December 2019 portfolio update

So that's 2019 finished. The highlight of the month saw Tweedledum taking the honours in the Westminster egg and spoon race. Tweedledee was left scratching his beard, blaming everything except the bonkers set of policies in his little red book. At least that's one lot of nonsense out of the way, and should provide some clarity on Brexit. Hopefully some day soon it will be safe to turn on the news on the telly again and not want to throw things at it.

The Sterling rally I was hoping for duly appeared as soon as the election exit poll was released. And then disappeared when someone forgot to keep Boris in his kennel, letting him create another Brexit cliff edge for us. So the FTSE100 xmas sale I wanted didn't materialise. I suspect the China deal with the US won't hold together, and a crazed Trumpy will want to go on a tariff rampage early in the new year, so I hold out hope for some January bargains.

So in expectation of a few market wobbles early in the new year, I'm staying patient and am continuing to research potential purchases.

Portfolio performance 
The portfolio was up +3.6% in December, ahead of my chosen benchmark the Vanguard FTSE All Share Accumulation which was up +2.8% over the same period.

Best performers this month:
Somero +39%
Computacenter +17%
Telecom Plus +13%

Worst performers this month:
Fulcrum Utilities -15%
Jersey Electricity -6%
Unilever -5%

December share purchase: ABDP
AB Dynamics (ABDP) joined the portfolio this month. ABDP provide technology for car manufacturers to test their vehicles, including various aspects of vehicle dynamics, safety features, and automation. I looked at this company a long time ago but never bought any shares, the price took off and never glanced back. All the time I was like a nervous toddler at the bottom of an escalator - trying to work out if I should step on. A 30% pull back in the price over the past few months encouraged me to indulge, but they are still expensive, so I have kept the purchase small.

It might seem a bad time to get involved in the car industry given the slowdown in economies across the globe, especially since cars are expensive and likely to be hard hit if people are tightening their belts. However, ABDP get their money not from car sales but from manufacturer R&D spend. Clearly if car sales collapse - R&D will likely reduce too, but should be more resilient that simple revenues. Cars are undergoing a fair degree of change including the move away from fossil fuels, and automated vehicles looming on the horizon. It is these sorts of longer term trends that ABDP have benefited from, and hopefully will continue to do so.

The ABDP financials are extremely solid, with ROCE and net margins averaging 19% and 16% respectively since their listing on the LSE in 2013, and they have no debt. They are also managed in a manner that I like, demonstrated earlier in the year when they raised capital through a share placing in order to fund a couple of acquisitions, rather than borrow. I think the last thing a high growth company such as this needs is a load of debt to complicate life. 

The founder of the company remains on the board and holds around 20% of the equity, with his wife owning a further 6.5%. Despite a bit of selling from the pair of them in the Autumn, as significant shareholders they should have the interest of investors front and centre of their thinking. 

The main negative is the price - if business performance wobbles then I expect sellers to be out in force. There is also a tiny dividend, but I'll forgive that if growth continues at anything like the pace it has done over recent years.