Portfolio Update October 2012

Another update to talk my own book on my current personal positions and the why I hold them. I like to think of my portfolio as a way to outperform cash so Im looking for total returns and the key is capital preservation.

SBRY: I topped up some SBRY in June which was a great decision. Since then the stock as gone vertical up 60p to £3.50. Sainsburys is way ahead of Tesco in terms of store quality and home delivery and its outperforming both Tesco and Morrisons. It now looks fairly valued to me unless bid rumours start to resurface but Ill continue to collect my healthy dividend yield and reinvest.

Pandora A/S: I sold out of this completely a few months back around the 80DKK mark. Its since managed to trade a bit higher but I don’t think there is a lot of value left there since reliable female sources inform me the brand is very yesteryear.

RSA: This stock still just looks cheap to me as it’s a good franchise, internationally diversified and it throws off cash. Risks for this are obvious; it is a European financial in a mega low rate environment so could get blown around by further chatter regarding the glacial unfolding of the euro area collapse. It is also a global insurer so all kinds of catastrophes pose a risk to medium term underwriting results. Still enjoying collecting my dividends and reinvesting this one.

BBd/B: This stock has continued to language below $CAD  4 per share which is a shame. Hence I’m nursing a small loss here but this still looks like a solid industrial to me which actually makes things that people, companies and governments need.

ABX: I bought into Barrick Gold during July at $36 and $33 per share because it frankly looked very cheap for a mega cap miner albeit it one suffering from a lack of momentum in the gold price. Since then the stock has done well off the back of QE and I continue to like its exposure to gold as most of the mines are in locations which are not politically dangerous or difficult (mines in Nevada rather than South Africa).

FGP: I bought some FirstGroup shares the day after their bid on the west coast mainline was cancelled. I take the view that not winning that bid was a good thing as they had overpaid. Since then I’m nursing a small loss on these shares as FGP continues to languish. The issue is FirstGroup is a relatively weak company financially (it probably needs to raise capital) and managerially (the CFO is actually called “Tim O’Toole”!).  However FGP is also very cheap and suffocating under a weight of negative newsflow. Looks to me like it could easily pickup a bit from here with bad news priced in. But not my idea of long term fundamental holding.

MAYG: I bought shares in May Gurney after their profit warning in September as the stock looked cheap at 4x fwd P/E (it still does; 6x fwd P/E with a 5% yield) with low financial leverage and the bad news seemed well priced in. An intraday drop of >40% seemed like an overreaction to what was basically some poor management decisions. I bought into the shares at £1.32 and £1.20. I wish id been available to trade on the 12^th September when these shares bottomed at 99p. Since then we had a favourable trading update for H1 (quelle surprise) and the stock has picked up. Again not my idea of long term fundamental holding but it looks good on a ‘special situations’ basis.

These kind of stocks can sometimes be very attractive especially small caps like MAYG or hot issue darlings who disappoint like Pandora as all the institutional money dumps them at the same time shutting the gate on a bolted horse leaving some pretty obvious value on the table for investors who don’t have to answer to any client but themselves. This is an arena where individual investors can easily beat the market because the market is herding. Forget about high frequency traders the long term fundamental value is what matters here.

Performance has been good and I’m measuring on a period of around 18 months since April 2011 during which time my total return has been 24% to date. My only realised loss was 6% on a short platinum ETF. I have had a dividend yield of 1.6%, realised gains of 16.9% and unrealised gains are currently 5.6% overall. The biggest contributor to my returns has been Pandora where I saw gains of more than 65% overall across my sales.

Current unrealised gains:

ABX, MAYG, SBRY and RSA

Current unrealised losses:

BBd/B and FGP

Caveat: Clearly I have a financial interest in these investments and this post relates solely to my personal investment positions. It is in no way a solicitation to buy or sell these investments nor does it constitute advice to do so.

Transience

How long does a lifetime last? If one stops to consider, it is like a single night’s lodging at a wayside inn. Should one forget that fact and seek some measure of worldly fame and profit? Though you may gain them, they will be mere prosperity in a dream, a delight scarcely to be prized. You would do better simply to leave such matters to the karma formed in your previous existences.

Once you awaken to the uncertainty and transience of this world, you will find endless examples confronting your eyes and filling your ears. Vanished like clouds or rain, the people of past ages have left nothing but their names. Fading away like dew, drifting far off like smoke, our friends of today too disappear from sight. Should you suppose that you alone can somehow remain forever like the clouds over Mount Mikasa?

The spring blossoms depart with the wind; maple leaves turn red in autumn showers. All are proof that no living thing can stay for long in this world. Therefore, the Lotus Sutra counsels us, “Nothing in this world is lasting or firm but all are like bubbles, foam, heat shimmer.”

- The Writings of Nichiren Daishonin, 1263

Quis custodiet ipsos custodes

US Drone attacks

“Mr Brennan also insists that the administration adopts “rigorous standards and process of review” when deciding who to target “outside of the ‘hot’ battlefield of Afghanistan”. The New York Times has reported that Mr Obama personally approves the names on the “kill list”.

As Georgetown University legal scholar Rosa Brooks put it recently:“That amounts, in practice, to a claim that the executive branch has the unreviewable power to kill anyone, anywhere, at any time, based on secret criteria and secret information discussed in a secret process by largely anonymous individuals.””

Despotic Monarchy

“The divine right of kings, or divine-right theory of kingship, is a political and religious doctrine of royal and political legitimacy. It asserts that a monarch is subject to no earthly authority, deriving the right to rule directly from the will of God. The king is thus not subject to the will of his people, the aristocracy, or any other estate of the realm, including the Church. According to this doctrine, only God can judge an unjust king. The doctrine implies that any attempt to depose the king or to restrict his powers runs contrary to the will of God and may constitute a sacrilegious act.”

In the end there is no absolute rule of law, no guard watching over the guards.

Sadly there is only might and might makes right. To the victors; the spoils and the spin.

Ok, who switched the tapes…

 I am now convinced that sometime in the last week somebody switched over the news and put in the “fiction” tape. This is the only explanation I can arrive at to explain recent events.

We have entered the twilight zone.

Obama tries to keep a straight face.

The EU gets the Nobel peace prize! If I were a respectable former holder like Yasser Arafat, David Trimble or Barrack Obama (who won for not being George Bush) I would be disgusted at this blatant devaluation of my Nobel peace prize. Clearly the central bank of Nobel has gone on its own QE splurge to award the most absurd prize to the most absurdly vast number of people possible. Well done you brave 500 million people living on something which is not a real ‘continent’ who apart from the odd skirmish have managed not to annihilate each other in death camps for 60 years.

Meanwhile in the domestic news we can see that Jimmy Savile is rapidly being erased from history except news footage of him in shorts from the 1970s;

“The removal of the headstone comes days after a footpath sign in Scarborough commemorating Savile was taken down by the borough council.

A plaque outside his flat in Scarborough was also removed last week after the words "rapist" and "paedophile" were written on it.

Leeds City Council has taken Savile's name off an inscription on a wall commemorating high profile citizens at the city's Civic Hall.

Officials at the Royal Armouries International events centre in Leeds have confirmed they will rename their Savile's Hall site, named in honour of the late presenter, "out of respect" for public opinion.”

For some reason nobody thought this guy was weird when he kept a shrine to his mother whom he referred to as “the duchess.” I could have told you at 6 years old I thought Jimmy Savile was sinister because hopefully I wasn’t alone in finding ‘Jim’ll Fix It’ unbelievably disturbing.

Now would someone please turn reality back on because this is all getting a bit too weird.