I have been writing my quarterly investment reviews since January 2011. Then the new MiFID II regulations came along at the beginning of 2019. I couldn’t be sure that my reviews wouldn’t fall foul of the new European regulations, so I had to stop producing them. The quarterly valuations sent direct from the platform provider became a statutory requirement. The situation wasn’t helped when the GDPR regulations came along. For a while I was even unsure as to whether I could still contact my own clients. Were my blogs marketing? Did I require permission to continue to email you?
Back by popular demand
It seems my quarterly valuations have been missed by my clients. So having picked through the copious regulations, it seems that I can still email my own clients and I can add to the statutory MiFID II quarterly valuations without fear of breaching regulations. So a little belatedly, here is my latest quarterly valuation.
back to the start of the year
The year started on a low point with the markets fearing that Donald Trump’s global trade war combined with a Federal Reserve Bank intent on raising interest rates, was going to kill the US economy and send the US into a recession. That matters to us a great deal as our UK Stockmarket is basically in lockstep with the US Stockmarket. That fear caused many global markets to crash ahead of the year end. Currently the US looks likely to avoid recession, as do we in the UK (touch wood). The slow down has effected much of the world already, notably in China and Germany.
As is often the case, a steep fall can lead to a swift recovery which was gratefully received early this year. However there has still not been a full recovery 10 months after the lowest point, with the most recent highest point now dating back to 18 months ago. Year to date the FTSE 100 has climbed by 10.3%, but to long term investors it simply feels like we are only receiving back, the amount that was taken away late last year.
investment decisions taken this year so far
This year we have taken both decisions on the amount of cash that we felt prudent to hold in our portfolios and also the individual shares that we wanted to buy, sell or continue to hold. Our Moderate Portfolio became temporarily cash heavy in July 2018, which helped greatly when the markets corrected in the last half of the year. But the shares we held still fell along with the rest of the market. We then bought additional shares with that spare cash across all of the portfolios in March and caught a very dramatic rise. We then swiftly realised some of our profits to build back a more sustainable long term cash position in our portfolios.
When we focus on the year to date, it can be seen that the 100 largest shares have faired slightly better than our Moderate Portfolio (the green line), but only when the dividends have been added back in (the brown line). It has once again been a difficult year to read. However the FTSE 100 index (the yellow line) holds nothing but shares, our Moderate Portfolio held a significant proportion of cash ranging from just 5% to 25%. Our Moderate Portfolio is also shown after fees and platform costs have been settled.
When we pull out to 3 years the benefit of diversification away from just holding the UK’s 100 shares alone becomes much more obvious.
Interestingly on average over the last 3 years our Moderate Portfolio held almost 28% cash. This is a good measure of how prudent we have been throughout this turbulent period. This prudence has paid off, beating the FTSE 100 over the period and broadly keeping pace with it over the last 12 months whilst taking 28% less risk.
individual share buys and sells.
We have sold more shares than we have bought recently. I do feel that is about to change shortly with a higher level of optimism starting to creep into the markets. Here’s a brief look at the shares sold so far this year.
those i’m happy we sold
Breedon, Scapa, Dignity, St. James Place, Total Produce, Smart Metering and Just Eat. These shares sold earlier this year would all be worth less today.
Those where the jury is still out
London Stock Exchange, United Utilities and very recently we also sold Dart. We are likely to re-buy London Stock Exchange and Dart once their price settles back down. It makes sense to take a profit when you can. I was very reluctant to sell United Utilities, but there is no smoke without fire. With the pledge from John MacDonald of taking control of the water companies and the train franchise operators, I didn’t want to be left holding the baby. Today he is taking a pop at BT. We sold Vodafone earlier in the year and it’s price will struggle if UK Broadband becomes free to all. I can’t see that happening.
Irrespective of your personal political ideology, as an individual with savings, a Marxist government in waiting is bad news for future investment growth. If it looks like there is any chance that there could be a working Labour majority in parliament stand by for the UK Stockmarket to crash along with Sterling.
those i wish we had kept
Hotel Chocolate and Shaftsbury. Both because of problems on the UK high street, both shares are still defying gravity. CVS the vets group has seen an astonishing turnaround since it looked like they were destined to fold due to cashflow problems.
Charlie would like to thank all of the clients who sponsored her. She completed the half marathon in style. She never walked an inch of it! In total £1000 was raised for a small charity very close to our hearts. https://353.org.uk
Please help us to comply with financial regulations. We are currently encouraging all clients to ensure they can login to their accounts on the Nucleus & Investcentre platforms. It has become a regulatory requirement that we ensure clients have access to a quarterly valuation of their savings. If you are reading this blog you probably need no encouragement to also see how your savings are performing on-line. However if you have registered previously but not visited the platforms for some time, please do so now. If you require any help please contact us.