As foreshadowed here and all relevant boards... 2018 trading from tomorrow, so time to repeat last year's "virtual portfolio" challenge. Same rules, as per the papers - equal weighted, valid for the whole year with no switching, full owning-up at year end!
Marks & Spencer
I retain a bias toward UK exposure and 'Value' (the two closely related, obviously), with an expectation that the UK domestic outlook will clarify satisfactorily (if not wonderfully) this year. But it's no slam-dunk... and so hedged with a decent slug of overseas earnings and a general focus on "stock specific" stories - with LLOY the only real pure play on 'UK PLC' and associated sentiment. Ultimately, well aware that it's near-impossible to avoid losers as well as winners, I have asked the question - can I see 15% over 2018 (plus divis)? Without necessarily much help from the wider market.
Four stocks stay in from 2017, with CPI, IMB, ITV and SGC still to justify their original inclusion and getting another chance (SGC was a close call). Bonmarche has done its job as "speculative" midcap retail play; VOD still looks fine to me but harder to see sufficient upside in either valuation or financial reporting; CARD and WTB were tougher choices, both still good for the long term IMHO but I see their respective attractions now more finely balanced against likely persisting near-term headwinds.
I will doubtless be elaborating on the case for each of the "new" inclusions in the course of the year. FWIW stocks actively considered but failing to make the cut (as well as CARD and WTB): Braemar and SBRY (from my 2017 Top 10), then Aviva, BT, Debenhams, Gattaca, Merlin, Morrisons, Trinity Mirror.
FYI I own 7 of the 10 stocks, with all of CPI (still!), WPP, GSK under active consideration (probably in that order). I'd be surprised if I didn't buy into at least one in the course of 2018.
Whilst as the Brexit deal becomes clearer, sterling may strengthen & the confidence in the UK economy may improve, I wouldn't bet on it, so I'll be avoiding any UK "High Street" shares. In theory Dignity comes into this group, as does Stagecoach, & BT (and Biffa which is another business I like which I think undervalued) but I think they are all special cases. But Supermarkets, other UK retailers, UK banks, insurance companies and Utilities (for a slightly different political reason) will all be shunned by me - at least until circumstances change or they go so far oversold that the case changes.
I'll have a cogitate and come up with 10 of my shares for 2018 - concentrating on solid largish caps.
"... I'm up near as 12% on the year with some dividends on top ... So I've beaten the FTSE100, but failed to keep up with the FTSE250. H1 was much better than H2. I've not given much specific thought to next year's shares, but I do feel there are quite a few companies which got beaten up this year... e.g. WPP (world cup year is always good for advertisers) Hikma, BT, Ultra, Merlin, Glaxo, Dignity..."
Hardboy - 12% is pretty good in any year, I am just marginally below that for the year (my real portfolio) and I am more than happy with that.
An interesting list of "beaten up" stocks - out of those, FWIW, all of WPP, BT, Merlin and Glaxo are on my own (not very long) short list for possible inclusion in the "Top 10 for 2018" selection. And while Dignity is not one I follow, I have read some interesting views on it recently and I can see how it might get onto my list too, if I get the chance for a detailed review of it over the next couple of days.
What to do with Stagecoach? Undecided as yet.... it could stay in, or it could slip out - undoubtedly cheap, probably too cheap, but with headwinds which are likely to persist for at least another year.
Thanks for admitting your performance, Bill. I'll be very interested to hear what you think will be good shares for 2018.
I've just totted up my overall performance & I'm up near as 12% on the year with some dividends on top (most of the dividends are reinvested.) So I've beaten the FTSE100, but failed to keep up with the FTSE250. H1 was much better than H2. I've not given much specific thought to next year's shares, but I do feel there are quite a few companies which got beaten up this year (for various reasons) showing some signs of recovery which I will be looking at more closely - e.g. WPP (world cup year is always good for advertisers) Hikma, BT, Ultra, Merlin, Glaxo, Dignity; and the SFO enquiry into Petrofac should finally yield some results. Standard Life Aberdeen has yet to give any meaningful update since the merger, and the share price has not reflected the huge potential synergies. Stagecoach is, of course, a sleeping giant which the market has fallen out of love with.
Just a few initial thoughts about potential big gainers which need more research.
That's it for 2017, in market hours anyway, so it is time to tot up the final results for my previously published 2017 Top Ten...
Q1 was not bad (in the end)... Q2 better, outperforming decently... Q3 not so much, a bit of a struggle throughout... and now a reasonable (if selective) Santa rally has delivered (belatedly) a decent enough Q4. It all means a positive absolute return for the year (+1.6%), albeit another good quarter for wider markets means I have underperformed the FTSE 100 by nearly 6% (and around 7% vs FTSE All-Share).
But it's not the full story - I went heavy on income plays, with dividends (including a couple of "specials") delivering a further 5.7%, around 50% more than the UK market yield. So I can point to a total portfolio return of 7.3% for the year - still below the 12% or so returned by the main UK indices, but somewhat nearer respectability - and preserving my status as (distinctly) average fund manager... making you some kind of return on your money, but not actually managing to beat, or even meet, an index.
Star performer, after a pleasing (albeit slightly suspicious) late run, was one of my small-cap speculatives, Bonmarche - up 60% for 2017! Then, at the other end of the size scale, comes Vodafone, an 18% return reflecting a year of solid success... just ahead of Card Factory (up nearly 17% after a rollercoaster ride), although CARD just edges out VOD in total return terms (+26% vs +24%). After that, a good Q4 sees Whitbread end the year up 6%, after 'promising' something much worse for most of it.
But that's it for gains, and 4 "winners" out of 10 doesn't really cut it, I concede. Both Sainsbury and Braemar ended near enough where they started (down just under 3%), but thereafter the disappointments pile up like roadkill... Imperial Brands falling 11%, ITV losing 20%, Stagecoach giving up 24% and Capita's year of woe and warnings means it brings up the rear, some 25% down - with some small solace that it's the only one I still don't own for real (but watch this space!)
How to rationalise this performance picture? Well, looking back at my original post, it seems I predicted it up-front a year ago - I quote... "a vague attempt at balance and diversification across the list, though it's probably still a bit too exposed to the UK economy - and hence any further Brexit downturn. Probably inevitable, given my usual bias towards 'value' and aversion to buying into momentum."
The hope was that the Brexit 'deal', and consequent UK economic outlook, would clarify - while there's finally some sign of that now, for most of the year it's remained mired in the mud of uncertainty and ungentlemanly exchange. There is the (related) theme of Value staying out of favour - albeit with 'green shoots' starting to appear just as the snow comes tumbling - and getting ever cheaper over the year as the market found reassurance in "reassuringly expensive" havens of Quality and Momentum.
So what for 2018? "Double-down" on the combo of cheap UK and underappreciated Value, in the expectation (or 'hope'?) that "this time NEXT year, Rodney".... or capitulate and jump on the market bandwagon, trusting the wheels stay on for another 12 months? Anyone following my thoughts for any length of time will know the answer ... but either way, all will be formally revealed in due course with my Top Ten for 2018 - as I always promised, and likewise enourage others to participate.
FWIW my 'real' portfolio fared better in 2017, up c.11.5% (total return c.15%). Nicely outperforming the FTSE 100 (+7.6%) and All-Share (+9.0%) in both price terms and their total returns of c.12-13%, though lagging the Global Market return of 20%. Given I've owned 9 of my Top 10 stocks for most of 2017 and I didn't set out to pick bad stocks, you can deduce much of my performance came from unexpected quarters - a good advert for diversification, of one's own thought processes and investment instincts as much as sectors and stocks!
Great to see the directors getting their dividend reinvestment plan shares at £1.61. Mine cost me just a fraction short of £ 1.73. Absolute rip off. Been a LTH and never sold a share. Cancelling my drip forthwith.
Having now reached the end of Q3, it is again time to "own up" on YTD performance for my previously published 2017 Top Ten...
Having just edged ahead of the market by end Q1, and outperforming decently over Q2, I am disappointed and (moderately) shame-faced to report that Q3 has been a struggle, pretty much throughout. The portfolio is still just about above water in absolute terms YTD (+0.3%), but with the markets holding onto modest gains over the quarter, it means I am now underperforming the FTSE 100 by nearly 3% YTD (and around 4% vs FTSE All-Share).
Star performer is now Card Factory, and not for the first time - despite recent wobbles, up 22% YTD. But after that, success stories are thinner on the ground than they were - it's perhaps relevant that the original 'speculative' plays, Braemar and Bonmarche, come next (up 13% and 9% respectively), and then decent returns are sustained by both Capita (up c.6%, albeit well down on where it was at Q2) and Vodafone (up around 5%).
So half the portfolio is at least showing gains... and I probably also get a "pass" with Whitbread, which is breaking even, near as dammit (-0.3%). But after that, the tale of woes unfolds in chunky increments... Sainsbury down nearly 5%, Imperial Brands a full 10%, ITV losing 15% (at least, better than it was) and Stagecoach still lagging the lot, now just over 20% down.
For full disclosure, I continue to own 9 of the 10 stocks (to varying degrees of 'happiness'), and while Capita remains on the "watch and wait" list, I have yet to bite... maybe in Q4? Maybe not...
Needless to say, I remain optimistic for Q4 - well aware that I am now in the 'last chance saloon' when it comes to salvaging my performance (and my pride), for the 2017 'competition' at least. I will not deny outright ropey stock selection, at least in one or two cases, but I think there is a wider theme at play... 'Value' still out of favour and just getting cheaper as the market hides in reassuring (and "reassuringly expensive") 'Quality'.
As such, it's a broader tide that I think will turn - and indeed it could at any time, and with it (I am sure) my portfolio... but whether it'll be by the end of Q4 or later, we can only now hope and wait. But a big juicy takeover bid wouldn't do any harm... surely all of ITV, IMB and VOD cannot end yet another year without the long-rumoured (and long-overdue) tap-on-the-shoulder!?
Until such time, it will likely remain the familiar story of (distinctly) average fund managing - just about managing to avoid losing your money, but failing to beat an index...
I guess Labour's Privatisation plans (stuck in the 1940s like the people originating them) don't help. A future Government planning to rob pension funds and charities is immoral; and I hope their union supporters see what the plans will do to their pension funds.
We are currently up just over 1% so the market likes the news. I guess transport just isn't sexy enough for the market but I use virgin north-east regularly and have no complaints at all, infact I'm looking forward to the new trains.
"Are things really so bad at transport group LSE:SGC:StagecoachÂ as its shares portray? Over two years the price has slumped from 420p to a recent low of 154p - currently 159.5p - which capitalises the company at Â£920 million and yields 7.7%, ..."
ii Fundamentals report this but I have looked for confirmation on the Stagecoach website and it's not there. I was going to buy but have been dissuaded by the poor website. It should not be difficult to find a declaration of dividend but I did not find one.
Originally bought Stagecoach in 2000 at 70.5p. Sold out in 2014 at 396p.
Hope to do the same again, buying at 180p this time. Will I have to wait so long? Will I get similar divs this time as I did last?
p.s. 70.5p in 2000 is the same as 83p today.
I think the people in the know are walking this share down,I'm saying the outlook will be on the decline and rail contacts will be lost,until councils begin to do something about cars on the road then there is no hope for any bus companies in Britain,only my views
..if it gets there soon, I'll be buying some more.
My present SGC holding is down 15% at the moment, but recent
dividends (..not reinvested, my present policy) soften this figure.
In the past (200p down to 10p and back up to its max) SGC has been one of my best
holdings, so some sentiment colouring my hopes here.SGC seem to bounce back.
GL from xstar.
Since investing in March the angry rattlesnake has spooked the horses, we have come off the trail and shed a wheel and now seem poised to roll over a cliff. The chance of lassoing safety via new contracts is far from certain.
Given that Go Ahead and First share prices are also struggling, playing with trains seems unrewarding at the present time irrespective of high yields and single figure P/Es. Time to sell and shelter in the nearest saloon to contemplate future investments.
Thanks for posting that Bill. it is of interest. And well done so far.
I think I mentioned when you first aired your list that I had no problem with any of the companies on the list, but as a whole I would like to be more international in the business. I know Imps & Vodafone especially have plenty of international exposure; but I'm slowly moving my portfolio to be as international as possible.
Even with Stagecoach, when reading the report I found the most encouraging bit being about improving markets in N America,
Having reached the end of Q2 and therefore H1 2017, it is time again to "own up" on YTD performance for my previously published 2017 Top Ten...
Having just edged ahead of the market at the very end of Q1, the list has spent most of Q2 outperforming decently, albeit somewhat erratically with different stocks putting in a strong run at different times, only to fall back again. But despite a weak-ish end to the quarter and first half, I am pleased to report that it is still up 4.4% overall YTD (vs +3.1% at end Q1)... outperforming the FTSE100 by 2.0% and the All-Share Index by a slightly slimmer 1.0%.
Star performer is now Capita - would you believe - up a full 30% YTD (and of course, the only one of the Top 10 I still don't own myself). The erstwhile magnificent Card Factory (+17%) has lost some of its lustre but holds on to a solid second place. After that, other decent returns were recorded by Vodafone and Bonmarche (both up c.9%) and Whitbread (up 5%).
Braemar and Sainsbury's have just about held onto positive gains (up 1-2%), albeit a tad below the market, while my three "losers" are now Imperial brands (-3%), ITV (-12%) and Stagecoach (-13%, most of it in recent days - annoyingly - post underwhelming figures).
For full disclosure, I continue to (mostly) happily own nine of the 10 stocks - I may now have missed the boat with Capita, though wouldn't be amazed to see it track back again with a number of outstanding issues still to play out. And I have recently doubled up on my holding of ITV, which is looking more and more the outstanding value play for H2 2017 (and a nice overseas take-out bid wouldn't go amiss).
Even in the current fragile and nervous market I remain optimistic for H2 - though I should probably bite your hand off for another half of marginal outperformance... god knows, it's good enough for most professional managers (and better than many can manage), and my fees remain highly "competitive" (I know my worth, or lack thereof).
Both the CEO (or at least, his wife) and the CFO buying shares over the past day or so. Nothing too major, but some kind of vote on confidence, I would say.
And I concur... a 6.3% divi yield, still very well covered by both EPS and FCF; actual P/E below 8x, and probably not much more than 8x on current year prospective; 5x EV/EBITDA.
Too cheap, IMHO... and probably by a significant margin, at least for the medium term. It is still a very cash generative business, and any immediate balance sheet concerns look overdone.
BUT... in a nervous market somewhat eager to pounce on any sign of weakness (whether cyclical or structural), I can't see much of a catalyst for a rerating back to reasonable, ' fair value' levels until we see evidence that the current revenue/margin/earnings down-cycle is bottoming out.
The two problems here may be a need to strengthen the balance sheet, and a requirement to service the pension deficeit. I agree with all you have said, but am a little more cautious. FGP may have set a precedent in 2013. Of all the transport behemoths perhaps GOG is the best placed, but it is not cheap enough at the moment, They have results out next month. (It is worth noting that in all these cases rail is actually only a minority interest, and the real profits come from buses).
Magoo: "I can see trouble ahead with transport companies"
Me too if we get a Corbynistic Government, but otherwise I think the long term view will see the UK (& other developed economies) investing in public transport, and actively encouraging people to use public transport, to reduce road congestion and emissions.
The results weren't great, but were in line with expectations. The business is still profitable, pays a progressive, well covered dividend; and should have a good long term future. The dividend should minimise the downside to the share price - at current prices, it offers a yield of over 6.3%; and this is more than twice covered by earnings. The PE is now 7.7. That's getting to the stage of being ridiculously low.
There were a couple of things which encouraged me:
"Improving revenue trends and contract opportunities in North America"
"We see positive long-term prospects for public transport."
I think the company is going through a difficult time, and markets are out of love with it; but at these prices it looks great long term value.
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