Wednesday, 16 July 2014

2014 Interim Portfolio Review

Six months has now passed. Now is time for the first health check for my young portfolio.

Composition of Portfolio

How does it stand now? After 6 months my portfolio of 10 equities are composed this way (I have included the percentage value by purchase value in brackets):

  • Banking/Financial--32.54% (32.29%)
  • Consumer--18.11% (15.63%)
  • Healthcare/Pharmaceuticals--13.24% (12.47%)
  • Energy/Utilities--10.54% (8.41%)
  • Oil--8.95% (7.77%)
  • Technology--8.93% (15.55%)
  • Supermarkets--7.67% (7.88%)

How do I expect it to change? I do expect to reduce the exposure I currently have to the banking/financial sector. Currently, though, it seems some of the best bargains are in that area. Nonetheless, the obvious volatility and cyclical nature of the industry pushes me to try and reduce this.

As a result, through my future purchases I am hoping to broaden and diversify my portfolio a bit. In some cases this may be through topping up current holdings or introducing new stocks to my portfolio. We will see.

I also expect for my position with technology firms to reduce. Currently this is entirely composed of my growth stocks. In general, this is an industry I am likely to look to keep a healthy distance from.

Overall Capital Gains/Losses

What has happened? Overall, my portfolio's value dropped by 7.26% in total over this period. To put this in context, over the same period (i.e. between 1 January and 2 July) the FTSE 100 had gained 1% and the FTSE All Share gained 1.18%.

Consequently, my portfolio underperformed the FTSE 100 by 8.26% and the FTSE All Share by 8.44%.

Not great, maybe. But bearing in mind the flat nature of the market over this period and the fact that I was largely investing in companies currently out of favour by the markets (especially banks) I am currently content with this. For example, nearly all of the companies I have invested in are currently running on low P/E multiples. As it stands, they are still trading on those low multiples.

What am I looking to happen? Of course, I am looking for the capital gains to emerge and bring my portfolio more in line and hopefully above the broader markets. Will it happen before the year's end? I am unsure, of course. But I do hope so.

Naturally, though if my portfolio continues to underperform going forward into the medium to long term I would be more disappointed and worried and possibly bring about a rethink.

Individual Performances

So how did my holdings perform individually?

Let's see (I have included the value including dividends in brackets).

This shows that of the 10 stocks in my portfolio 6 were currently showing paper losses. It is noteworthy, though, that two of those "losers" (HSBC and GSK) were purchased very, very recently.

Poor performing growth stocks

What has happened? By far the worst performers were my two growth experiments--Seeing Machines and Blinkx. This I anticipated if not quite to such an extreme.

Indeed, if you take the growth stocks out of consideration you find that, in fact, my portfolio's performance is flat at a 0.003% gain. Still behind the FTSE 100 and FTSE All Share, but barely noticeably so. Including dividends I made a modest 0.98% gain.

What am I looking to do? In the future I plan to avoid investing in exclusively growth shares as it does not suit my investing character. Value investing and growth and income stocks appear more my cup of tea.

Does that mean selling Blinkx and Seeing Machines at a loss? No, I don't think so. Not currently. Certainly in the case of Seeing Machines I still think that it is a company with great growth potential. Regarding Blinkx, however, if it continues to perform as currently I may consider dropping it at a loss. Though this is some time ahead.


On the dividend front, it has had little impact on my portfolio so far. Why? Chiefly because most of the main dividend income I am set to receive will occur in the second half of the year. I thus expect that this--along with more recent "dividend focused" purchases--should see that aspect of the portfolio improving in the short term.


What has happened? Heading to the volatility of my portfolio I find that my portfolio's overall Beta value currently stands at 0.92. This means that for every 1% change in the market you would expect my portfolio to change about 0.92%.

What am I planning to do? Overall I am pretty content with this. With such a long-term investing horizon short-term volatility does not overwhelmingly worry me. That being said, I do hope to bring down that figure over the long term. As a result, when assessing potential stock additions I do factor in volatility. It is, however, low on my priorities.

Overall Thoughts

Overall, I am not overwhelmingly worried about the current health of my portfolio. It is still very young indeed with even the oldest holding being present for less than 5 and a half months.

As a result it will increasingly evolve as time passes and, hopefully, with an upturn in the economy and sentiment towards the shares in my portfolio it should see a positive return emerging. I am reminded of what Neil Woodford said of his recently started CF Woodford fund:

I’ve been using a pilot analogy to explain the process of building the portfolio.... We have taken off and we have already gained a lot of height, but we are not yet at cruising altitude. The portfolio will continue to evolve.

Hopefully once cruising altitude is attained my more mature portfolio will start to bear fruit.

[Image from Flickr user Scubastevio]

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