In March, my portfolio gained 2.6 per cent, nicely ahead of the FTSE All-Share (TR) Index return of +1.2 per cent. For the first quarter of 2017 the portfolio was up a healthy 11.0 per cent compared with +4.0 per cent for the All-Share and since inception in January 2012 is up 135.9 per cent, (17.8 per cent annualised), ahead of the +68.3 per cent (10.4 per cent annualised) for the All-Share.
The US equity market hit a small air pocket during March, with the S&P 500 Index ending the month where it started and 1.6 per cent off its intra-month all-time high. President Trump suffered some setbacks, with his plans to overturn President Obama’s healthcare bill lacking support in congress and his second attempt to introduce a travel ban being suspended by the US District Judge in Hawaii. The Federal Reserve also increased interest rates and indicated that further hikes were likely later this year. It will be interesting to see if this was merely a pause for breath or whether the market is topping out.
Of the major equity markets, Germany led the way, with the DAX up 4.0 per cent, buoyed by firmer economic growth. Continental Europe is seeing its fastest growth in over five years. India continued to recover from the shock of Prime Minister Modi’s surprise withdrawal of 500 and 1,000 rupee notes last November. The market, and the electorate, seem to support his reformist agenda, with the Sensex Index gaining 3.1 per cent. It is now hovering around its all-time high, recorded in January 2015 (I am playing India through the
In the UK, the major event of the month was surely the triggering of Article 50. It, however, certainly wasn’t a surprise and markets took it in their stride. Sterling gained 1.3 per cent against the dollar to 1.255 and 0.4 per cent against the euro to 1.1762. The FTSE All-Share was up 1.2 per cent. Gold gained 0.4 per cent to $1,251 an ounce (oz) and Brent Crude, despite a couple of strong days at the end of the month, finished down 4.9 per cent at $53.70 a barrel.
The JIC portfolio
In last month’s column, I mentioned that I was hanging on to
Now on to the fallers. Geiger Counter was down 15.8 per cent, although it is still up 25.8 per cent since 1 January. Hopefully just some short-term profit-taking, as I believe the fundamental reasons for my original purchase remain in place.
StatPro’s Revolution system shows that as well as Bioventix and Crawshaw, the biggest contributors to my 2.6 per cent portfolio gain were two of my investment trust holdings.
Other notable company news included solid results from
I introduced one new holding in March. I bought a 1.0 per cent holding in
which joined the Alternative Investment Market (Aim) in early February. It buys conventional oil and gas wells in the US from larger oil companies. Typically, the vendors, focused on building their shale operations, are disposing of smaller assets deemed peripheral to their strategy. DGOC is strict about the price it pays and the payback on investment is typically quite quick. Later in February, it announced the acquisition of a package of producing gas and oil wells in Ohio and Pennsylvania for £1.75m. This is a typical deal for DCOG, increasing its gas production by 14 per cent and oil by 23 per cent. At current prices, it is expected to generate operating cash flow of approximately $1.0m a year; not bad compared to the $1.75m purchase price.
The Board intends to return 40 per cent of operating cash flow to shareholders in the form of dividends. The remaining cash flow will be used, along with cash raised in the flotation, to invest in the business and new assets. At my 67p purchase price, given its commitment to pay out 40 per cent of cash flow as dividends, the prospective 2018 dividend is forecast at 6.0¢ (4.8p per share) giving a prospective dividend yield of 7.2 per cent. With further deals this should grow. Growth is reliant on it continuing to make cheap acquisitions and there is the slight concern about why, as a US company, did it list in the UK? I have reflected those risks by buying just a 1.0 per cent position to start with.
I added to several existing holdings. I increased
I halved my position in
I realised some nice gains by reducing Renew Holdings to 2.0 per cent on 9 March at 469.9p and
Finally, on 29 March I met Gaurav Narain, manager of India Capital Growth Fund, who was over in London for the 2016 results. I have written up the meeting in detail on my website. I liked his strong bottom-up approach to stockpicking and his focus on management. He manages a concentrated portfolio of around 35 stocks and turnover is low. In 2016, he sold two holdings and bought five new stocks. This year he has added just one stock and sold two. When initiating an investment, he aims to double his money every three years. He likes to focus on “what is predictable”. I’m not sure he would like my exposure to oil and mining stocks.
The fund is currently trading at a discount to net asset value (NAV) of around 18 per cent, which I think should narrow in the coming year. Given the longer-term Indian growth story (his broad view is that there is “no shortage of growth in India”), my confidence in Gaurav’s stockpicking and the potential for the discount to NAV to narrow, I increased the position to 3.0 per cent of the portfolio on 30 March at 89p.
Apart from a brief setback around the Brexit referendum last June, equity markets have had a super run over the past 15 months or so. March saw a small pick-up in volatility, with the S&P 500 recording its first 1.0 per cent down day since November, but the buyers returned and markets resumed their upward path. I continue to believe a ‘correction’ is likely given the length of time since the last 10 per cent pullback. In any case, historically, stock markets have tended to generate most of their returns between November and April.
As we head towards the summer I feel comfortable running with 10 per cent cash and may well increase that further during April and May. I know calling markets successfully is next to impossible, but I am happy to lock in some of my recent gains and give myself the flexibility to buy in the event of a setback.
|Name||EPIC||Market cap (£m)||% of portfolio|
|Fidelity Asian Values PLC||FAS||266.1||6.5|
|TR European Growth Trust PLC||TRG||463.8||6.4|
|AdEPT Telecom PLC||ADT||77.6||5.8|
|Conviviality Retail PLC||CVR||470.3||5.5|
|BlackRock World Mining Trust PLC||BRWM||611||5.4|
|Baillie Gifford Shin Nippon PLC||BGS||268.5||5.0|
|Biotech Growth Trust (The) PLC||BIOG||417.7||4.9|
|Imperial Brands PLC||IMB||37,073.4||4.0|
|Royal Dutch Shell PLC||RDSB||175,651.7||4.0|
|India Capital Growth Fund Ltd||IGC||101||3.0|
|Inland Homes PLC||INL||118.7||2.5|
|Faroe Petroleum PLC||FPM||364.5||2.2|
|Accrol Group Holdings PLC||ACRL||131.6||2.1|
|Card Factory PLC||CARD||971.4||2.1|
|Serco Group PLC||SRP||1,268.8||1.9|
|Renew Holdings PLC||RNWH||272.3||1.9|
|Revolution Bars Group PLC||RBG||110||1.8|
|Crawshaw Group PLC||CRAW||16.6||1.8|
|Elegant Hotels Group PLC||EHG||77.3||1.5|
|Hurricane Energy PLC||HUR||682.7||1.4|
|Patisserie Holdings Ltd||CAKE||312.3||1.3|
|Satellite Solutions Worldwide Group PLC||SAT||45.6||1.2|
|Geiger Counter Ltd||GCL||1.1|
|Diversified Gas & Oil PLC||DGOC||1.0|
|StatPro Group PLC||SOG||57.3||0.5|
|Fidelity Asian Values PLC||FASS||0.1|