Lots of confusing newsflow in the markets during May, continued talk of central bank support for economies risking them running too hot and then having to play catch up with inflation. The rotation from growth to value seemed to relax as the month progressed and markets were choppy throughout.
Bitcoin followed through on it's threat to collapse and took most of the crypto markets with it. I had a small holding in crypto for a while, purchased following the 2017 bull run, that ended up growing to a much larger holding recently. I grew nervous about the crypto markets and had been selling out of my positions leading up to Bitcoin rolling over. I'm happy to watch the current volatility from the sidelines.
Taking on extra responsibilities at work have led to an exchange of time for money. This is welcome in some regards, but I'll need to make a few adjustments to investing and researching. That being said I've looked over a few interesting companies in recent weeks, it's only potential over-excitement in the markets that's kept from putting a few shiny pounds into them. As a result of a few nerves over a bit of complacency in the markets, the only addition to the portfolio was a top up of the pleasantly defensive and high yielding Impact Healthcare.
Two holdings left the portfolio this month, Dignity had a trailing stop triggered during the market selling in the middle of May. It was a purchase made several years ago when I was keen on buying after profit warnings (believe it or not, it did work... for a while...), following my purchase it went on to get hammered through various calamities. There had been an upward trend, and I was comfortable staying put on the way up, but the market decided to kick me out. Keystone Positive Change also left - it was heavily invested in many US stocks that have been sold off aggressively as risk appetites change. Capital preservation dictated that I cut it loose before the loss got any bigger, particularly as markets look wobbly after a strong run last year.
Best performers this month:
Blackbird +12%
Nichols +8%
QinetiQ +7%
Worst performers this month:
Craneware -15%
Lancashire Holdings -11%
Telecom Plus -9%
May sale 1: DTY
Dignity disappeared in May, this was a daft legacy purchase from some years ago that's been hanging around waiting to be sold. A May trading update read like a car crash, but the share price had seen a bit of a lift from the largest shareholder replacing the chair with their own man. However, I lost interest in this some time ago, so put in a trailing stop loss, which was triggered when the markets got twitchy earlier in the month. Dignity sold for a loss of -35%
May sale 2: KPC
KPC was a relatively new addition to the portfolio, so to have it leave after a matter of months is not my usual form. However, in keeping with my first aim of not losing money, I've taken to insisting on a limit to losses with new positions - KPC hit that threshold so it was sold. It is stuffed full of the stocks being sold off vigorously in the US, so bad timing on my part. Keystone Positive Change sold for a loss of -16%
May purchase: IHR
Not a lot of buying action this most, just a top up of
Impact Healthcare. A solid update including an indication of a decent pipeline of potential acquisitions convinced me to add a little more. Should inflation make a reappearance, property might benefit, so in addition to a nice defensive dividend payer, there's also a potential hedge there too.
Updates from the portfolio (in order of appearance):
Tritax Big Box (BBOX)
Trading update from BBOX showed decent rent collection, with one customer agreeing a rent deferral being the only outstanding payments. 37% of the BBOX portfolio is due for a rent review this year, and progress on sites under development. Pretty unexciting - just how I like it.
Anglo Pacific Group (APF)
Q1 trading from APF saw earnings down 39%, most of which was due to a reduction in holdings in a key investment from which dividend payments were then reduced. The maiden output from their new cobalt Canadian cobalt acquisition was available in Q1, so should be sold in Q2. Net result is the reduction in income looks like a timing issue, the share price in the days following the update was positive, so the market seemed to have a similar view. Other key news was to have all assets back in operation following COVID disruptions. Always a relief to see a new buy get off to a good start.
Somero Enterprises (SOM)
Pleased to see "...expects to exceed previous guidance..." in an unscheduled update. Revenues now expected to be around 12% -13% higher than anticipated, with improvements to profits and cash. The US providing a lot of momentum, and increased uptake in new products. Thumbs up.
Compass (CPG)
Half year results from Compass revealed yet again how corporate and events catering have been decimated through various lockdowns. Customer retention is around 95% and they've been picking up new business. I doubt corporate catering will return to pre-covid levels as office workers have demonstrated the ability to work remotely. But they will likely pick up market share if smaller operators struggle, but how much will the market have shrunk? With the share price back to 2019 levels, is there a little too much optimism already built in?
Diageo (DGE)
A decent recovery in the booze markets saw Diageo give a nice positive update. The US has continued it's strong sales from earlier in the year, and other markets contributed well too. All of which gave the board the confidence to resume it's capital returns programme and start buying back shares. Given they are back to pre-covid highs, I would rather they performed these purchases when the price was a little lower, or return via a dividend. Nevertheless, a welcome update.
Hargreaves Lansdown (HL.)
Nice update from HL - year to date AUM up 28% and revenue up 19%. Plenty of new clients and new business. Enthusiasm for US stocks has been a major driver behind the performance, and they flagged that re-openings are coinciding with a drop off in share dealing. No comment on possible Woodford litigation. Apparently clear beneficiaries of our boredom during various lockdowns.
Impact Healthcare REIT (IHR)
NAV up 2% during the quarter and an increased dividend. Management are cracking on with rent reviews and purchased a couple of additional properties. The pipeline of investment opportunities is "strong and growing" apparently. Boxes ticked.
Sage (SGE)
Half year update - and one theme dominating this, the move away from legacy licensing to cloud. Revenues were down -4% and operating profit down -30%, but the business is focussed on shifting their customers onto a subscription model. They appear to be making progress, with recurring revenues up 4%, and the guidance being towards the top end of expectations. I wonder whether this is more a case of managing down expectations to such an extent that any progress is welcome. This is one of my investments that I think scores highly on various markers of quality, but I question where the growth comes from going forward. I'll hold for the time being.
Jersey Electricity (JEL)
Interims from JEL, were pleasantly uneventful. Revenues up 5%, profits flat due to increased costs, net cash up by a little with cash up to £35m, set against £30m debt, and the dividend up 5%. Nothing to see here, tucked away again.
National Grid (NG.)
National Grid are a bit of ballast in the portfolio - I'm accepting a lack of capital gain for a lower level of volatility and a steady stream of dividends. It's doing pretty much what I'm after. The full year results showed an increase in statutory numbers, with adjusted numbers slightly down, and an increase in dividends by 1.2%. Back in the bottom drawer.
QinetiQ (QQ.)
Preliminary results from QinetiQ followed an upgrade a few weeks ago. The results all look rather positive, revenue up 19%, underlying profits up 14% and a chunky looking order book going forward. Cashflow was up, and have almost doubled the cash in the bank from £85m to £164m. Acquisitions appear to be contributing, and given the swollen piggy bank, I would expect more on the way. The outlook was typically cautious, giving themselves plenty of opportunity to beat expectations. Pat on the back QQ..
Tate & Lyle (TATE)
Whilst there was a lot to like in the full year results from TATE, they also managed to sneak in what looked like a pre-emptive profits warning for next year. It was a bit confusing and Mr Market wasn't impressed. Revenues were up 1%, PBT up 6%, cash flow increased and debt fell, all of which contributed to a nice 4% bump in the dividend. Then a line in the outlook soured things, stating that commodities profits and a change in tax rates would lead to lower profits next year. The intention to sell their Primary Products (or at least a controlling stake) was clarified - I think I'll hold to see what comes of this.
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