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.

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.

April 2021 portfolio update

April proved fairly unexciting by comparison to recent months. News flow over the month was steady with vaccine programmes in the US and UK apparently proving successful. Europe remains behind the curve but hopefully picking up steam, elsewhere the virus continues to cause havoc.

Restarting the global economy appears to be encountering one or two kinks, as supply chains work through various disruptions. Basic commodities, shipping containers and semi-conductors all have their problems to be ironed out and it feels like everyday we read about a potential shortage of something on the horizon. On the back of this there is a lot of talk of inflation coming back with a vengeance, and increased interest rates in it's slipstream. We've had over a decade of cheap borrowing, so raising the cost of debt is likely have a few tough outcomes.

Earnings reporting from US tech giants showed incredible results, though their shares gave a mixed response, despite this both US and UK markets chugged higher. Talking heads are concerned about a market sell off, unsurprising given the recovery in markets over the last year.

It's been a busy month outside of investing, with work being hectic and April also provided the chance to catch up with family in person rather than on a screen. Pretty busy in the portfolio too. Lots of positive news again this month, and the portfolio ended up with the second best monthly gain since I started tracking it. The FTSE managed to put in a decent turn as the recovery momentum continues, so outpacing it is pleasing. 

At some point the positive news about vaccines and reopening is going to be fully priced into the markets. Government support is going to disappear before long too, at which point the true economic impact of the pandemic is going to become apparent.

The portfolio pruning continued as Foresight Solar was removed this month, the proceeds from both the solar fund sales over the last couple of months have topped up existing holdings. Smith & Nephew was added to the portfolio this month - it's sales of medical devices and products are dependent on health services getting back to business as normal. There is plenty of evidence of a backlog of non-COVID related activity to be worked through in the UK at least, from which Smith & Nephew should benefit.

Portfolio performance
The portfolio was up +7.7% in April, ahead of my chosen benchmark (Vanguard FTSE All Share Accumulation) which was up +4.3% over the same period.

Best performers this month:
Craneware +30%

Blackbird +25%

Somero Enterprises +18%

Worst performers this month:
Impact Healthcare -1%

PZ Cussons -1%

Reckitt Benckiser -1%

April sale: FSFL

March saw one of my solar funds offloaded, April waved goodbye to the other. I've written before on the reasons for losing my appetite for these investments so won't rehash it here. The short version is that I think these are a bet on the direction of the price of wholesale electricity, a commodity which I believe is becoming available in increasing supply at ever lower prices. FSFL sold at a loss of -11%.

March purchase 1: SN.

Smith & Nephew make various medical devices and products. They are listed in the FTSE100 with a £12bn market cap. Many of their products are used in non-COVID related medical procedures. They've taken a whack from these not happening as healthcare systems were overwhelmed with treating COVID patients. I've looked at SN. in the past, but they never quite made it into the portfolio.

Their business is in 3 segments: Orthopaedics, Sports Medicine & ENT, Wound Management. As it is in healthcare it's products are highly regulated, providing a high bar to entry. I think it's main competitive advantages come from switching costs. Use of it’s implants and technology require familiarity and training – this is particularly the case with orthopaedics as the treatments are far more severe. Sports medicine surgery is less invasive, and there are limited costs to changing wound mgt product providers. However it is also the case that these same "moats" are likely to provide a barrier to SN. taking market share from it's competition too. Around 52% of it's revenues are from the US, and a further 32% from other developed regions, so the successful deployment of vaccines here should enable SN. to start to recover.

In 2020, revenues were down 11%, and free cash flow down 35% due to lower cash and increased capex. There are plenty of questions in the financials that would usually prevent these shares entering the portfolio, however they seemed to be an obvious COVID recovery stock whose share price had lagged other similar businesses. There is a long term tailwind here with aging populations and increased spending on healthcare, and pre-COVID, the shares had a steady upward trend that appealed. At the time of purchase the shares were trading around 30% lower than their pre-COVID peak, and about 20% off their post-COVID highs.

April purchase 2: APF

I topped up Anglo Pacific Group after my initial buy last month. The cash from selling the first of my solar investment trust getting redeployed here. APF presented their annual results, which were heavily impacted by COVID, as expected, mainly through impacts to coal demand and supply chains throughout the pandemic. Their move towards commodities likely to be in demand over the coming years is appealing. Coal remains 23% of their portfolio, but this has a scheduled decline baked into their current investments, these are based on land purchases from which the producer is moving regardless. 

If we see a global economic improvement over the next few years, APF should benefit through a general increased demand for commodities, and their pivot towards minerals used in battery technologies, at least in the medium term should also leave them well placed. I was convinced enough to recycle some cash into more shares.

April purchase 3: HFEL

Another top up. The cash from selling Foresight Solar was used to buy more shares in Henderson Far East Income Investment Trust. Their half year update was solid enough and it provides a decent dividend. It has a good track record of dividend increases, and didn't falter during the widespread pandemic dividend slashing that was seen elsewhere. The update also indicated that they had been able to add to revenue reserves which provides more security on the dividend. 

Updates from the portfolio (in order of appearance):

Saga (SAGA)

Have to admit to being a little disinterested in Saga's preliminary results. They were predictably disastrous, revenue down 58%, travel booking bearing the brunt of cruise ships being parked up for a year. Some bright lights from their insurance business which was up 3%. Cash burn was £6m-8m, and £75m in the bank to play with means they can probably keep going until vaccine programmes enable their boats onto the water again. Since the price jumped 11% on the day, I guess Mr Market was/is in an optimistic mood. I'm only still holding in the hope that the reopening enthusiasm drives the price up a little to recoup some of the loss from this one.

QinetiQ (QQ.)

Nice update from QinetiQ:  "...expect our results for the full year to 31 March 2021 to be above our previous guidance and above market consensus expectations." There were a few moving parts described in the updates, with various elements of the business over and under performing, still driven by COVID impacts. Net cash was over £150m compared to £112m reported in their interims in November and long-term guidance maintained. Thumbs up.

Anglo Pacific Group (APF)

Results for APF were presented for the period prior to their Canadian cobalt stream acquisition. Royalty income was down 39%. Despite COVID causing limited operational impacts at production sites, it closed ports, shut down demand in coal, which was against the backdrop of a record year in 2019. It was clearly the sort of message that the market was expecting as the share price responded positively to the results.

RELX (REL)

As expected from RELX, the 3 segments focussed on publishing, data and analytics are generating cash in line with expectations. The exhibitions business is pretty much shut down. The outlook statement is for more of the same - steady growth in the open segments, not much happening for exhibitions. Happy with that.

RWS Holdings (RWS)

An update on trading and integration between RWS and SDL. Revenue and profits in line with expectations, although given the high proportion of revenues in USD, there is some FX headwind. SDL progressing well apparently, and with additional cost savings/ synergies (whatever they are) identified that are roughly double what was anticipated. If correct that should drop straight into profits. Pleasing update since I bought after the merger announcement, as it looked like the combined group would have a dominant market position, so good to hear integration is progressing to plan.

Henderson Far East Income (HFEL)

Half year update from this income focussed Investment Trust. Total NAV up 7.4% to the end of February, with dividends increased by 1.8%, and additional funds added to the revenue reserves. Many of their holdings are in finance, industrials and materials so if we get a chunk of economic growth in Asia HFEL may benefit. The total return is lower that some of the Asia indices, but the reason for investing in this one was income first, with a bit of growth on the side. So the update is pretty much what I was after. 

PZ Cussons (PZC)

Trading update for the 3rd Quarter was reassuring, stating "...encouraging growth was broad-based, with all Regions delivering top and bottom-line growth".  This was a struggling business needing to be turned around - just happened to be in the right place at the right time, with marketing spend up 30% that momentum will hopefully continue. Overall revenues and profits up, and net debt down, and a steady outlook statement.

AB Dynamics (ABDP)

Half year numbers from AB Dyamics gave the impression of the business getting back on it's feet, and performance expectations unchanged. Most numbers were pretty flat compared to the previous 6 months, although cashflow had more than doubled. Customers and orders slowly returning. A steady sort of update, however, the shares are expensive and priced for fast growth rather than "steady". The sell off following the update was no surprise.

GlaxoSmithKline (GSK)

An in line update from GSK, stating revenues down -15% and operating profit down -8% (constant currency). Of more interest is the progress towards splitting the pharma (which I'm less keen on) and consumer businesses (which I'm more keen on), which is going to plan apparently. All of this is a bit of a sideshow now that Elliott have lumbered into the room...

Nichols (NICL)

I like Vimto, and it cropped up 5 times in the latest Nichols trading update. Year on year comparisons seem rather meaningless to a business that had much of its sales wiped out for most of 2020 - but they did it anyway: revenue down 5.9%. More interesting was Vimto apparently growing market share. Plenty of cash and a reopening of their out of home business should see Nichols through the pandemic in surprisingly good shape.

Reckitt Benckiser (RKT)

First quarter trading for Reckitt showed revenues up 4.1%. Under the bonnet of the revenue numbers this increase was driven by their Hygiene segment +28.5%, which sells cleaning products amongst other things - clearly a beneficiary of the current urge to disinfect everything. Their other two segments were both down, Health -13%, and Nutrition -7.4%. Outlook statement is for flattish revenue growth, and a hit to margins from increased investment. Key for me is growth of market share and the push into new territories. Clearly the purchase of Mead Johnson by the previous management team was not money well spent, hence the search for a buyer.

Telecom Plus (TEP)

An in line trading update from TEP, no number for revenue but PBT down from £61m to 56m. Lower energy prices and COVID related costs (no numbers provided) to blame. Customer growth reduced, which is attributed to lockdowns inhibiting their partners' ability to get out and recruit. Dividend safe, expected to be the same as last year, which I guess reflects a business treading water during 2020.

888 Holdings (888)

Lots of positive numbers in the first quarter, but this is almost expected from 888 now I think. Of more interest was a notably cautious outlook statement, that for the remainder of the year comparisons with 2020 would be tough as last year posted some big numbers, increased regulatory changes and the fact that people would have something to do other than stay indoors and gamble. This contrasted with a CEO "...excited about the US, where we plan to roll out sports into further states in the next few months, and launch our upgraded poker platform into further states in partnership with Caesars and their leading and hugely popular WSOP brand.". Combined I think the outlook + CEO = cautious optimism.

Unilever (ULVR)

Unilever's first quarter trading showed revenue down slightly but increased growth in sales, volumes and prices. Emerging markets led the way with China and India out in front. The tea business is still in limbo, and some beauty lines are getting carved out going forward. A share buyback programme to the tune of €3bn, is to start in May. I'm generally sceptical of scheduled buybacks as they usually seem rather indiscriminate, the board here clearly have a crystal ball when enables them to predict the shares being undervalued in May. All a bit silly. Good steady update nonetheless.

Lancashire Holdings (LRE)

A positive update from LRE - gross premiums increased by 46.1% . Storm Uri claims were between $35 million and $45 million. A bullish outlook from the CEO 'We have increased revenue across many of our core lines as well as achieving faster than expected momentum in some of our newer business lines". All sounds good. I don't really understand insurance well enough, so this will get the chop at some point, but happy to hold through the positive momentum.

Computacenter (CCC)

First quarter trading update from Computacenter - profit growth has the board "extremely pleased", and there has been "strong demand" for various services, particularly in the UK (I wonder if this correlates to the UK's successful vaccination programme? Europe to follow?). US business is ahead of expectations, but any profits get consumed by FX. Slightly strange outlook statement, the usual cautious optimism, but inline (I think).

Eleco (ELCO)

Very welcome update from ELCO. 1st quarter trading at ELCO indicated that revenues (and recurring revenues) were up 9% and PBT up 21%, and increased cash is sitting in the bank - net cash up from December's £6.2m to £7.9m. Nice operational update too including some big names using their software. Some of the larger shareholders seem to want a board shakeup with a General Meeting requested seeming to target the Chair and one of the non-execs. Hopefully it won't distract from the current positive momentum.

February 2021 portfolio update

February felt tough, cold weather, lockdown, home schooling... However, light at the end of the COVID-19 tunnel was shining a little more brightly as the UK vaccine programme continued to deliver. On the back of this Boris announced his re-opening plans.

The UK markets, being stuffed full of economically sensitive businesses - banks, construction, oil, mining - all enjoyed themselves for most of the month. Then the bond market started getting lively and equities threw a tantrum. Many US tech stocks got smacked down in the ensuing selling, which seemed to ripple over to these shores. A few of my tech companies had their shares sold off without any accompanying news, so I assume they were caught up in the rush for the exits.

This month the portfolio was beaten up for various reasons: a few updates weren't approved by Mr Market and investors moved out of some defensive bond proxies into equities benefiting from economies reopening and into actual bonds. I sold off one of my smaller holdings, Fulcrum Utilities, after some thought and reinvested that cash in an alternative, a small software company, Blackbird. I've also topped up an old timer, Unilever, whilst it's shares were being sold off.

Portfolio performance
The portfolio was  down -4.3% in February, behind my chosen benchmark (Vanguard FTSE All Share Accumulation) which was up +1.5% over the same period.

Best performers this month:
SAGA +53%

Compass +11%

Tate & Lyle +6%

Worst performers this month:
GlaxoSmithKline -12%

Unilever -12%

Hargreaves Lansdown -12%

February sale: FCRM

I bought a small slice of Fulcrum Utilities back in March 2019, it operates in an area likely to see plenty of growth, in that it installs smart meters and electric vehicle charging points as well as providing other pipes and wires related services. It paid a decent dividend and seemed to be a well run business that stood a good chance of growing. Maybe it still does. 

However, earlier in the year there was an attempt to take the business private. This attempt failed, and resulted in two new appointments to the board, one of which was from the firm trying to delist FCRM. In January the CEO left "with immediate effect", and the new CEO and chairman seem to be reluctant to buy into the firm - they each own less than £10k of shares. Since dividends have been stopped and a loss was reported at the interim results, I don't get a warm fuzzy feeling about holding these any longer. The business is in the sort of sector that should have a strong tailwind, but I'll look for opportunities elsewhere. I sold at a loss of -16%.

February purchase 1: BIRD

I recycled cash from the above sale into Blackbird (BIRD). Not an obvious choice perhaps, since they are just about the opposite of what I usually opt for. Small, £80m market cap, pre-profit business, jam tomorrow? Maybe, but they seem to have some unique technology for production of video content. Of course developing interesting tech, doesn't make it a good business, certainly not a good investment. But it does seem to have got the attention of a few sizeable customers and partners, including TATA, the huge Indian conglomerate. So I thought I would pick up a few shares and see where it leads.

BIRD listed on AIM in 2000, so have been around a while. They were previously known as "Forbidden Technologies" but rebranded in 2019. They have been focussing on News and Sports broadcasting as the speed of their technology suite enables the production and distribution of content really quickly. Many of their recent client wins over the past year or so reflect this, and includes the NHL, Sky News Arabia, Liverpool & Arsenal, and eSports wins with Riot Games, Venn (and a renewal with Gfinity). There are plenty more, the biggest fish landed being TATA. They also had a couple of industry awards thrown in for good measure during the year.

As with many businesses that facilitate remote working and digitisation, Blackbird seem to have been given a boost from social distancing enforced through the pandemic, video production teams have been forced to move away from having a room full of people to edit and produce their content, and this seems to have been beneficial to Blackbird. Interims published in September showed a 49% increase in revenues, and whilst they don't yet make a profit, their cost base is improving, so it is hopefully not far away. Cash in the bank in June was £7.1m, and cash burn £846k, down 31% on the previous year. From their 2019 cash flows, they used £1.9m last year, so they have around 3.8 years of financing if they repeat last years figures - but the initial numbers look more promising with revenues up and costs down...

February purchase 2: ULVR

I topped up Unilever in February. I've owned shares in them for a while now, they have some great brands that sit on the shelf in the supermarket, and in my home: Ben & Jerry's, Dove, Persil to name a few. They are one of the big beasts of the FTSE, the sort of financially strong, dependable companies in which I'm quite happy to invest.

They've had net margins and return on capital both averaging in double digits over the past 10 years, and have been slowly churning their portfolio into higher margin products. During the COVID-19 chaos of last year their business remained pretty robust, with dividends maintained throughout, and even increased following their latest set of results.

The markets were unimpressed with their recent numbers, leading to a drop in the share price. Margins were reported a little lower, but volumes were up - I always like to see a company increasing the amount of product being sold rather then just hiking prices. Cash flow increased over last year, and came in ahead of net profit, net debt was reduced from €23.1bn to €20.9bn...all good stuff in my view. Mr Market didn't like it though, possibly due to concerns over pricing power - price growth was pretty flat, and in their home care ranges it went backwards...are they losing out to cheap home labels? Across geographies, the US was up, Europe was down. So a mixed bag to which the markets gave a thumbs down. So I added a few more shares while the price was lower.

January 2021 portfolio review

Markets remained pretty frisky during January, with a Santa rally initially in full swing. This was particularly evident in the UK as a Brexit deal was struck on Christmas eve. The FTSE 100 motored 6% higher in the first week of the month, but it then lost momentum and proceeded to slide back down for the rest of the month. Even the US markets stuttered, despite great results being posted by some of the tech giants.

So Trump finally left the building, at least he did it in a dignified and low key way, handing the baton of the presidency to Biden with a generous and humble speech 😁.

Vaccine deployment is apparently going rather well in the UK. Something that I find quite surprising, but it's happening. I can't quite wrap my head around the sheer volume of people that we are processing. The EU seem to be tripping over their own feet in a manner that I would have expected us to, which led to a rather unseemly spat over access to the vaccine. Despite this there does appear to be some genuine light at the end of the tunnel.

The month also saw plenty of talking heads voicing opinions over wallstreetbets and their Gamestop short squeeze fun. It has a very similar feel to the run up in crypto a couple of years ago, although much smaller in scale. It's entertaining but I'm sure in a few weeks it will be consigned to the history books. However, a tip of the hat is necessary to those who managed to orchestrate it.

This month the portfolio just nosed ahead of the benchmark as markets started selling off. Lots of reassuring updates from the businesses in the portfolio this month. I've added more consumer staples and a REIT top up in January.

Portfolio performance
The portfolio was up 0.8% in January, ahead of my chosen benchmark (Vanguard FTSE All Share Accumulation) which was down -0.4% over the same period.

Best performers this month:
Somero Enterprises +22

Elecosoft +18%

Hargreaves Lansdown +12%

Worst performers this month:
Dignity -10%

Telecom Plus -9%

Qinetiq -6%

January share purchase 1: DGE

January saw a bit of booze poured into the portfolio with the addition of Diageo. Even if the name  of the business isn't familiar, it's brands probably are, and include Johnnie Walker, Tanqueray, and of course Guinness. The business found it's current form in 1997, when Grand Metropolitan and Guinness merged, but the many of the brands it sells have been around quite a while longer. It's largest contributing category is it's Scotch Whisky portfolio which chipped in 23% of 2020 revenues.

As might be expected at the moment, the pandemic is having an impact on Diageo, bars, pubs, restaurants are no go areas as social distancing measures are insisted upon. Despite this, the interim results posted in January showed some resilience. Organic net sales were up 1%, volumes essentially flat, and somehow US sales (it's biggest market) were up over 12%. Free cash flow and debt both increased, as did the dividend. Arguably they should have been paying down debt rather than raising the dividend since their debt crept outside the preferred debt/EBITDA range stated by the business. Whilst operating numbers dipped this year, their margins and return on capital have been good, and consistently over 20% and 10% respectively for the last 10 years.

Their brands are their key competitive advantage, many are known and loved. The churn in their portfolio is a result of a strategy of "premiumisation", which this year involved acquiring a couple of bolt on premium gin brands. Coupled with their brands is scale - both economies of scale and their exposure through the booze aisle in supermarkets, and regulation - the age requirements for purchasing alcohol limiting the ability of new entrants to find a foothold in the market. I'm also not sure how you can compete with a product that needs to be aged for multiple years, as is the case with many of Diageo's brands, the cost of storage and maturing that inventory would make a tricky barrier to entry.

The risks of investing in a booze purveyor seem obvious - the most stark are regulation and taxation. If governments are looking at increasing debt burdens, will they look to apply more taxes to non-essentials such as Diageo sell? Maybe more regulation and cost is on the way. Or a post-COVID public decide they want to get healthy and extend their dry January. Or COVID simply doesn't go away in the timeframes we hope for, leading to prolonged social distancing and further restrictions on bars and restaurants. I suspect we'll all need a tipple to get us through this, and possible be raising a glass or two when it's in the rear view mirror.

January share purchase 2: IHR

I also topped up Impact Healthcare REIT in January. This was added to the portfolio in October, IHR provide real estate that is leased to care home providers. A couple of nice RNS releases were issued during January, which were appreciated.

The first indicating that 100% of rent had been collected for 2020, which for anyone holding property investments in their portfolio, is a pretty positive outcome for the year. Although IHR is far removed from the struggles of commercial property right now, it's still good to know that they are getting paid. In the same RNS they announced that their acquisition pipeline was back in motion, and that they had purchased 6 new properties. This increased the rent roll, and further diversified their tenant base.

The second RNS had more good stuff, including confirmation that most (93%) of their properties were receiving vaccines,  NAV had increased (albeit unaudited), dividends are increasing. All of which is pleasing to the ear.

November 2020 portfolio update

To the moon...ahem...markets predictably shot up in November as, not one, but three vaccines came charging over the horizon. Although the Astrazeneca version had a few doubts over it's data. And Pfizer's needs to be kept at super-duper (#science) cold temperatures. Still there was a palpable relief that there is some light at the end of the tunnel.

Lockdown2 is proving as tedious as expected. God knows what the rules are...however, Blighty appears to be fairing better than the US. The Trump experiment to ignore the virus until it goes away seems to have backfired somewhat as the numbers of infections and deaths coming out of the US are awful. I expect the xmas relaxation in the UK will be followed by lockdown3 in a couple of months...

Speaking of the orange buffoon, he lost. Hurrah. They can now wheel in Biden and try to fix some of the damage done by Trumpy. The predictions of market chaos were exaggerated as usual, the markets didn't seem to care as virus news, and the potential vaccines to protect us from it grabbed the headlines.

And Brexit, apparently it's still going on...

The portfolio had a good month, as the stocks most beaten up over this year had a sharp bounce the markets jumped. I've avoided many of these, whilst I missed out on some of the big falls earlier in the year, I also missed out on some of this month's recovery. Higher valuations and fast moving markets held me back a little this month, so the only change was a top up to an old timer.

Portfolio performance
The portfolio was up 4.5% in November, behind my chosen benchmark (Vanguard FTSE All Share Accumulation) which was up 12.2% over the same period.

Best performers this month:
SAGA +78%

Craneware +40%

Dignity +39%

Worst performers this month:
AB Dynamics -14%

National Grid -8%

Reckitt Benckiser -5%

November share purchase: TATE

Tate & Lyle (TATE) are probably best known for their sugar and syrup that you'll see when you stroll through the baking aisle at the supermarket. Which is ironic since they no longer have a sugar refining business. Their genesis was indeed the merger of two sugar refiners owned by a Mr Tate and a Mr Lyle, but the sugar business was sold along with the rights to use the brand over 10 years ago. Today they are an ingredients business - for food, drinks and for a range of industrial products.

They've been in the portfolio for a while, never shooting the lights out, but have been a steady dividend payer. I was impressed that during the height of the pandemic they were able and willing to continue to issue guidance and maintained their dividend, and according to their half year report have managed to reduce their nebt debt since March. Recent announcements include the purchase of a majority stake in a starch business based in Thailand, and buying the remaining stake of a sweetner business it had a small part of, which had facilities in China. Clearly the intention is to try to increase their footprint in Asia, which sounds rather sensible.

It isn't a business that I think has a particular competitive advantage since it essentially offers commoditised, bulk products that could be purchased elsewhere, although established relationships with food and beverage producers would be difficult to disrupt. And shifting to alternative ingredients is something a large food/ drink producer is unlikely to do at a whim. They are however a pretty defensive business, and unlikely to see much change in demand from economic cycles, and they seem to be well run. So I'm happy to pick up a few more of their shares.

October 2020 portfolio update

A wobbly set of markets in October. Not quite collapsing, but looking like they were considering it. Most markets drifted from green to red over the course of the month. In addition to the virus, in the UK Brexit headlines had Sterling whizzing around which tends to impact the overseas earners on the FTSE. 

Virus news continued to deteriorate across Europe and the US, with the predictions for a tough winter playing out. As health systems started to get stretched more restrictive social distancing measures were deployed. I get the impression many people are now suffering some fatigue from this, and can't wait to get out, even the morning commute is starting to look appealing to me.

The two elderly US gents vying to run their country managed to continue to squabble over social media, and just about managed a civilised second debate. The Trump team have publicly announced that they have given up trying to control the virus. Perhaps of no surprise is that the blue and red teams couldn’t agree on any more economic support for the country until the election is out of the way. Can a country of 330m people really not do better than these two? Ah well it will be over soon…maybe.

The portfolio stumbled this month, along with the wider markets. October brings to an end a nice run of monthly increases over the last 7 months, which equalled it's previous best run.

Portfolio performance
The portfolio was down -3.3% in October, ahead of my chosen benchmark (Vanguard FTSE All Share Accumulation) which was down -3.8% over the same period.

Best performers this month:
Dignity +23%

Abcam +20%

SAGA +10%

Worst performers this month:
Qinetiq -15%

Sage Group -12%

RELX -12%

October share purchase 1: RWS

RWS provide a range of highly technical translation services. Their business is divided into 4 segments:

• IP Services: patent translations/ filing/ research
• Life Sciences: language solutions for clinical trials and other aspects of technical support
• Moravia: localisation of products and content for international businesses
• Language Solutions: translation and interpretation services

They were listed in 2003, and have continually grown and developed their business both organically and through acquisitions. Earlier in the year RWS announced a merger with fellow translation firm SDL which specialises in AI based translation services. It follows acquisitions of various technology based firms over previous years, and now puts RWS as the market leader in the field. Following Terry Smith’s advice I decided to invest in RWS not because they might be the next big winner, but because they have already won.

RWS started life as translation firm Randall Woolcott Services. The Chairman, Andrew Brode bought the company along with 3i in 1995 and currently owns over 30% of the shares. He seems to have been doing something right as over the past 10 years, net margins and return on capital have both averaged in the mid-teens. Dividends have increased each year, at a compound rate of over 10%, and is currently covered more than 2.5x cash flow.

Their competitive advantage comes through providing highly technical and niche expertise, which increases client dependence on RWS. The acquisition of SDL cements their market leading position and increases scope for dominant pricing power. I prefer defensive companies, and suspect that RWS falls into this categorisation. Although clients will likely reduce discretionary spend during economic downturns, the critical and highly technical nature of RWS services should make for dependable income irrespective of macro-economic issues.

I see the main risks to RWS being the development of AI to provide such sophisticated translation and localisation services that the likes of RWS become superfluous. This is why RWS have been making their recent acquisitions, to ensure that they are part of the development of this AI. Over time we shall see how things pan out.

October share purchase 2: IHR

The second purchase this month was a small investment in Impact Healthcare REIT, this business owns real estate that is leased to care home providers. The trust has over 100 properties that are used by 11 different care home operators, with the rental income being split 3 ways - 60% from local authorities, 30% from private firms and 10% from the NHS.

Despite the COVID-19 disruptions the trust has collected all of it's rental income for the year to date, and has continued to pay dividends. Loan to value stands at 18%, and the weighted average lease is getting on for 20 years. The trust has been quietly improving on it's portfolio over the year, which is a trait I'm looking for at the moment - businesses that continue to operate relatively normally, not crippled by the pandemic.

The share price is down around 10% since the start of the year and I might well add to this holding if it stays that way. The risks of doing so would include changes to government policy over care home funding, and the care home providers needing to protect their occupants from the virus until we have better medical treatments available.

September 2020 portfolio update

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

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.

August 2020 portfolio update

August proved to be a fairly uneventful month in the markets, UK markets going sideways and most others chugging North. US tech continues to eat the world and now a small handful of these companies are worth more than all European listed companies. I wonder what will happen when the tech giants' share prices fall over?

At least the drip feed of hopeful news on COVID-19 treatments continues, as does the search for a vaccine. Hopefully the mask will be to COVID-19 what the condom was to HIV, my ventures into public spaces recently have been filled with a mask wearing public. I even saw a TV advert for the fashion conscious mask wearer the other day.

I've been having a ponder about the portfolio, and there are a couple of changes I think I'd like to make over the next few months. Following some more research, and release of info from a couple of holdings, I'm less keen on keeping hold of them, so potentially a couple of sales required. On the buying front, I'm curious to see what will sell off during the next drop - will the shares already hurt go much lower, or will it be those that have held up well that are in the firing line? 

Portfolio performance
The portfolio was up +1.2% in August, behind my chosen benchmark (Vanguard FTSE All Share Accumulation) which was up +2.4% over the same period.

Best performers this month:
Dignity +65%

Compass +16%

Elco +13%

Worst performers this month:
Somero Enterprises -12%

Saga -10%

Network International -7%

August share purchase: REL

RELX (REL) was added to the portfolio in August. I'm rather pleased about this as it's a company I've been following for a while, but the price never seemed to fall too far when the market wobbled. So I thought I should take the opportunity when the price dropped earlier in the month.

RELX has it's roots in publishing, in particular, scientific, technical and medical material, and legal textbooks. It was formed from a merger of two publishers, one British: Reed International, and one Dutch: Elsevier. It has been listed on the London Stock Exchange in some form since 1948, and over the past few decades has grown to a market cap of around £33bn.

RELX now make relatively little from paper publishing, only around 9% of revenue is from print. Today the company, in their own words: "...is a global provider of information-based analytics and decision tools for professional and business customers". They have 4 segments in the business: Scientific/Technical/Medical, Risk/Business Analytics, Legal, Exhibitions. The first 3 segments provide data and analytics technologies to a range of industries, from life sciences, fraud detection, and case law. The 4th segment - Exhibitions - is a bit of an awkward fit with the rest of the business, and the reason that I think the price tumbled. More on this below.

The interim results announced at the end of July told of the 3 data and analytics segments of the business holding up well under the pressures of COVID-19, and even growing. However the Exhibitions have been whacked by the virus - getting large groups of people together to try to sell each other stuff isn't a great idea at present. This part of the business generated around 16% of revenues last year, which was roughly the discount on the price from the start of the year at which I managed to pick up the shares. Face to face business clearly isn't going to happen for a while, so this part of the business is likely to continue to struggle, but so long as the other segments hold up RELX shouldn't be in an too much bother.

According to their annual report RELX are in the top 1 or 2 position in the various markets in which they operate. Their "moat" has been built over many years, RELX has developed sophisticated databases and decision-making tools that many industries and professions now heavily rely on to carry out their daily activities. The majority of their revenues are subscriptions, which is preferable in my view - they tend to be sticky and give visibility of future earnings. Their Return on Capital has averaged over 15% and net margins over 17% over the past 10 years, which combined with relatively light capital requirements have led to healthy cash flows. These have covered the dividend more than 2x over the past few years. 

It's not all silver linings of course, on the cloud front, they have more debt than I would like. Should the data that RELX provides become more accessible in the public domain, or author/reader payment models change, this could give them a headache.

July 2020 portfolio update

I find watching the virus headlines come and go a bit dizzying after a while. But hearing Google pronounce that they don't expect to get people back into the office for another 12 months got my attention. 12 months...?

Over the last month US stocks have been pushed up by the trillion dollar tech companies, elsewhere they have been down. Europe saw spread of the virus start to pick up after it's lock-down, and the US saw it's cases explode. Probably a useful experiment as to the effects of not implementing adequate social distancing. This, plus an increasingly creaky relationship with China, and an election in a few months has seen the Dollar weaken. Trumpy went particularly strange at the end of the month deciding that the November election (the one that hasn't happened yet) won't be legit thanks to voter fraud...

There has been a bit of movement in share prices as businesses have delivered trading updates, which has resulted in some of those on my shopping list getting back to more inviting prices. A few companies have demonstrated a great deal of resilience. Good companies temporarily having a bad time could be a great investment, providing those tough times reverse before any long term damage is caused. Those companies showing resilience - these are the businesses I really want to own, but their prices are high... For this month, nothing too exciting I've topped up the Asian investment trust I bought into in June.

Portfolio performance
The portfolio was up +1.3% in July, ahead of my chosen benchmark (Vanguard FTSE All Share Accumulation) which was down -3.6% over the same period.

Best performers this month:
Dignity +31%

Computacenter +21%

Somero Enterprises +10%

Worst performers this month:
Fulcrum Utilities -12%

National Grid -9%

Glaxosmithkline -7%

July share purchase: HFEL

A top up of Henderson Far East Income Investment Trust (HFEL) was the only activity for the portfolio this month. I bought into this last month - there a few details on HFEL in my June update.

The Trust increased it's quarterly dividend by around 1.5%. In "normal" times this wouldn't get much attention but given the current environment it did cause one of my eyebrows to raise. The argument from the Trust is that most Asian economies went into the COVID-19 crisis healthy, and has managed it's response relatively well, so they expect them to come out in better shape than most other areas. And the specific companies in which they are invested have decent cash flow so should see relatively limited damage to dividend payments. There are around 9 months of reserves that the Trust can use to cover any shortfall and smooth out the dividend payments. I would have preferred them to err further towards caution and not increase the dividend, instead building up the reserves, which could then contribute to more aggressive increases on the other side of COVID-19 if they weren't needed.

However, the confidence of the Trust's Board and managers that they could at least continue the current dividend payments were enough to encourage a top up. I do wonder if this is a little bit of marketing, trying to pinch a few customers of other income based Trusts that may have a tougher time with dividends, time will tell.

June 2020 portfolio update

Lock-down restrictions easing off were a bit of a relief, particularly with temperatures increasing. I'm sure once the pubs re-open we'll all be piling in to share our pathogens over a pint. It only took a couple of days of sunny weather to see south coast beaches overwhelmed with people - my fingers are crossed that we don't cause such a spike in infections that schools close in the Autumn.

Markets seemed a bit fragile in June, perhaps with the huge recovery surge in stocks since the March lows investors are looking over their shoulders a little. But there are a few other reasons of course. Trumpy's polling numbers are headed south, giving Biden a lead which will have a few people on Wall Street wondering if their wallets will look a little less plump. Finger pointing from the US and Europe over potential naughtiness involving Boeing and Airbus led to a list of new tariffs being considered on various obviously airline related products such as gin and olives (?). And Whitehouse insiders couldn't quite make up their minds if the US/ China trade deal was still intact. Oh did I forget the massive increase in COVID-19 cases in the US...

This month cash was split into two investments, part went into an Investment Trust and part into an interesting software company. I've been looking into a few Investment Trusts that add to the diversification of the portfolio, particularly into businesses listed outside of the UK. This month I bought a few shares in a Trust focused on Asian/ Australasian dividends, the thinking being that most countries in which this Trust is invested seem to be doing a better job of managing their COVID-19 outbreaks, so should get their economies up and running more quickly.

As for the rest of the investment cash - it's often suggested to buy what you know, which is what I decided on with the addition of Elecosoft. I saw a name that looked familiar in an online discussion, and after a quick bit of digging found that they own a software business I used to work for. A positive trading update and decent set of accounts helped convince me to buy a few shares.

Portfolio performance
The portfolio was up 0.6% in June, slightly behind my chosen benchmark the Vanguard FTSE All Share Accumulation which was up 1.6% over the same period.

Best performers this month:
Lancashire Holdings +19%

Fulcrum Utilities +17%

888 Holdings +14%

Worst performers this month:
Saga -26%
Abcam -11%
Craneware -9%

June share purchase 1: HFEL

A few shares of the Henderson Far East Income Investment Trust (HFEL) made their way into the portfolio this month. It is run by Janus Henderson, and as the name suggests it's aim is to provide a growing source of dividends. I bought in at roughly the NAV, although given the volatility in the markets at the moment I think that NAVs should be taken with a decent pinch of salt. It gets 3 stars from Morningstar, which I take as pretty positive given that it's aim is income focused rather than capital growth.

The holdings are spread across Asia and Australasia, with over 30% in China. It has a range of sectors, with the largest being Financials and Telecomms, with Oil and Gas thankfully making up just over 1%, it's most notable holding is the semi-conductor giant Taiwan Semiconductor Manufacturing. It has around 2% gearing, and has reserves from which to payout around 9 months of dividends should it need to. The Trust's dividends have grown at around 3% - 4% over the last few years, and with the Spring sell off the yield is around 6% - 7%.

The Asia Pacific companies from which the Trust likes to invest have tended to hold more cash than their European and US counterparts and have been increasing dividend payments over recent years. A relatively low payout ratio should mean that dividend growth can continue, although that remains to be seen given COVID-19 continues to circulate without us having adequate medical responses.

June share purchase 2: ELCO
Elecosoft (ELCO) was also added to the portfolio in June. They are a software business focused on architecture, construction, and property management. It is a relatively small business, with a Market Cap just under £60m. They listed on the AIM in 2006 and have been making solid progress over the past few years.

Around 40% of revenues are generated in the UK, with most of the remainder being made in Europe and further afield. Recent acquisitions bolt onto a portfolio of architectural and construction systems, provide multiple cross-selling opportunities and should provide a useful comprehensive end to end service offering.

Elecosoft have a potentially sticky customer base as evidenced through their impressive cash conversion. Their recent trading update covering business until the end of April showed a reduction in revenues that was outweighed by increases in profit and crucially in renewed subscriptions for support and software. Recurring revenues such as these are a great way to ensure ongoing income.

The accounts look sound with a net cash position as of April. Revenues, profits and free cash have all been chugging higher over recent years. The dividend is relatively small but has been increased at an annualised rate of over 20%, and they have plentiful free cash covering the dividend.

I'm sticking with my approach of taking smaller positions in businesses I think might be higher risk - in this case, due to the small size of the business, I consider this potentially more volatile. There's a chance this could get hit by any COVID-19 downturns, although the balance sheet looks healthy, there's no need to take unnecessary chances, so only a small number of shares bought at this stage.

May 2020 portfolio update

The COVID-19 saga moves onto the next chapter. Some welcome moves towards normality with businesses gradually opening. Lock-down fatigue certainly seems to be setting in at Chez Sleepy, I can't see everyone accepting a similar level of restriction if we get further waves of infections.

In other news it's nice to see The Donald getting back to normal and stoking the China trade war embers once again. I expect this will be a central plank (and useful diversion tactic) of the orange buffoon's re-election strategy, so more volatility awaits.

A couple of reassuring updates were announced from companies in the portfolio this month, giving me comfort that whilst we're not out of the corona woods, the businesses in which I'm invested seem to be managing their way through the mess that lock-down has created. The most impacted of my core holdings is Compass, the global catering firm, who have been taking the appropriate steps to shore up the business and this month issued shares to raise funds to avoid taking on more debt. I was tempted, as the offer was open to retail investors, and at a fair discount but ultimately I think it could take them a while to recover the business back to previous levels so decided to pass. We are yet to see what impact the virus has on the daily operations of businesses, including Compass, what has been on display so far is the aftershock of an economy being put into hibernation. All will become clear over the coming weeks and months, particularly in the next round of corporate reporting.

I'm continuing my cautious approach of waiting for business updates to get some understanding of the state of their operations and finances before any investments. Historical data has to be taken with a decent amount of salt at the moment. A positive set of preliminary results from defence firm Qinetiq saw it jump from the watchlist to the portfolio this month.

Portfolio performance
The portfolio was up 3.8% in May, slightly behind my chosen benchmark the Vanguard FTSE All Share Accumulation which was up 3.9% over the same period.

Best performers this month:
Saga +28%

Abcam +16%
Tritax Big Box +15%

Worst performers this month:
Compass -11%
AB Dynamics -6%
PZ Cussons -6%

May share purchase: QQ.
Defence firm Qiniteq was added to the portfolio in May. They were spun out of a UK Government defence research agency in 2001, and listed on the stock exchange in 2006. There are a supplier of defence services including various technologies, R&D, testing and assurance capabilities, mainly to the UK Govt where they have a long term arrangement with the Ministry of Defence. 

Their other main customers include the US and Australian Governments (the "home countries"), which along with the UK provide their main sources of revenues. Increasing exposure to other international clients and diversifying their customer base is part of the current strategy and appears to be bearing fruit. But this is at the expense of taking on shorter term deliverables, which provides less visibility over earnings than the longer term contracts with the "home countries".

Qinetiq have a sticky customer base, the sensitive nature of the products and services being transacted coupled with the amount of red tape to become a trusted supplier offers a moat of sorts. A recent update indicated that COVID-19 had not disrupted the company unduly. Revenues and profits were up, and the order backlog is growing nicely.

Revenues have been picking up in recent years following a change in strategy a few years ago. Return on capital and net margins have both been in double digits since 2015, and the balance sheet is healthy with a nice net cash position. Dividends are on hold at present whilst COVID-19 is doing the rounds, but there is a progressive policy and it has been covered by free cash flow.

With the above sticky customer base comes a risk of course - with a small number of customers providing revenues, should any of these decide to move to an alternative supplier it could be painful for Qinetiq. Another risk is that should we enter a horrible recession that leads to government defence budgets being reduced, it's likely Qinetiq will also feel the squeeze.

April 2020 portfolio update

The novelty of lock-down is starting to wear thin. Child1 turning the garden decking into a rainbow is growing on me though.

Adjusting to working from home, and being dragged into a crisis management team at work made for a busy and rather taxing time over the last few weeks. C'est la vie, everything seems to be calming down a little now.

I've had to review my stock market shopping list, given that there were plenty of businesses pulling down the shutters thanks to COVID-19. Even though stock markets were falling I didn't just want to pile in without some consideration as to the impact on each business, and how I felt about investing in them given what is happening.

It has proved difficult to know how to go about judging stock valuations, historical metrics are all very well, but of limited use in the current environment. If a business has no revenue for a while, in a worse case it may not even survive, I think most will, but in what condition? As I point out here, I've decided to only invest in companies that are currently making money. And that I think will be in reasonable shape this time next year. This has had the effect of shuffling a few names on the shopping list. I expect this will all change again as we adapt to our new world.

Some dividends pulled by companies in the portfolio:
AB Dynamics - plenty of cash but prudence required as car makers have taken a beating
Network International - postponed until better clarity on trading
Compass - half the business is shut so needs to preserve cash
Computacenter - permits changes to cash flow from relaxing customer payment terms

The first two are businesses on a sharp growth path so losing the small dividends proposed is of no concern. Compass may take some time to rebuild cash to a point that it can justify a dividend, they effectively have a global duopoly with Sodexo, so I'm confident they'll be a good long term investment. Computacenter's decision is particularly sensible, as helping customers stay solvent is far more useful that getting an invoice paid on time, and the update was quite positive.

Purchases this month included a top up of Sage Group, and adding a small slice of PZ Cussons.

Portfolio performance
The portfolio was up 6.6% in March, ahead of my chosen benchmark the Vanguard FTSE All Share Accumulation which was up 4.4% over the same period.

Best performers this month:
Fulcrum Utilities +64%
AB Dynamics +58%
888 Holdings +16%

Worst performers this month:
Dignity -12%
SAGA -4%
Lancashire Holdings -1%

April share purchase: SGE
A top up of Sage Group was my first April purchase. You'll find Sage in the "Software and Computer Services" sector of the FTSE, but that's where the excitement stops, they provide a range of software to help businesses manage their accounts, people and payments.

They have been moving their business to a subscription model, and were behind the curve in doing so, but seem to be rapidly getting customers across to the new model - at least before the COVID-19 shenanigans. This means that their revenues become increasingly sticky; the cost and disruption of  moving key payment and back office business systems to a different vendor gives Sage a bit of a moat, and the sort of defensive investment that I prefer.

Their revenues and profits have been increasing at around 6%-7%, dividends increasing at a rate just above that. ROCE and margins have both been comfortably into double digits for most of the last 10 years. I'm not convinced historical data is terribly useful at present, but at least they are taking money.

Management are expecting a hit to revenues, and for the second half of the year to look ugly. Businesses can be expected to hold off on contract renewals, and if there are companies succumbing to the lock-down induced economic issues, then there will be some customer churn.

April share purchase: PZC
Second purchase for the month was PZ Cussons, a consumer goods company with brands many will be familiar with - I have some in the bathroom, Carex handwash and Original Source shower gel (love a minty shower 😎). This purchase is a little contrarian as Cussons have been in the doldrums for a while. The share price has reflected the drift in the company's strategy, which has ultimately needed a volte face, and a new CEO. The previous incumbent is also suspected of being naughty - so has had some pension payments cancelled, and the new CEO has spent time at big consumer goods companies, so should know his onions.

An acquisitive strategy has been abandoned in favour of one that focuses on a smaller number of key brands. In addition the business has historically generated a decent chunk of revenue from Nigeria but continued instability in the country has led to this drying up. The demographics in Nigeria are promising, the economics, not so much.

PZ Cussons has all the hallmarks of a plodder, a company with limited growth potential - just handing excess cash back to investors (not a bad thing in my view). But it does have a number of positives, not least of which is that it's business is open, and the tills are ringing. A trading update in April stated that two of it's brands had contrasting fortunes from COVID-19, St. Tropez (fake tan product) has seen sales fall away as people presumably won't be prepping the skin ahead of summer hols, but Carex (handwash) is selling like hot cakes. Announcing that earnings were expected to come in at the lower end of guidance left the markets unperturbed. Simply having earnings and not having to explain how the company is planning to survive the next few months makes for a refreshing read.

March 2020 portfolio update

Only one thing in the news - COVID-19.

It's not the only problem affecting the markets of course. Oil prices have been smashed by demand dropping off a cliff since nobody is going anywhere, and the Saudi's opening their taps. And until they have achieved whatever they have in mind, any business dependent upon oil is going to suffer.

The collapse in price of a key global commodity, such as oil, and the suspension of the vast majority of consumer spending in a number of economies on the planet is certainly making everyone sit up and take notice. With this happening against the backdrop of expensive markets, it's unsurprising we have seen significant reductions in share prices.

It's going to be interesting to see how far revenues, profits and cashflow have fallen once we start getting earnings reports issued, and whether any businesses are actually priced as bargains. I have a list of companies I'd like to buy into, but I'd like to see a bit of economic data first. Even though some of them are historically very good companies, there is a genuine whiff of existential angst in the air. I'm quite comfortable missing the bottom chunk of the recovery if need be, and I'm equally not fussed about getting in too early. Most quality businesses should recover over the next year or two.

As an investor keen on dividends, it is disappointing to hear of dividend cuts but these are unusual times. The investor community has insisted on spare cash being returned to us via dividends or share buy backs, so we should be not be surprised that an acute cash flow crunch leaves firms a little exposed. Three of my portfolio have so far reported cuts to their dividends, I'm relatively sanguine as this should help reduce the probability of needing to borrow to survive the next few months.:

Somero Enterprises - postponed dividend to 2021 (it's ok guys, you can cut it - we understand 😎)
Nichols - cut dividend as revenues are likely to materially impacted by COVID-19
Fulcrum Utilities - dividend had been postponed whilst asset sale completed, now formally cancelled

Nothing bought or sold during March, waiting for things to stabilise a tad, so keeping the powder dry just a little longer.

Portfolio performance
The portfolio was down -8.9% in March, losing less than my chosen benchmark the Vanguard FTSE All Share Accumulation which was down -15% over the same period.

Best performers this month:
888 Holdings +9%
Reckitt Benckiser +7%
Craneware +1%

Worst performers this month:
Dignity -52%
SAGA -47%
AB Dynamics -33%

February 2020 portfolio update

COVID-19. Cheeky little feller, causing a bit of a nuisance.

The markets are thrashing around trying to work out how to price it in, and have gone from exuberance to despair in a few days. A somewhat predictable reaction, with apparently indiscriminate selling. I imagine we will see selling continue for at least a couple more weeks, with some small relief rallies in between, until the headlines get more positive, or stocks all go to zero. Fingers crossed for a vaccine being developed quickly (preferably by Glaxo 😎).

Anyway nothing bought or sold during Feb, and as there's a whiff of panic in the air I'll keep my cash in my wallet and hope to pick up some bargains once the selling eases up.

Portfolio performance
The portfolio was down -8.3% in February, losing less than my chosen benchmark the Vanguard FTSE All Share Accumulation which was down -8.9% over the same period.

Best performers this month:
Dignity +1%
Craneware -0.3%
Next Energy Solar -1%

Worst performers this month:
AB Dynamics -23%
SAGA -23%
Abcam -17%