September 2019 portfolio update

Another volatile month, with crazy oil price movements, Trumpy being naughty, Bojo and Parliament butting heads over the tediousness that is Brexit. Some price reductions in some of the big defensive blue chips piqued the interest, but they aren't quite into buying territory. My guess is that some of the selling was due to Sterling showing signs of life, but also people moving out of the big international defensive stocks and into more UK facing businesses. I expect the portfolio exposure to big internationals will result in some share price decreases over the short term, I'm comfortable with that as I believe it is outweighed by long term benefits.

Portfolio
The portfolio was pretty much flat during September, just about getting into the positive, but behind the wider markets which were considerably more frisky. The portfolio was up 0.3% compared to my chosen benchmark the Vanguard FTSE All Share Accumulation fund which was up 3% over the same period.

Leaping like a salmon this month was Craneware (CRW) +40%. There didn't seem to be an obvious reason, maybe an institutional investor got interested, short covering...who knows.

Somero Enterprises (SOM) flopped -34% during the month after another soggy trading update that left investors less than impressed.

September share purchase: TEP
Telecom Plus (TEP) was a new entry to the portfolio this month. It got a brief mention when I took a look at some telecoms companies here, but not in any detail as (despite being listed by the LSE as a telecommunications firm) telecoms is only a part of it’s business. If you have a rummage on the internet you’ll find it calling itself Utility Warehouse – which is a relatively apt name for it. It makes money by providing a range of utility and "utility like" services, such as phone lines, mobile network, internet etc. However, it doesn’t build and manage the infrastructure - the pipes and wires - as such, but connects customers to the service providers, then manages the customer facing aspects such as support and billing. In this way it manages to offer some utility like defensive qualities, but also manages to avoid the huge capital costs that utilities and/or telecoms providers get saddled with. It has also managed to keep marketing and sales costs low by offering existing customers a chance of earning cash by getting them to sign up new customers.

ROCE has been in double digits over recent years, net profit has not been as high as I would like, but I’m prepared to ignore that given the defensive qualities of the business. They also have a reasonable dividend – clocking in above 4%, with regular annual increases, and low levels of debt. They seem to make a habit of getting awards for keeping customers happy, and have seen their customer numbers growing which is encouraging. I don’t see this as a fast growing business, but if they can keep slowly adding customers, keeping them happy, and increasing the dividend I’ll be content.

As with any utility company in the UK, it might well find itself in the cross hairs of a Labour government, should they get themselves into power. As an interface to utility providers, they probably wouldn’t fall into the bracket of “things Labour want to nationalise”, but any risk of labour treating this sort of business as a political football is unlikely to be reflect well in the share price. Since some of their profits are being paid to me, I might as well contribute to them by switching a few of my bills across to them too.