Happy Friday! Happy end of dry January! Happy Brexit day!
Every year I promise myself I will end the year with 4-5% of the portfolio in cash so that I can react to news flow (e.g. January trading updates) and any new year trends that are emerging. And every year I ignore this self-promise and convince myself that it is better to be fully invested. Naturally, 2019/20 is no different and I have started the year by making several tweaks to the portfolio. The downside of writing an investment journal is that I now have to try and explain to myself and the world the rationale behind these changes.
So here goes, in chronological order.
Exited Rockrose Energy (RRE) – having taken a position just a few weeks earlier, I decided that RRE was an incredibly crowded trade (too good to be true?) and I had no informational advantage and therefore, I should never taken a position in the first place. Note to self – avoid the O&G sector completely in future.
Top Sliced Anglo Asian Mining (AAZ) – This was a planned reduction, taking the weighting (at the time) from 22% to 20% (it is now around 18% given the subsequent share price fall – more on that later).
Top Sliced Games Workshop (GAW) – This was part of my ongoing strategy to top slice high flying, high momentum holdings to lock-in profits along the way – in this case, I sold some either side of the results. GAW has been a fantastic holding, delivering excellent results and a very encouraging outlook. If the price falls to any significant degree, I will happily increase my holding again. If the price continues rising, it remains my second largest holding and I will still be a happy bunny.
New Holding in Central Asia Metals (CAML) – This was a re-buy of an old holding. At a company level, CAML has low production costs, a proven management team, excellent free cashflow and pays a near 8% dividend. I had anticipated that with the phase 1 trade deal between the US and China signed, the copper price might recover this year. It still might of course but the coronavirus has cast a shadow over that scenario for the time being, so I have this week exited CAML, possibly to revisit again at a later date.
New ETFs (IITU and EMQQ) – As part of my long-term strategy, I am experimenting with several funds and ETFs. I have this week exited both of these in favour of adding a straightforward S&P 500 tracker (CSP1). I might revisit both of them again but probably not until the full extent of the coronavirus is known and/or the US market has a major sell-off.
Exited City of London Investment Group (CLIG) – Given the uncertainty presented by coronavirus, CLIG’s exposure to emerging markets and the pending sale of shares by the founder and former CEO (he notified an intention to sell a certain number of shares at 425p and another tranche at 475p but neither have materialised yet), I decided to step away for the time being. I also had in mind another asset manager that I wanted to buy but had resisted doing so because I limit myself to a maximum of two asset managers at a time in the portfolio.
New Holding in M&G (MNG) – this is effectively an IPO going straight into the FTSE 100. It is a divestment of Prudential’s UK asset management, savings platform and pension business and is forecast to yield 7.5% this year. Stockopedia’s quality scores are appalling at just 4 but I think it is a much better business than that. I will reassess as news flows and results are posted.
New holding JP Morgan Global Growth & Income (JPGI) – This is also part of my long-term strategy to experiment with funds and ETFs. In the case of JPGI it diversifies my income (3.5% paid quarterly) while also providing exposure to some growth opportunities.
Other Top Slices and Top Ups – There have been lots of these. Partly, I have continued to top slice high flyers such as Bioventix (BVXP), Impax (IPX) and Spectra Systems (SPSY) and partly, I am rebalancing our accounts in readiness for pension drawdown and therefore, adding to the income holdings. From the outside looking in, it is best to ignore these trades because many of them only make sense to my own specific circumstances and goals. The process won’t change but the frequency of such rebalancing exercises will reduce in future.
Net-Net, my portfolio has pretty much been at a standstill for the month of January. If I were to take out the drag of AAZ falling c10% since the start of the year, then the rest of the portfolio has held up pretty well – delivering a c2% gain despite all of my tinkering. In terms of news flow, there have been few alarms and plenty of in-line updates (CAML, IPX, AAZ, CLIG, PSN, IGG, KETL, PAY) with the two standouts being Games Workshop (GAW) and Belvoir (BLV).
My main portfolio focus for this quarter (or maybe next quarter, depending on news flow and price action) is to normalise the weighting of AAZ. There is plenty of news to come in February/March – debt free status (when I first bought AAZ in 2016 it had $50m of debt, including a $3m loan from the CEO, so debt free status is an incredible milestone), 2020 production guidance, exploration and resources update. Perhaps the overriding factor is whether anything comes from the discussions with the Azeri government. Regardless, we know that 2019 results when published in May will be good and the dividend likely to be raised again, so it is a comfortable hold for me until something significant happens. As to why it has not responded to the rising gold price recently – I don’t have a Scooby!
As things stand, the portfolio is around 4% in cash and I am in no rush to deploy it. I don’t think the markets have fully priced in the effects of the coronavirus yet. It will affect Chinese GDP and it will slow down global trade for a while. It doesn’t feel like a cliff edge moment but the US market in particular could do with losing some heat. So, I might buy some more US exposure after a sell-off (if one happens) and I am also keen to add to a couple of my existing holdings if they sell-off to any degree. This aside, I have my eye on a couple of ETFs and a couple of REITs.
And finally, I shall be watching my beloved Cherries at home to Aston Villa this weekend. They have been tough to watch this past couple of months – we have simply been dreadful and deserving of our lowly place in the league table. Our last game against Brighton had signs of improvement but Villa are probably a notch above that. I am looking forward to watching Jack Grealish in action and to welcoming back Tyrone Mings as an England international.
Whatever your plans this weekend, I wish you a wonderful time.
Disclosure – At the time of writing, I own shares in AAZ, GAW, CSP1, MNG, JPGI, BVXP, IPX, SPSY, PSN, IGG, KETL, PAY and BLV which were mentioned in this article. For the avoidance of doubt, I no longer own shares in RRE, CAML, CLIG, IITU and EMQQ which were also mentioned in this article.