May 2021 portfolio update

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.

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

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.

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.

March 2021 portfolio update

I'm sure things are more bonkers than they used to be. March saw bond yields leap like a salmon, a boat the size a planet get stuck in the Suez canal, and a hedge fund was caught with it's pants down. European countries decided they didn't trust the Astrazeneca vaccine, but the EU got grumpy at the prospect of it being exported from their territories...

March markets were choppy as slow progress with vaccinations in Europe gave pause for thought and fixed income did their best to upset the equities apple cart. Lots of the growth stocks that have been propelling the US markets started getting sold off, with investors moving into areas likely to benefit more from economies reopening. I have no idea how this is going to pan out, so I'm ignoring macro economics and focussing on investing in (hopefully) sound businesses with good prospects.

There were plenty of updates from businesses in the portfolio this month, on the whole pretty positive. The portfolio has managed to correct it's course from last month and head north thankfully. Even turning in a performance ahead of the benchmark, which I found a little surprising. Being stuffed full of economically sensitive businesses, UK indices have been rapidly ascending on the back of re-opening hopes and expectations. Most of my investments are more defensively positioned so when the market shoots up, they are likely to get left behind. I'd like to think that they are a quality bunch, so hopefully that helps. Another sale this month as I prune some of the dead wood - Next Energy Solar waving goodbye. Additions included a top up of Somero after a positive end of year report and adding Anglo Pacific - a mining royalties business who are repositioning themselves to capitalise on demand for electric vehicle battery metals. 

Portfolio performance
The portfolio was up +5.5% in March, ahead of my chosen benchmark (Vanguard FTSE All Share Accumulation) which was up +4.5% over the same period.

Best performers this month:
888 Holdings +33%

Dignity +29%

Nichols +20%

Worst performers this month:
Abcam -18%

Saga -10%

Keystone Positive Change -6%

March sale: NESF

I invested in two solar infrastructure investment trusts in 2019, Foresight solar and Next Energy solar. I gave a write up of my concerns with one of these, Next Energy Solar Fund, here. Both suffer from the same issues in my opinion. The reason for investing was to have some low volatility equities and a steady dividend stream. However, I believe the link to wholesale power pricing continues to drag down the share prices. Diversification into batteries will help Foresight, as the revenue from these is not dependent on those wholesale prices. Including private partnerships such as the one NESF has entered into with AB inBev might help too. I am unconvinced. I no longer believe them to be an attractive investment and is really a bet on the direction of the price of the commodity, which I believe is becoming available in increasing supply at ever lower prices. NESF sold at a loss of -13%.

March purchase 1: APF

Anglo Pacific Group provides financing to mining projects, in return it takes a proportion of revenues as royalties. It can also take a slice of the output of the mining as a return (streaming) as an alternative to royalties. It has 8 investments currently productive with another 7 in pre-production. It invests in projects located in sensible sounding places such as Canada and Australia. It is mostly an investment for income, with a sizeable 6% dividend on offer at the moment. 

It popped up on the radar when they bought a large chunk of a cobalt stream in Canada. They are repositioning the business away from fossil fuels and towards commodities required for batteries. The intention being that renewable energy and electric vehicles will drive the demand for such commodities. They still have investments in coal, their major investment is linked to a land purchase, output from which is anticipated to drop significantly in the next year or two as production moves outside the area purchased.

Commodities are clearly extremely cyclical but the attempted move into battery metals should mitigate that for a while. And if there is a post-pandemic economic surge which drives commodity demand, then they should have a tailwind. Revenues and profits have been heading upwards over recent years, and they have been generating plenty of cash - covering the dividend with free cash flow 2.9x last year.

The business isn't directly exposed to the operational risks of the mining companies in which they are invested but clearly they are completely dependent on commodity prices to make money. And should their investments have operational issues, then the royalties dry up too. 

...I have to admit to enjoying researching this one, as it was completely out of left-field...fingers crossed...

March purchase 2: SOM

I topped up Somero Enterprises following a decent end of year report. I've owned these since June 2019, when they announced poor trading following difficulties managing construction sites during a period of very heavy rainfall. Since then they have recovered nicely and put in a very creditable performance in what must have been tough conditions during 2020. They appear to be coming out of the year strongly and showing intent to invest in the business - as well as distributing lots of cash via dividends and buybacks. I expect in the next year or two that they should benefit from the continued growth of ecommerce, and the need for warehousing. They may also get a tailwind from Biden's spending plans. The continued impressive performance and potential for further growth over the next year or two encouraged me to buy a few more shares.

Updates from the portfolio (in order of appearance):

Craneware (CRW)

Interim results reported revenues up by 6% and PBT up 3%, cash is up from $45m to $50m, and the dividend was increased by 4%. Solid but unspectacular numbers on the face of it, but having to work with heath-care back office systems over the past year can't have been easy. On the operational front new orders were ahead of the prior year, and there was better visibility of future revenues. I'm happy to hold for the time being.

Nichols (NICL)

The preliminary results from Nichols outlined that soft drinks were not the place to be in 2020: revenues down 19%, operating PBT down 80%...when the out of home business was shut for large chunks of the year it's no great surprise. There were brighter spots though, they maintained their clean balance sheet with no borrowings and have increased cash to £47m (not bad given revenues of £118m). It's a solid business, family owned, and capital light, and I expect them to recover to a pre-pandemic state, but maybe not quickly.

Abcam (ABC)

Interims showed quite a lot to like but Abcam has a high price tag so any glitches lead to the share price getting punished. Reported revenues up 6.7%, with currencies adding a couple of percent, margins up, but profits and cashflow were down. Various improvements in quality led to increased product satisfaction rates. They provided a cautious outlook statement and it remains expensive, promising plenty of growth, hopefully it will deliver. One to tuck away.

Foresight Solar Fund (FSFL)

The main takeaways for me from the annual results from FSFL was it's NAV per share drop by 7.7%, the blame assigned to lower power prices. It also noted a reduction in the discount rate used to generate the NAV, which has the effect of increasing the NAV, or in this case, cushioning the fall. It invested in 4 subsidy free solar assets, and it's had diversification into batteries approved. Since the NAV is tied to power pricing over which the company has no control, and this appears to have a downward trend, it is likely to continue to drag down the share price. Unconvinced.

Tritax Big Box (BBOX)

A nice strong set of results posted by BBOX. Unsurprising since they provide the sort of warehousing that is in high demand as part of a business' distribution infrastructure - and rather key for ecommerce. All key numbers were going up, with the exception of the dividend somewhat strangely, since they took in more money and expect to get all rent payments for 2020. 37% of the rent roll is up for review in 2021 so income should increase as a result. The integration of db Symmetry, acquired in 2019 seems to have worked, and the Aberdeen Standard investment in the Tritax management company is intriguing, as they also have a logistics property Trust: ASLI...

Somero Enterprises (SOM)

Final results from Somero were a positive surprise, as they have been all year: revenue down 1%, costs up around 3% leading to net profits being off by 11% but cashflow up 62% . Lots to like - mainly just keeping the business running during the year, expanding two facilities, introducing new products, good management of working capital leading to large pile of cash. Going forwards, I like promises of investment in sales & support staff, and reviewing cash thresholds for investor returns in order to invest more in the business. Net result of their current cash pile is dividends and buybacks. Pleased with the results so bought some more.

Computacenter (CCC)

Computacenter upgraded earnings expectations a few times over the past year, and were an unsurprising beneficiary of lockdowns forcing life online. Their final results demonstrated this with lots of positive figures, revenues +8%, PBT +46%, cash from ops +19%, and a nice fat dividend. CCC always seem to issue conservative and cautious guidance, which I rather like. Despite the positives there were difficulties in Germany and the US and acquisitions remain to be fully integrated. If the big US tech stocks roll over, the CCC share price will likely take a hit, which could make for an opportunity to buy a few more shares.

Dignity (DTY)

Revenues up 4%, but PBT ended up at a loss of -£19.6m after a £44m gain last year, cash generated down a smidge. No CEO or Finance director - amusingly the web page for the board has two blank spaces, just to remind everyone that they are missing. No dividends likely any time soon. All this at a time that deaths are up 14%. About the only bright spot in the announcement was that debt had been reduce a little. No wonder their major shareholder wants to replace the chair. The bad news appeared to be priced in, and the prospects of fresh blood at the top had the share price moving north. Will hold as long as the current upward momentum continues.

888 Holdings (888)

The price of 888 has been skipping merrily uphill since lockdown. Mr Market anticipated that with everyone stuck indoors they might indulge in a bit of a flutter. He was right. Revenues up 52%, net cash position doubled, cash flow more than 2x, with all segments contributing well, adjusted EPS up 103%, basic EPS up...hang on...down by -73%? Apparently Bingo wasn't doing quite so well which led to an impairment of the goodwill & intangibles of $80m. Someone find whoever did the shopping and take away their credit cards. Apart from the write-down, lots to like here, including a bumper dividend. A presentation post-results indicated that continued US expansion is targeted which sounds promising too.

Hargreaves Lansdown (HL.)

Short but sweet trading up date from HL - trading volumes are up, resulting in PBT expected to come in "...modestly above the top end of analyst expectations.".

Blackbird (BIRD)

Lots of good stuff from Blackbird, nothing out of leftfield with most of the partnerships and operational progress well communicated in advance. Revenues up 45%, a nice chunk of future revenue contracted for the next 3 years, costs up a little but overall cast burn reduced. Gave the impression of solid progress.

Compass (CPG)

Pre-close trading update from Compass - must be one of the most traumatic years in the history of the company since half of the business was shut down for most of 2020. Horrific revenue numbers reflect that - expecting to be down getting on for -30%. Margins improved which indicates that they are managing the business. One to tuck away whilst vaccines are distributed and we await the reopening of the economy.

Impact Healthcare (IHR)

Final results from IHR were nice and steady, just what they should be from this sort of investment. NAV per share up 2.6%, rent roll and property valuation up over 30%, and a 2% proposed increase in the 2021 dividend. All rent was collected in 2020 and rent cover for the year end was 1.8x. Just have to hope for a market sell off so I can find an excuse to buy more.

Eleco (ELCO)

Final results were pretty solid - revenues flat, PBT up 12%, free cash flow up 36% and net cash increased to £6.2m from £1.1m a year ago, and a small dividend was reintroduced. Holding the revenue flat throughout 2020 seems impressive, the increase in profit is likely a one off result of cost cutting during the pandemic. A refreshed strategy was announced too (although it looks like a fairly generic brief to me). Of more interest was the 4% revenue increase in the first 2 months of the year.

AG Barr (BAG)

AG Barr final results showed the impact of social distancing, much like Nichols and Compass. Revenues down -11%, PBT down -30%, and net cash increasing 26%. Like the other two, it awaits the lifting of the social distancing measures across the UK, and it probably will take some time for the business to recover. That said they expect to restart dividends this year, so the board presumably have confidence in balance sheet going forward. 

Tweaks

I've continued my consideration of why I own certain investments. But I've also been thinking through my approach to investing. I've given some thought to each of my investments, making sure I'm clear on why I own each investment, putting them into rough categories of steady compounders, income and growth. Some additional thoughts:

I need to keep things simple. I have a job and a family, and limited time to research investments - despite finding it really enjoyable, I need to find a way to focus my attention on a smaller number of key investments. 

Once invested, I also have limited time to keep track of the portfolio. Some of them are well behaved and can be watched from a distance - others need careful attention.

I also need a lower limit on returns, below which an investment should be jettisoned from the portfolio.

I enjoy dividends, it has been pointed out that I have some runway before I need income from the portfolio, and that I'm probably inhibiting my total returns by focussing on them. Seeing those dividends come in gives me some comfort. They also help to dampen downward volatility as the cash ticks in. And of course they provide funds to redeploy. So whilst total return should be more of a factor than income, there are emotional and psychological reasons for me including decent dividend payers in the portfolio.

Ultimately absolute returns are what matter but performance against a benchmark is interesting. It can also provide a useful yardstick against which to measure risk vs. returns. If I can get the same returns from an index fund as I get for holding a handful of individual companies, then I'm getting a diversified investment, and lower risk for the same return. My benchmark is a comparison with the 600 companies listed on the UK All Shares index - the shorthand version of this is using the Vanguard FTSE UK All Share tracker. 

There's no reason for me to limit my horizon for investing to the UK, I can pick up cheap globally diversified ETFs from Vanguard or Blackrock. These would certainly simplify the portfolio - one fund to rule them all...But...should an investment have the potential to outperform the global tracker, then it should be in the portfolio.

So what would an investment need to do to outperform a global tracker?

A simple set of comparisons taken from Vanguard and Blackrock follows, I want to strip out noise of too many considerations. I've taken pre-pandemic data, which might seem arbitrary, but I'm going to assume that in a year or two, COVID-19 will be just another bug that we live with. And that as a result, life gets back to what we were used to before it turned up. Some things will be different - the change brought about by the virus and our response to it, but most of our lives will revert to something close to before the pandemic. So most businesses will also return to a similar pattern of pre-pandemic behaviours. I've looked at historical data, with the cut off point being January 2020.

2 global trackers show pretty much the same results:

Vanguard: VWRL

Blackrock: IWRD

Vanguard have data for VWRL since 2012, and up until Jan 2020 grew at an annualised rate of around 12%. When I add in dividends it is around 14% (if dividends had been reinvested straight away the magic of compounding would have pushed the numbers up a little more - but it was getting complicated enough...)

IWRD over the same period gave an almost identical result. I guess it should - although it does have higher fees...

IWRD has data back to 2010. If this is used as the starting point then for the 10 year period until 2020 it grew at around 8% growth, and with dividends, around 9% 

The reason for the lower returns is a period when the market went sideways between 2010 and 2012:

So how does this fit in to my investing. Well dividends remain important, there will be a group of investments focussed on income. There will also be a group of investments that are steady compounders. Both of these I intend to keep under minimal supervision, so they need to be well behaved.

If the compounders are going to hold their own against a global ETF, it looks like they need to be generating at least as much return. And this is where the lower bound fits in. I'm going to aim for something in the middle of the two timeframes I looked at above for the two global funds, a convenient 10% as a lower limit. In other words if an investment doesn't look like generating at least a 10% return over the period that it is in the portfolio - it will be asked politely to leave.

That leaves me with compounders and income, as needing minimal time, which means I can concentrate on keeping an eye on the investments that are likely to be more volatile - the smaller companies with more room to grow. But also potentially a larger fall if they upset the market.

I will also be putting some money into a global ETF to provide a completely hands off investment. And this should enable me to have 75% of my investments either passive, or requiring minimal time.

I'm not about to throw out everything in the portfolio. It will be a matter of gradual pruning, rather than lopping off chunks, there are a few businesses in the portfolio that have been clobbered by the pandemic and should be given more time to resurrect themselves. Others have great looking operating numbers, but I question their ability to grow.

New long term investments will need to be both high quality, as distinguished by considerable competitive advantages - so only the moatiest will end up as long terms holds.

Other purchases may become shorter lived holdings...

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.

Pause for thought

As we are coming out of such a crazy year I wanted to ask myself a few questions about my investments. My goals remain the same, and the strategy to achieve them is fine I think. I have a few holdings I’m not convinced about so I’ve it’s worth asking a few questions about each:

• Why are you invested in that business?
• If you weren’t already invested would you buy it today?
• Given that you are invested, would you buy more today?
• If it’s underperforming, why not sell it? You can always buy back when the business is back on track…

So I’ve been through each holding in my portfolio, the initial exploration being to examine each holding in some detail to be sure that I want it in the portfolio.

I’ve put each holding into one of 3 buckets: slow and steady, income, growth. And a 4^th bucket for those with a question over them. It is these that I am reviewing in detail first.

 

Slow and steady	Income	Growth	Naughty step
AG Barr Compass Diageo Hargreaves Lansdown Nichols PZ Cussons Qinetiq Reckitt Benckiser Relx RWS Holdings Sage Group Unilever	GlaxoSmithKline Henderson Far East Income Impact Healthcare Jersey Electricity National Grid Tate & Lyle Telecom Plus Tritax Big Box	888 Holdings AB Dynamics Abcam Craneware Eleco Keystone IT Somero Enterprises Computacenter	Dignity Foresight Solar Fulcrum Utilities Lancashire Holdings Next Energy Solar Saga

Most of those in the “Slow and steady” box are businesses that I expect to hold for a long time, that are generally well run businesses that I’m happy to own a slice of. I’m expecting these to be slow steady compounders, and whilst they all pay a dividend (or did until the pandemic) they are not there primarily for the income. Despite these being a pretty defensive bunch of holdings, some have been hammered by the pandemic. Beverages for example you would expect to be a fairly dependable business, except when all bars, pubs, restaurants get closed for long periods. Catering, equally – shouldn’t be exciting, but has been slammed this year. I’m happy to hold these for now to see how they come out of the pandemic.

The income stocks pay a decent dividend, I don’t expect a lot of capital growth here, but this should be compensated by steadily increasing dividends. I may move some of this bucket into investment trusts over time as these have proven to be a safer income bet, and came up trumps during a rather testing period this year. Glaxo is an interesting one as they recently announced that as part of the split of the consumer health and pharma businesses they would reduce the dividend…one to think about.

Growth stocks I expect to generate capital returns, with any dividends being a bonus. I would expect these to be smaller businesses with better potential runway for growth. They have done just that. With the exception of AB Dynamics they have each come out of 2020 with a creditable performance, a couple were in the right place at the right time, just like a few others in the portfolio were in the wrong place. ABDP are uniquely placed and have a nice wide moat. They still need to deliver however, so I’ll be casting an equally critical eye over them too.

When I look at the distribution of my investments I have invested 44% in the slow and steady group, 28% in income, and 17% in growth. The growth bunch have put in an overall 45% return, compared to 14% from income and 3% from the steady mob. I’m not sure what the correct distribution should be, but I might try to make these more equal over time.

 Under review elevator pitch summary:

Dignity

Messy turnaround, regulatory scrutiny and management changes.

Foresight Solar

I’ve become sceptical about future power pricing which will impact NAV and potentially dividends.

Fulcrum Utilities

Activist investor wanting to delist the business, behind the scenes political shenanigans, board changes who appear reluctant to buy their own shares.

Lancashire Holdings

Don’t understand the business well enough.

Next Energy Solar

I’ve become sceptical about future power pricing which will impact NAV and potentially dividends.

Saga

Unconvincing business model – however likely beneficiary from vaccine rollout so may hang around in the portfolio a while if the price momentum is upwards.

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.

Annual portfolio review 2020

So 2020 was bonkers. No need to rehash the madness, and with a new year to look forward to it’s time to appraise my investment decisions and performance for 2020

Investment goals:

• Don’t lose money
• Increase capital by more than the rate of inflation
• Build a conservative dividend paying portfolio

Through doing the above, I will hopefully also outperform the FTSE All Share Index. I have chosen the FTSE All Share as a benchmark as it most closely matches the pool of companies from which I’m investing. It is also the most likely vehicle into which I would invest if I decide to stop stock picking and passively invest in a tracker fund.

Portfolio performance

Based on unit value, during 2020 the portfolio  increased in by 0.3% (including all costs, and dividend payments). This compares to an decrease of -9.9% in my benchmark (also including costs – as an accumulation fund dividends are reinvested automatically).

Total return:

	FTSE All Share Tracker	Portfolio
2018	-9.6%	1.6%
2019	19%	23.6%
2020	-9.9%	0.3%

Compound annual growth rate:

	FTSE All Share Tracker	Portfolio
2018	-9.6%	1.6%
2019	3.7%	12.1%
2020	-1.1%	8%

The above shows the portfolio unit value, the internal rate of return (XIRR) comes out as 10.7%

The difference between the two metrics is that the unit value excludes cash flows in and out of the portfolio, whereas the XIRR incorporates these – the truth relating to performance is probably somewhere in between…

The portfolio beta - a measure of it's volatility relative to the benchmark was 0.67. Although I'm slightly dubious about the construction of the statistic, it indicates that the portfolio exhibited lower volatility that the benchmark.

Dividend yield

At the end of the year the dividend yields of both benchmark and portfolio were the following:

Benchmark = 3.03%

Portfolio = 2.5%

The historical dividend yield on the amount invested since 2018 is 4.8%.

 A look back at the 2020 shows how the benchmark outperformance worked out:

The index was slammed at the outset of the virus, and took time to start to recover. Over the last couple of months as the outlook has become more positive, the recovery in the wider market has picked up pace. The portfolio is behaving rather as designed, in that it will tend to lag the overall markets and be less volatile. The defensive nature of the portfolio should lead to shallower drops, at the expense of slower gains.

Portfolio analysis

2020 performance by holding:

The best performer in the portfolio was 888 Holdings, with a 77% increase, 4 other holdings increased by 20%+. Overall 21 out of 33 holdings finished the year in positive territory. Some of the portfolio were only purchased over the last few months, so I don’t expect any particularly exciting gain or loss.

I sold Network International in September, for a 40%+ loss, since when a paper by Shadowfall Research has raised a few questions over acquisitions and links to failed payments provider Wirecard. I’ve no idea what the outcome will be, I’m glad I’m no longer holding it.

Two of the best performers, 888 and Computacenter are beneficiaries of the enforced social distancing we’ve been subject to since COVID-19 made itself known. 888 provides various online gambling services, and there is aggressive M&A happening in the sector as the US relaxes it’s gambling regulations. Computacenter has been helping businesses cope with remote working, and for the second year running has been one of the top performers in the portfolio.

Saga and Compass were on the opposite side of the virus impact. My finger was hovering over the “sell” button for Saga at the start of the year, but as the virus hit, I dithered and the share price was hammered. It now has lost most of it’s value, and makes little difference whether it is in the portfolio or not. It has recovered somewhat since it’s lows, but even if it were to double from here, it would not move the needle on the portfolio. However, it stands a chance of a high % increase as the virus is brought under control in 2021.

Compass had a good chunk of it’s business shut down for most of the year, as many corporate clients had little need for catering with no-one working from their offices, and sports events were either closed or operating with minimal crowds. Under most circumstances I would suggest it is a very defensive business, but the virus blindsided this one. I suspect Compass will benefit in the longer term as smaller and weaker competition fade away, but may take a little longer to stabilise. I don’t imagine 2021 will see it get back to “normal”.

The contribution of each holding to the final position of the portfolio at year end is below:

Thankfully my approach of reducing the size of the investments of riskier holdings (looking at you NETW…) has helped contain the impact of the poor performers.

The performance of each holding since the start of the portfolio:

The contribution of each holding to the total portfolio returns is above, with a split of both capital and dividends. Over time the dividend contribution should increase even if capital moves around.

Poor performers and lessons learnt.

Poor performers were really those impacted by the pandemic – Saga & Compass. Network International looks to have a few issues, or at least some public relations work to do…Saga was on my sell list but the virus hit before I got around to it.

Those holdings most likely to be sold include Saga, Dignity, and the two Solar investment trusts. I think there may be longer term issues relating to power pricing that will impact renewable investments as noted here. Dignity is a wonderfully defensive company, what could be more reliable than people dying, particularly at the moment. But they appear to have been overtaken by other more agile businesses, and are trying to respond to this, and changing regulatory scrutiny. They may be able to turn around the business but it's looking messy.

I’ve been comfortable with most of the holdings this year, in what has been a rather odd 12 months. I couldn’t help staring with wonder at the markets melting down earlier in the year, and should have been more active to capitalise on it. I do tend to want to see trends play out rather than jump in, which means I miss some lower prices. I guess market timing isn’t my thing. However, I didn't feel any panic urge to sell, more a desire to try to understand what was going on.

Buying and selling

2020 saw the following purchases:

• January: Nichols
• February: Nothing
• March: Nothing
• April: PZ Cussons & Sage
• May: QinetiQ
• June: Henderson Far East Income & Eleco
• July: Henderson Far East Income
• August: RELX
• September: Glaxosmithkline
• October: RWS Holdings & Impact Healthcare REIT
• November: Tate & Lyle
• December: Keystone Investment Trust & Hargreaves Lansdown

Most of these were new additions, I bought more shares in existing holdings in Sage, GSK and Tate & Lyle during the year.

Only 1 stock was sold - Network International was sold in September.

Conclusion

I’m pleased with investments this year, although the return wasn't stellar, it just about crept into the positive. It was a mad year, one I'm sure most of us are glad to see the back of. 2021 should see some more interesting events in the markets as economies try to recover, and we start to get a grip on the virus. Trump's gone, a Brexit deal is signed, what's next?...