July 2021 portfolio update

Home life is starting to return to normal but work remains hectic. Still feels like I'm not left with sufficient brain power at the end of the day to have much left to think about investing. The big news over the last few weeks seems to be China deciding to self-harm it's own stock markets. I wonder if this will be contained to the Chinese or if it will prove to be the catalyst to a wider significant correction.

I've recycled the cash from selling PZ Cussons into Homeserve, on the basis that people might be more inclined to spend on services related to their property if we have a greater bias towards working from home post COVID. In addition I've added to Telecom Plus, it's results seemed steady but the shares have sold off, and they provide a decent dividend.

Over July half the portfolio holdings were up, the other half down, leaving it pretty much flat on the month, much like the wider UK market. Most of the portfolio reported updates during the month, making for a lot of reading. Those businesses damaged by COVID lockdowns wobbled with concern over Delta, and inflation started to find it's way into reports of increased costs for a few holdings. 

Reckitts was the worst performer after it revealed the cost of it's exit from the child nutrition business in China. It is also lapping a strong set of results from last year. However it has a decent set of brands and there were positive signs in the results too. Excluding the China IFCN numbers, revenues were up 3.6% and ecommerce has grown. Telecom Plus shares suffered for no obvious reason, perhaps on concerns that Delta is going to prevent it's members from finding new TEP customers, and JAGI sold off, presumably over concerns with China.

Top performers included Blackbird, which continues to expand it's customer base and listed in the US. AG Barr continued to recover, without any news, so presumably on increased optimism of a return to pre-pandemic socialising. RELX put in a good performance too, with solid growth expected from it's 3 analytics and publishing segments. It's 4th segment - exhibitions -  didn't get a mention so I guess it's still pretty much shut down.

Aside from the above, GSK and Tate & Lyle gave more detail on the breakup of their respective businesses. I think both sound like positive moves and am tempted to add a little to both if prices fall.

Portfolio performance
The portfolio was up +0.3% in July, behind my chosen benchmark (Vanguard FTSE All Share Accumulation) which was up +0.5% over the same period.

Best performers this month:
Blackbird +13%

AG Barr +10%

RELX +10%

Worst performers this month:
Reckitt Benckiser -13%

Telecom Plus -10%

JP Morgan Asia Growth & Income  -10%

Dividends as at 31st July 2021:

Vanguard FTSE All Share Tracker yield: 2.62%
Portfolio 2020 yield: 2.5%
Portfolio July 2021 trailing 12 month yield: 2.7%
Portfolio total yield from January 2018: 5.3%

July purchase 1: HSV

I recycled the cash from the sale of last month's sale of PZ Cussons shares into Homeserve (HSV) this month. Homeserve is comprised of 3 segments: Membership, HVAC and Home Experts. Membership offers customers a home repair service. HVAC installs and services heating and air conditioning systems. Home Experts provides a marketplace for trades such as Checkatrade.

Their customer base in the UK has been slipping but their growth market is the US. It has been growing in the US, overtaking the UK in terms of cash generation, but it is also seen as having more potential for growth as fewer households have existing coverage of the sort provided by Homeserve. HSV has been hoovering up small bolt-on acquisitions in the US in what appears to be a pretty successful buy and build strategy.

Revenues and cash flow has continued to increase over the years. Margins and ROCE has slipped a little over the past couple of years, but this does include a year of COVID impacted business. Their results included a nasty £85m write off of legacy IT, which contributed to a consistent price slide since summer of 2020. I bought in around 30% off those highs, so am hoping for at least a partial return towards those levels. Increased time spent at home in various lockdowns, and a vigorous slug of house buying should keep people keen to spend on their homes. We've seen plenty of evidence of this in Housing and DIY businesses posting results over the past few months...time will tell.

July purchase 2: TEP

Telecom Plus shares sold off after a reasonable set of results. Management were of the view that results were "in line with expectations" - clearly the market and management had different expectations. However, after a year of COVID impacted trading, revenue was down 1.7% and PBT down 9.6%. Debt was down a little, but cash was reduced by more, resulting in an increase in net debt, but it's still a relatively small amount of borrowing. The dividend was held, and their capital light model provides a decent payout which I'm happy to take, at least in the short term, so bought a few more.