my position that morning, as money in bank is better than waiting for a drip feed of returns (which I see as the likely FCIF outcome) – and buying SKG as a replacement from my “targets list”. Smurfitt Kappa are a paper/card producer with huge market reach across the globe, and my current “valuation” metric has them trading below their true value (which should be 15% above current market by my calculations (as a lower-end estimate)). Given that and a 3% dividend, it met my up to >20% growth in a year metric. It also has the owners heavily invested in the business’s future stake (which I love to see in a company), and is trading at a healthy PE. The Venezuala situation did hit this years bottom line, but I don’t see it being repeated.

As this is going ex-dividend shortly, I expect to expand on this position in 2019 as the price drops – it looks like a long-term holding potential for me – I may not sell this position for 10 years if I’m right, given how cheap it seems right now.

I’m also intending on buying the same share in the SIPP over time, as I do see it being a core-industrials holding, and the current move to home-delivery is really helping SKG.

One small point, this does place me reasonably underweight reference Bond/Loans in the portfolio, so I do need to replace this percentage over the coming year. I may top up CGT, which has been a good exposure to this market which actually has made me money in last year (circa 8% in 13 months, as I purchased on a dip!).

FCIF – Funding circle investment fund

Posted on by
Reply

This is more a note to myself on not investing what you don’t understand fully. Last year I made one of the embarrassing mistakes that end up defining your investment strategy in future years. Back in 2008, I had similar “big bets” on Oil plays like Aminex, which I also didn’t understand, but the money lost was tiny! From then on I didn’t really lost most years, however, last year, I did make a mistake.

Last year, when I was re balancing my ISA, I put £1000 over to FCIF, as at the time it had a decent Dividend. But this was early in my understanding of both valuations (NAV) and ETF’s – ie, the fact an ETF can trade both above and below the asset valuation.

At the time, I just had focused on the price, which had been a steady ~ 100-102p since inception, and hadn’t paid heed to the NAV graph (which wasn’t exactly rising). The fact the NAV was below the actual price the shares was trading should have been a “danger” sign, and should have prevented me buying at a 5-10% premium.

Last year I paid over the odds effectively for this investment, and it’s made my future buying more informed. For the value of the knowledge priceless, but it did cause a £200 drag to the overall ISA last year, which would have actually resulted in my other investments outperforming the benchmark (ie, Lifestrategy) in 2018.

Is FCIF a good investment now? Well, it’s relatively under the NAV now – and personally I do top-up the investment when I have nothing better to top-up in the ISA monthly (as having assets in the market in a liquid stuck like FCIF is a good play to allow a faster trade compared to an OIEC settlement), but I know for sure right now that won’t be the case this month (I have 3 better candidates for this months monthly “regular” investments). However personally I would rate this as a ~7.5% divi rise in a year, and maybe 2% on shareprice over 2019 (but it does have a future potential 10% rise on the discount). As you can get a ROCE of up to 15-20% elsewhere right now, I’d personally avoid buying outright given I don’t expect the recovery this financial year. Am I going to sell this? Well no, as having a investment like this in the portfolio does help to remind me of the failure. And I may want to top up when I see the NAV monthly gain numbers start to recover a little.

Investing as a Ltd Company

Posted on by
Reply

I write this hoping for advice from readers! I have a full time consulting company, which is where I get my funds to invest.

Over the last few years, that company has now passed the banking threshold to safely store funds in a single institution. It is still making money, as I am still full time consulting for a couple of clients as my day-job. The money that remains is now no longer deemed “rainy day” money, as there is sufficient for me to survive a year or so without actual work. However, given it is still gaining money as a company, and it is not tax efficient to withdraw that money, should I not invest it as the company so it is not losing money to inflation? My thoughts are I should and I expect a whole series of blogs to indicate that.

The outline plan will be to first get the LEI number I require from the stock exchange – then sign-up for a trading account as a Ltd (many companies offer this I have found). My question to others who have done this is what limits should I place on this trading? My understanding is my gains from this should be limited to 20% of the companies overall turnover to avoid any issues from HMRC – which actually should be reasonably easy to handle in the early years. The actual assets held, I was thinking of keeping it in a moderately reasonably ETF that pays dividends (something like Merchants), and stays about same “value” – allowing withdrawal of the dividends back to the business as income, and this will easily stay under 20%, but will end up earning me a 4-5% ROI instead of the 0.5%-1% in the bank. It’s probably a better bet in the long term.

There have been a few previous posts on this from a few people – but I’m yet to find others actually doing this (such as this article from Foxy) – my accountant advised that I should still limit my turnover and it is “simpler” to do on same Ltd. I’m personally unwilling to setup a 2nd Limited company but interested how many others have actually done this. So please comments please on advice on this, given even forum searches, I’ve yet to find many people actually doing this.

Portfolio Performance – March 2019

Posted on by
Reply

Overall “monthly” figures (from my sharepad tracker), taken on Sunday 31/3/19 as markets closed

  • SIPP : +2.2%
  • ISA : +1.7%

Given during the month the Vanguard Lifestrategy 60% we have as benchmark is +2.29%, so I am behind this “rolling” month by a small amount on both portfolios (I’d also add these figures include dividends!)

Lets see how we do next month – Given this is first time I’ve been tracking my portfolio this way, I should add my largest benefits/detractors :

  • SIPP – Largest growth : BP +4.78% – + a dividend payment making this higher.
  • SIPP – Largest detractor : WPCT -5.15% – overall portfolio is -0.4% on this now
  • ISA – Largest growth: BGJSB +4.09%
  • ISA – Largest detractor : LLOY -1.13% **

Given majority of shares in both portfolios have actually had gains, and we’re due Dividends on quite a few having already gone or are going to be going ex-divi over April, I expect growth over next 2 months to actually exceed the benchmark.

With the top up strategy discussed yesterday, I expect reinvestment to continue in the detractors going forward.

** Aviva was actually largest detractor, but we expect this from a new position in portfolio, and I haven’t lost as much as a long-term holder of a share – majority of losses are in stamp-duty and the trade fee – as is normal when entering a position.

Lets hope for a better result next month!

New reinvestment strategy 2019

Posted on by
Reply

I have just had the realisation, maybe a revelation, after a few beers, that maybe I’ve been going about this slightly wrong. I mean a few beers and a spreadsheet combined with last years month by month share price figures. Conventional wisdom is not to catch a falling knife, but I’ve been doing quite well overall in recent years (I wasn’t minus equity in 2018-19 when most funds including my world tracker was). So I was thinking the following:

Why not robo-target my monthly regular investment pot to invest in the companies or OIEC, or ETF with the highest fall over previous month? I’m also tracking fall over the financial year (which for me runs on an ISA year basis) – so I’ll probably likely also have a next-preference to the overall yearly fallers after the monthly, all things being equal. The math said I would have overall ended up with a higher percentage of winners last year by adopting this strategy.

Is this a stupid plan, I’d be glad of your comments, but I think I’m going to try it for a 3-6 month period now given I expect we’re in an extreme volatility period. Now as my investments are publicly listed on this blog month by month, this would allow others to also follow this so hence I am pre-notifying this will be the plan for a few months at least. I will exclude “new investments” under 1% from this rule to allow me to top up to a reasonable 4% min holding, otherwise I wouldn’t be able to sell without horrible trading losses.

I also couldn’t have implemented this due to sheer lack of portfolio size in 2017-19… I would have ended up with a far to high percentage in single stocks if I had followed this strategy (on positive, I’d have gained > 20% from those investments, but I also do need to keep an eye on the percentages from a risk perspective). If a single, non fund investment exceeds 10%, that should be a marker to stop doing this – unless it’s one of the major holdings I have previously identified (LifeStategy 60% ACC or Fundsmith).

So those are the new “robo” rules I’m setting my portfolio. Comments please!

Given I usually put a lot of planning into new shares in portfolio, this should help maximise returns over the year – if it works as well as the numbers showed last year (if I hadn’t had beers as I wrote this I would have done a nice diagram!), it’ll be a permanent feature. Analysing the numbers in excel, I missed out on ~ 4% of extra performance, which is reasonably substantial in both portfolios from not doing this in 2018..

I don’t need to be told the obvious downside, this could be chasing losses and may horribly fail – and it will multiply this failure if this IS the case, but my monthly reinvestment’s are split value wise – there should be a further post as I work out percentage top ups from the available funds, as I have an immediate feeling it needs to be proportionally weighted, which could result in some fun math in the future. But that’s after I try this for 6 months.

Aviva trade

Posted on by
Reply

This post aims to explain the reasoning behind my recent Aviva Purchase (my first large purchase/rebalance in 2019) compared with other shares on the “Targets” list. I already had Legal and General and Aviva in the targets list and had been monitoring both for a few months with a view as to which to choose.

To start however I needed to identify other potential targets for an insurer were any insurer with Life exposure which gave a list of insurers from FTSE 350 – doing a FTSE sector search recorded similar to the below:

Sharepad example of full market search of all companys in the Life insurance sector.
Example of Sharepad.co.uk/Sharescope “Life Insurers ftse350 with some minor fields added to show PE, price to NAV, Yield and cover”

From here it’s reasonably clear, the yield from Aviva is higher than the rest, with the 2nd highest Dividend cover, and lowest PE earnings of the insurers in this sector, also using this I can dig in and the PE is at a several year low. The “analyst” price expectation was nearer 500p per share, however analysts are frequently wrong. Next stage was to analyse director dealings, I see that a couple of the board were also buying shares at a higher price than the shares currently are trading at in the recent history.

There was a recent CEO change this month with Maurice Tulloch taking over – this doesn’t concern me as an internal candidate who will know the business and it’s weaknesses, where an external candidate may not move to remediate any problems as fast. Given Aviva returned under 25% compared with the overall market at 65% in recent years, this change may actually improve the return on investment going forward (or that is my hope). This is understandably a risky change, but he is invested in the business himself, as is the previous chairman.

So in not strictly analysis of performance, the other piece I was personally familiar with was that Aviva seemed to be advertising a lot more heavily in past few months in the UK. Where I had not seen legal and general advertisements, I could recall many from Aviva across print, transport, and other media which again gave confidence this was correct call.

The combination of these factors gave me a degree of confidence the market has this priced incorrectly at present. As the true “true” value of this share should be higher – which along with the 7% dividend will likely give me my desired > 10% annual return from this share pick. I’m sneakily hoping this will be a 15% return in 12 months however.

I aim to hold this for several years given the compounding potentially possible here. I also don’t see this as a Brexit risk share given majority of revenue is from the UK. I may add to this holding if this was to drop further, as I can’t see any financial reason for this to be trading at a PE of 7.1.

The next class of share I need to add to the ISA is Oil – as banking, insurance sectors now covered. I’ve been leaving technology picks to the funds I hold for moment despite actually working in a technology field, and it is arguable Oil is a technology stock in any case due to the fast adoption of technology in the Oil field.

ISA Update – March 2019

Posted on by
Reply

I am to cover all my investments in current portfolio in a future post, but my aims on my ISA are quite different to my SIPP. The aim here is to keep 50% of shares in regular funds or ETF – with the remaining 50% split between personal single share investments and shares I have analysed myself – a higher risk profile is acceptable within the latter 50% pool. At start of March 2019 there were 11 investments in the ~ £14,000 total at that time, so less diversified than the SIPP and with less overall concentration. The theory is as I start to outperform passive investments and “good” active investments, I should move to managing more of my own money.

At end of tax year, ie last week I added a non-scheduled £2000 to my ISA. As I usually add £250 a month, this allowed me to take a position in another “investment”, bringing the total number of investments in this ISA to 12 from the previous 11.

How I invest is an entire future blog post, but I have a table of “Investable Universe Targets” I have identified previously on my dashboard on the http://www.sharepad.co.uk website, which gave me at the time a choice of several investments to pick to invest this funding. I decided to pick an Insurer, as my ISA at present only has an individual Bank share, not any insurer – and is overall quite weak on individual shares as it is 80% funds at present.

My primary reasoning on a life insurer was the relatively recent news on life expectancy for Annuities reducing, ie, people living less long, giving the Insurers the ability to return cash to investors. Despite this being “old” news, and this being case, I spotted a few insurers had actually been trading at quite low prices to their expected and historic PE despite this “bonanza” of upcoming returns. This along with the knowledge that the money from annuities will be returned over several years would hopefully set the insurers up for buy-backs and improved dividends going forward. As this has potential to increase both share price and dividend over next 5 years, it was a risk I was willing to take.

I decided to not invest the full amount available as I know the market will have some degree of Brexit turmoil, which should allow me to spend the remaining money on topping up under performing investments post Brexit (of which this could be one). As many great investors know turmoil is a great time to be in the markets sometimes – it’s worth holding some extra funds in cash for this. I usually use Capital Gearing Trust for this “cash equivalent” pot, and don’t hold in Cash at all, but given I already have > 10% of the ISA in CGT to allow for “future” quick trade plays, I will not increase this given the trading fees, and fact I’m pretty certain I’ll want the cash reserve in next 2 months to rebalance the portfolio.

So onto my first tracked large (ie, outside the £250 a month) trade of 2019 on Friday 22/04/19 – where I purchased 300 shares of Aviva for a total of £1256.31. This has since lost around 2% since purchase, but I’m still reasonably happy with the value. A blog tomorrow post will discuss more of the reasoning for the decision.

End of month totals (this was recorded as a timed post early this week – sorry, as I am out Friday so values are likely “out”):

  • ISA Portfolio current value Total: £15995.60
  • Current investments Value: £15,221.27
  • Current cash Value: £772.43

Mears Group Plc

Posted on by
Reply

As mentioned yesterday this was an investment added as a monthly short-mid term “feeder” investment for my SIPP last month, and will likely remain whilst the price remains attractive and below my max buy price, which would be circa 350p at present (Today this trades at 250p.

So why Mears, and not one of the other companies in sector (social housing repair/maintenance)? The shareprice has fallen heavily since the results & they have now hit the magical Yield figure to make me interested. The recent graph doesn’t look good though:

Graph courtesy of Sharepad.co.uk/Sharescope with their permission

The yield is a pleasant 4.8% with 2.3X cover, and the PE hasn’t been this low since ~1999. Also the annual report makes for reasonable reading and does explain the dip a little. Large shareholders (Primestone) have added funding only in November at £3.31 price, making my purchase at 260p seem very cheap – which has reassured I was not the only person seeing value here. Mears were on my target list prior to their results at this higher price level due to the previous years results being “acceptable”, . This dip probably did make me add them to the portfolio a few months ahead of planning. (I also had XP Power on the list to add this month, but they were near 20% up from when I had marked to purchase, so did not seem appropriate to add at this time from the 2 potential targets).

What I can’t dispute however, is the likely fact that caused this is the operating cash flow is at an all time low (lowest since 2014) – so I consider this given this a little bit of a punt over 12 months, however, this is a company that looks to have better figures than in 2012, but is currently trading at the same book valuation (despite the fact there is clearly a better forward order book (from the annual report). With the long procurement times in this sector, they fit my target list as a long-term likely gaining share with decent dividend prospects.

My prediction is for a recovery over the coming years, but I could be wrong, hence why I am funding this with 10% of net new “income” to the SIPP over the likely the next year, which will represent under a 4% net holding by end of year.

SIPP Portfolio March 2019

Posted on by
Reply

Future blogs will improve the style of this data “dump”, but attached below is the current full portfolio for March, along with cost/values in GBP. I have not included percentages, but my aim is for “fund” to eventually make up 50% of the below, with 50% being self selected shares. We are currently far higher percentage wise on “funds” however at current market values. 25% of the fund should remain as a passive investment with Vanguard Lifestrategy 60 as the bedrock, and “target” to beat for the rest of the SIPP.

Every month £1000 is added to the portfolio, with it being split in last month into the shares marked in italics below with £100 going to each option – which shares get added to do change monthly to rebalance – typically the “less” profitable shares get the topups. I am using interactive investors “regular” trade option to pound cost average down the trades, so trading fees are £1, and stamp duty where effective is 50p. This compares identically to a real time trade of £10 of £1000.

Share/FundOriginal CostCurrent P&L
Vanguard LifeStrategy 60% ACC5249.95311.58
BP3545.53416.60
Capital Gearing Trust2228.251.95
Direct Line952.47-5.42
Fidelity China Special Situations39621.36
Funding Circle SME Income299.14-47.09
Fundsmith Equity T Acc574.9939.80
Milton European Opportunities B ACC900.0116.10
Lindsell Train Japanese Equity B Sterling Hedged2002.55
Mears Group98.07-3.39
Merian UK Smaller Companies Fund R ACC60020.11
Scottish Mortgage Investment Trust Plc985.88-40.91
Smithson Investment Trust Plc365.8613.24
SSE Plc1299.7720.72
Threadneedle European High Yield Bond 3G550-11.19
Woodford Patient Capital Trust Plc
1147.86-42.52
Baillie Gifford Japanese Smaller Co B ACC899.75-14.15
BT843.847.07

Total Profit over last 12 months: ~707.91 GBP (above was from real-time data so may be slightly out!). Not bad for what was a bad year overall for the markets and given ~ 10k of the funding was drip fed over the year it is no wonder that the returns are lower than the top 3 investments, which were bulk purchased at the start.

The return to beat is the Vanguard LifeStrategy piece is the 60% – which returned ~5.9% the previous year as a whole. Given the total portfolio was funded initially mostly on this – as a whole the portfolio has under performed this. However, this excludes for most part any Dividend in past 12 months, making the BP Figures in particular very out. BP comfortably outperformed LifeStrategy, and generated double the return from a smaller investment overall when this is taken into account. As this was my largest “pick” of all the shares outside of the Fund list, this firms up my strategy of picking under priced shares, and holding, and reinvesting Dividends.

The “new” share added this month to the Portfolio is Mears group, following what the market saw as disappointing results. I however found this to be a company that has a high potential for recovery in future, with a potential upside of 30-40% + dividend over next 2 years. I will do a seperate post on the indicators that lead to this conclusion. But I will be adding to this holding over next few months unless the market does recover by 30-40%. This was in my Targets list previously from a search, so I know the fundamentals looked reasonable for this option.

Next month I plan do not plan to add any new share, and likely will not change the distribution in the short term, unless market conditions change. I appreciate I will need to keep re-adding funds back to Vanguard in a few months, as this is dropping below my 25% target for this holding. Changes from last month include re-adding Woodford Patient Capital to monthly top ups following the Woodford Equity reshuffle at a premium (they paid 95p). Given this currently is a 15% discount to NAV, thats month I’m (hopefully) locking in for later. Also have put BT back to the “purchase” list, as both have had recent falls in value – similar reasons.

Overall there are likely too many funds/shares in the portfolio right now, however, it is being 20% weighted with new funds to Japan ahead of Brexit, as I suspect Japan will benefit greatly if the UK economy takes a nosedive. Lindsell Train Japan is also mainly because of their 10% Nintendo holding – I sense this will be a winner, and I can’t easily “drip” feed into the Japanese markets without using a fund. As a gamer don’t bet against Mario, Nintendo and Zelda, as I see Mario and Zelda as a moat that other gaming firms dream of holding.

As a whole the portfolio is also considerably underweight ref: Asian equities, and I need to find a fund for Asia/Australian assets as soon as reasonably possible.

After I have filled that gap – I suspect the next decision are on other “shares” to rebalance to 50% directly held shares. At moment that percentage is ~40% so I have a way to go on that. I also will be too highly weighted to WPCT soon, so will need to switch to another option – however I still feel that I should invest when the fund is trading below my “value” figure.

I’m still unsure about SSE as a longer term holding – but thats a blog for another day.