September in the markets felt like a bit of a tease, a mix of selling and a threat of a significant fall, on other days there was a jump higher. A number of the big US tech firms saw their shares getting sold off, perhaps unsurprisingly given the journey they've been on since March. It was a bit more sedate in Blighty, the FTSE drifting gently lower.
Virus news worsened over the month with increased spread across the country, and with it came the risk of more restrictive social distancing. The US election got up to full steam, with Biden and Trump on a live "debate" - looked to me like two daft old men bickering. And in case that wasn't entertaining enough Brexit is back with a vengeance. Come to think of it, I'm surprised the markets haven't completely collapsed under all that nonsense.No new additions to the portfolio this month, although an old-timer was topped up. And there is now one less holding, after waving goodbye to Network International.
Portfolio performance
The portfolio was up +2.1% in September, ahead of my chosen benchmark (Vanguard FTSE All Share Accumulation) which was down -1.7% over the same period.
Best performers this month:
888 Holdings +27%
Somero Enterprises +24%
Fulcrum Utilities +20%
Worst performers this month:
Dignity -21%
Craneware -10%
Eleco -10%
September share sale: NETW
Network International is a provider of payment services, focussed mainly on the Middle East. I bought into this in August 2019, after it's IPO in April 2019. This proved to be counter to my usual purchase targets, which are typically businesses that have been publicly listed for a while, and have demonstrated some degree of resilience over the past few years.
The main box ticking that NETW provided was that under "normal" circumstances - i.e. when we're not in the middle of a global pandemic - payment providers should be a pretty defensive business. People will buy stuff, no matter what. Exactly what they buy will change, but there will be a sustained requirement for a mechanism to pay. What it didn't have was a history as a publicly traded business, this deviation from my usual practice left me feeling a little uncomfortable when COVID-19 hit as I didn't have my usual research and business history to fall back on.
What really took the biscuit, however, was the share price getting cut in half on no news. Directors then made comforting statements, and bought some shares, pushing the price back up as dramatically as it fell. But I can't help wondering.... It reminded me of NMC, Finablr and Wirecard. Rather than wait this one out, I decided to sell at a 40% loss. I'd rather have that money invested in something else that I feel more comfortable with. Thankfully my approach to riskier investments meant I'd kept the amount invested small.
September share purchase: GSK
September share purchase: GSK
I've held shares in GlaxoSmithKline (GSK) for a while, I quite like buying shares in companies whose products are found in my house, toothpastes or painkillers, for example. They also have a range of pharmaceutical products, and vaccines. They've been in the news a fair bit recently, as has every other pharma business, trying to develop vaccines for COVID-19.
I'm less concerned about whether they cross the finish line in the race for the first COVID-19 vaccine, I'm invested because I suspect there will be a relatively stable demand for GSK products. As a pharma business, it has to run just to stand still, as there is a constant patent cliff edge over which it's products fall. Once they do, generic medicines can be spun up at much lower prices, and assuming they do the job, why pay for the more expensive brands. It also has a consumer healthcare arm which is a much less demanding part of the business.
GSK has merged it's healthcare business with that of Pfizer, which could be spun out as a separate company. It provides a tempting investment as it now comprises a huge over the counter healthcare business, that is likely to be more profitable and easier to manage than a pharmaceutical company. No specific news has been issued on this recently, but I'm content to wait and enjoy the ride.
Glaxo has a decent dividend at around 5%, and has been rebuilding it's dividend cover whilst holding the payment flat over the past few years. As of last year it was covered around 1.7x by free cash flow. The vaccines business has taken a bit of a hit this year, with fewer vaccinations due to healthcare systems being overwhelmed by COVID-19, but hopefully this will have recovered somewhat during the back end of the year.
