June 2021 portfolio update

Too much going on at home and work this month, I struggled to keep up with market news, let alone keep this updated. However, it's a useful diary of portfolio activity so I want to keep it going if possible.

I've continued to tweak the portfolio, adding JP Morgan Asia Growth & Income , an investment trust focussed on Asia. Also added is Euromoney Institutional Investors, a business that includes events management, and one I think still has some recovery left to work out, which is reflected in the share price.

Leaving the portfolio are two holdings, SAGA and PZ Cussons. SAGA has been a basket case and was the one remaining shocking purchase from my bad old days - it's had a good run since March 2020 but virus worries led to a trailing stop being triggered. PZ Cussons is a business trying to recover some former glory, and the share price has had a reasonable recovery over the past year that I've owned it. But it's been going sideways for a while and I thought the company may take a while to convince the market to give it another leg up.

Portfolio performance
The portfolio was down -1.3% in May, behind my chosen benchmark (Vanguard FTSE All Share Accumulation) which was up +0.6% over the same period.

Best performers this month:
Eleco +10%

Jersey Electricity +10%

GlaxoSmithKline +6%

Worst performers this month:
Blackbird -13%

RWS Holdings -12%

Craneware -11%

Dividends as at 30th June 2021:

Vanguard FTSE All Share Tracker yield: 2.63%
Portfolio 2020 yield: 2.5%
Portfolio June 2021 trailing 12 month yield: 2.7%
Portfolio total yield from January 2018: 5.3%

June sale 1: SAGA

The last remaining awful buy from my bad old days. The only saving grace was that I was sensible enough to keep the investment small. It got smaller rather rapidly. I lost interest in this some time ago so just put in a trailing stop and let it go wherever it felt like. Virus concerns impacted travel once again triggering the sale. Sold for a loss of -56%

June sale 2: PZC

PZ Cussons was in the right place at the right time to sell bucketloads of Carex over the last year or so. It also has suncare brands that have been hammered by the lack of holiday makers. I felt that the handwash sales would start to reduce, but the suncare sales unlikely to compensate given the ongoing travel restrictions. It's a business in the middle of a turnaround story and seems to be heading in the right direction. However I thought I would take my profits on this one as the price has been drifting for a while. Sold for a gain +37%

June purchase 1: JAGI

JP Morgan Asia Growth & Income (JAGI) was added this month. I have some exposure to Asia simply through owning shares in global companies such as Unilever, but wanted to increase this on the assumption that the region might grow a little faster than the US over coming years. 

JAGI seemed a reasonable compromise between taking a punt on high growth vs. old world businesses. It's been around since 1997, and tracks above it's benchmark - the Asia ex Japan index. It has a stake in the Chinese mega caps with which most are familiar - Alibaba, Tencent, Ping An, along with other Asian big guns TSMC and Samsung. But also has exposure to consumer discretionary and it's largest sector is financials.

It has around £475m in assets, so it's not a huge Trust but no tiddler either. It pays a dividend equivalent to 1% of NAV, with capital used if required. This should allow it to focus on a total return approach, rather than focusing specifically on dividends.

I managed to pick it up with a neutral premium/ discount. Costs are around 0.74%, which is lower than most other Asia focused Trusts (but obviously pricey compared to most ETFs). There are risks with investing in Asia, most notably the Chinese doing something bonkers. Since China makes up 38% of the Trust fingers are crossed that they don't. 

June purchase 2: ERM

I added Euromoney Institutional Investor (ERM) this month. ERM is a data and media company that offers services in three segments: asset management, pricing and data & market intelligence. The asset management and data & market intelligence segments combined generate the largest portion of the revenue, primarily from subscriptions to research and data published by the company. They generate most of their revenues in the US at 52%, the UK at 15% and the rest of the world at 33%.

Their strategy is to embed their products and services into the workflow of their customers, such that switching costs would become prohibitive. They already provide data and research that seems esoteric and difficult to replicate, so if they become critical to their customers they would have a considerable competitive advantage.

Their financials have been up and down over recent years, but they have no debt and ROCE and margins have been around the 10% and 20% mark most years. 

Since a portion of their revenues are from events management, COVID lockdowns and travel restrictions have hit them hard. Their loss in revenues last year was almost entirely from their events business. At the point of purchase there was still a 40% upside to the share price recovering to it's 2019 pre-pandemic high. In 2019/ 2020 over 56% of revenues were from US/ UK, where vaccination programmes are proving successful. Europe is also now picking up steam. Hopefully events revenues will return and there will be some appreciation back towards prior years pricing as at the moment the shares are trading for around the price they could have been purchased in 2016.

Trading updates from the portfolio (in order of appearance):

RWS Holdings (RWS)

Half year numbers from RWS were in line with expectations, and they also announced the CEO was off. Revenues were up +92%, but profits down -7% as the SDL acquisition gets digested. A net debt position of £34.5m March 2020 has turned into net cash of £11.8m which speaks to the piles of cash the company typically generates, and doubtless contributed to a 14% increase in the dividend. They maintained the narrative from earlier in the year that SDL cost savings would be £33m, more than double the anticipated £15m - I suspect this is a case of under promising, and over delivering - it's a great detail nonetheless.

Telecom Plus (TEP)

Telecom Plus final results were in line with expectations. Revenue was down -1.7% and PBT down 10% reflecting higher operating costs during the pandemic, but customer numbers up a little. Cash from ops was up, debt reduced, but the net debt increased as cash in the bank reduced more than the debt. The dividend was held to be the same as the previous year. Overall the business ended up treading water, which given the crazy year is a decent performance. TEP management are guiding to improved trading next year as lockdowns disappear.