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Fire and fury like the world has never seen

The USA military will use fire and fury like the world has never seen. Words from President Trump of the United States in response to threats from North Korea to strike a US military base on Guam using medium to long ranges missiles. A tense situation. Let’s hope that if they are going to war they have agreed not to go nuclear.

Anyone doubting war may want to take a look at this video. Added here for a couple of reasons. One because the speaker, George Friedman, tackles the subject from an interesting angle. He says “ global war is sitting in your pocket”. Mr Friedman spoke at Brain Bar Budapest, a forum for challengers and trend setters. Well, if Mr Friedman is setting trends then what he says may just be a self fulfilling prophecy, but an important one.  Here is a link.

Fire and fury

Time for balance

As editor of Let’s Compare Bets.com I have showcased a number of posts about investing and trading.  Suggestions for investments have been given to readers with the caveat of do your own research (DYOR). Two things recently converged to spur a new post to review the performance off a hypothetical investment portfolio.  A portfolio where all the possible investment ideas have been followed and invested.  In the post title My Sip Conundrum…. (link below) we suggested a retirement investment portfolio, which should be re-balanced at regular intervals.

Two tings have converged to make me want to balance my hypothetical portfolio.  In the interests of full disclosure the auther has investments in some of the companies mentioned.

Number one.  War drums are getting loader in the USA. Geopolitical risks are on the up.

Number two.  The current phase of the business cycle for the USA and UK which normally precedes recession or a contraction in economic activity is getting long in the tooth.  Odds of recession or a contraction in economic activity are getting shorter.

Next we’ll check how each investment has performed from the date of the original article.  Links to the original article have been provided. The percentage change in value, with a suggestion to either buy, sell, hold, accumulate or reduce have been are given.  ‘Buy’ means now is a good time to buy more. ‘Sell’ means sell the whole investment (a sell suggestion would be based on the valuation and technical analysis of the share price chart), accumulate means buy more at regular intervals giving the benefit of cost averaging into the investment, reduce mean sell a portion of the investment in order to balance the portfolio to within your target range, and hold means do nothing.

Balancing a portfolio is not a science.  From the original article about running a self invested personal pension it was suggested dividing the portfolio into categories.  Each category has a target asset allocation percentage compared to the total value of the fund.  When the percentage goes over target it’s time balance. Readers should balance in accordance with their own style.  Normally holdings that get sold would be rotated into categories that are underweight.

For simplicity my portfolio would be split one third in equities focused on growth, a third focused on income, and a third focused on commodities.

Now is a good time to hold cash. Readers may want to investigate the Sage of Omaha’s $100 billion dollar problem.  Cash has something called option value because it gives the option to invest the cash when valuations on shares are better.

15/05/2012    Astra Zeneca

(income category)

Performance + 100.5% including dividends. Over the past two months the share price has declined by 16.1% due to negative news flow about the drug pipeline. Now is a good time to buy more. Dividends have gone up during this time and the yield is currently a very good 4.8%.

Accumulate 

28/11/2015     My SIPP Conundrum

CF Woodford Equity Income fund (accumulation)

(income category)

Performance + 10%.

Long term the fund price is still in a up trend.

Hold

Woodford Patient Capital Trust

(growth category)

Performance 0%

Patience is required with this one. No change in price over that time but it has a bright future as we progress through the long term credit cycle.

Hold

J O Hambro Japan Dividend Growth

(income category)

Performance + 47% including dividends. The investment case remains the same.

Accumulate

Fidelity Asian Dividend (accumulation)

(income category)

+ 54% including dividends.  As above.

Accumulate

BlackRock Commodities Income Investment Trust

(commodities category)

Performance + 28% (including dividends)

still in an uptrend.  The category is also underweight compared to the income and growth categories.

Accumulate

SSE plc

(income category)

Performance +5% including dividends.

Political sentiment has affected prices of utilities companies due to price caps and talk of more wider reaching price controls. As the share price of this company is less than it was in November 2015 it represents a good buying opportunities. A recession is way over due and odds are that it is going to come in the next 12 months. Utility companies tend to perform well during recessions due to the reliable nature of their business and inflation linked dividend increases. As of today SSE offers a cracking 6.57% dividend yield. Furthermore, when price controls end, if they are implemented, price and profits jump back.

Accumulate

Other utility companies worth considering include Pennon and National Grid plc, both or which are currently a buy.

TT Electronics

(growth category)

Performance + 41.4% including dividends.

With exposure to European economies that are at earlier stages of the business cycle, TT Electronics is predicts (by market analysts) to continue to grow earnings.  The income multiple of  although elevated is till below the average multiple for the sector which is currently 23 and the market as a whole, which is 17x.

Hold

Morgan Sindall plc

(income category)

Performance + 108.7% including dividends.  Currently sitting at the top of the trading range.  The earning multiple is the same as the market as a whole and the current dividend yield does not make it worth buying more.

Reduce

Costain plc

(growth category)

Performance + 42.2% including dividends

Currently the share price is relatively close to the bottom of an upward trend.  There is good scope for an increase to dividends and the earnings multiple is less than the market as a whole.

Hold

Ossiam Shiller Barclays CAPE Europe ETF

(growth category)

Performance + 38%.  Reasons to invest still outweigh reason to not invest.

Hold

30/05/2016

Sprue Aegis 

(growth category)

Performance + 72% including dividends.  In a solid industry which is insulated against the business cycle to some extend.

Hold

03/04/2016

International Business Machines (IBM)

(income category)

Performance – 2.5% including dividends. Reasons for investing in IBM are still the same. The dividend is above average, well covered by earnings, and is likely to grow in the future. Readers who want to buy IBM and want to time the market may want to look at a long term price chart for IBM and set a buy order in the range of 135 to 140 USD.

Buy

28th October 2016

Stocks for a technological revolution

AGCO corporation

(growth category)

Performance + 40%. There is a small dividend paid by AGCO but I have not included in this figure. Checking a long share price chart for AGCO indicates that it is trading at the upper end of it’s trading range. AGCO is a capital goods company of which sector tends to perform well at this stage of the business cycle. It’s not quite at the top of it’s trading range but almost. AGCO’s earnings multiple is 48 times.

Sell

Trimble inc

(category growth)

Performance + 36%. Technology companies do well as the business cycle matures. The valuation of Trimble is now quite high with an earning multiple of 58 times. Checking the share price chart shows that the price of Trimble has a long way to fall before it touches it’s long term trend.

Sell.

22nd November 2016

Stocks suited to inflation 

iShare Global Infrastructure Exchange Traded Fund

(Category growth)

Performance + 10.3%

Global infrastructure is a positive theme. Investing in an exchange traded fund does gives exposure to some of the largest infrastructure companies and offers diversification. Diversification reduces the risk of significant share prices reductions, but, growth may be lower.

Hold

HICL infrastructure Company Limited

(category income)

Performance + 20.05%.  There is good narrative behind this theme and dividend increases are keeping pace with the valuation.

Carilion plc.

(category income)

Performance – 78%. Anyone doing DYOR on this company would have found that it has a lot of debt on the balance sheet at that it’s order book is under threat from cancelled or delayed projects due to deflation in energy markets. Furthermore, they do business in Middle Eastern countries which may involve more geopolitcal risk. Hindsight is a wonderful thing as they say and the damage has been done. It is sensible to trailing set stop loss orders on all purchases to prevent the carnage that investing in this company would have done. They are involved in structurally important infrastructure projects and have been awarded a large contract by the UK government. So it may be worth holding but, there could be more pain to follow as the companies debt is restructured.

Sell

Dairy Crest

(category growth)

Performance + 8.4%  including dividends. Dairy crest is in a now a consumer discretionary stock and could be negatively affect by a recession.  However, they are positioning products in long term growth markets.  The dividend pay out ration is currently high.

Reduce

J Sainsbury

(category growth)

Performance + 8.2% including dividends.  Supermarkets are good defensive companies.  The dividend is relatively high.

hold

Tesco

(category growth)

Performance -34%.  A company that has all sorts of negative press.  The damage has now been done and the company could be a good turn around stock.

Hold

27th March 2017

Royal Mail

+ 2% including dividends

Not a great return but Royal mail is still has a good dividend which is comfortably covered by net income. Looking at a share price chart is shows that Royal Mail is trading at the bottom of it’s long term trading range and the reason to invest remain the same.

Accumulate

Performance figures do not include the affects of reinvesting the dividends to buy more share which has a snowball affect.  Performance figures would have been slightly higher for this reason.

 

 

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