It has been remiss of me not to resume the weekly Share Watch articles during September but in truth, it has been difficult to find the motivation to do so. Not that things have been going badly for me, quite the reverse in fact with a portfolio gain of 9.49% during the third quarter bringing year-to-date returns up to 38% which is comfortably ahead of all benchmarks. Most of the gains this quarter can be attributed to my largest holding, Anglo Asian Mining (AAZ), with some decent supporting acts, mainly low volatility, a steady flow of dividends and once again, no major disasters – long may that continue.
You’d think that with my portfolio strategy playing out so well, I would be wanting to write about how great my investments are doing at every opportunity. After all, eight portfolio holdings have delivered decent results/news during September (for the record, BLV, DUKE, CLIG, IGG, SPSY, KETL, AAZ, GAW) and yet, my focus has been elsewhere.
Judging by my Twitter timeline, a lot of investors are avoiding investing altogether at the moment, no doubt waiting for the current Brexit impasse to play out, one way or another. The general market news flow has been downbeat with (anecdotally) an increasing number of profit warnings and reduced guidance – often citing Brexit and/or geo-political uncertainty. Lest we forget, while the UK obsesses about Brexit, the rest of the world is paying much more attention to US-China trade/currency wars, Iran sanctions and heightened middle east tensions, central bank easing, possible presidential impeachment and possibly a liquidity crisis in the US repo market.
Whether by luck or judgement, gold has reacted favourably and AAZ shares have followed suit over the quarter, even if one has to live with a certain amount of volatility along the way. I have no idea what will happen to the price of gold – it seems to be holding its own at around $1500, for now. However, as I wrote about here previously, some form of corporate activity seems to be on the horizon for AAZ and while my plan remains to normalise this position size (currently around 30% portfolio weighting), I have decided to wait for clarity on that front before acting. Hopefully, whatever “it” is, it will provide a valuation/liquidity opportunity.
And this brings me to what I have been doing throughout September – research. I am anticipating at least 20% of my portfolio by value will need to be re-invested during the fourth quarter. While some of that will be used to top-up existing holdings, I also want to continue diversifying income streams and possibly, add a couple of new quality/growth holdings. As we look forward to 2020, that will give me plenty of new writing material along with a new mechanical portfolio that I have also been working on. Stay tuned!
In the meantime, I trust readers will understand the continued radio silence while I wait for events at AAZ to unfold.
There have been a few portfolio movements during the quarter, mainly tinkering around the edges…
I exited CAML and LGEN on concerns about continued geo-political uncertainty in the case of the former and in the case of the latter, the effect of an increasing defined benefit liability in a falling interest rate environment. In both cases my concerns are probably overdone, especially CAML which I might yet return to. I also reduced my weighting in DUKE and CLIG during the quarter in order to re-allocate funds to some higher conviction holdings.
Two new holdings entered the portfolio; SEDY and IGG both in the Value/Income segment. Additionally, I added to several existing holdings; AAZ, BLV, SPT and SPSY, all of which are now top ten holdings by weight.
I shall not attempt to forecast what might happen to stock markets, politics or currencies in Q4 other than to say, it will be eventful. The world seems to have gone mad at the moment and in these uncertain times, there is danger for investors but perhaps also, opportunities to pick up some great companies at decent prices.
Disclosure – At the time of writing, I own shares in all of the companies mentioned in this article except CAML and LGEN. A full list of portfolio holdings/weightings can be viewed here.