Portfolio Review - End March 2021

Well, what a dramatic year. We went into a global lockdown last March, eased up during the summer months and then we were hit by a deeper second wave during the winter months as new cases rose exponentially, hospitals were severely stretched and deaths here in the UK rose to over 125,000. Clearly we have experienced a global pandemic crisis which has a social impact not seen since the second world war. This experience will remain long in our memory banks.

Naturally there has been volatility on the markets, especially the initial shock. In March last year the FTSE saw its largest one-day fall - 10.8% - since 1987 with a similar pull-back in the US where the Dow Jones recorded its biggest one day points fall of over 3,000. Then, a week later, the FTSE records its biggest one-day points jump of 452 and the Dow Jones climbs a record 2,100 points and the biggest gain for 90 years...remarkable...the global markets don't get any more dramatic than this. However, despite the pandemic, the markets turned out to be remarkably resilient and have weathered the storm well...so far.

Portfolio Changes

The turbulence last year provided an opportunity to pick up a few bargains and the likes of Google, Microsoft, McPhy, Ceres Power, Nibe and Tesla were added to my portfolio. Later in the year following the election of Joe Biden I added Plug Power, Enphase and SolarEdge as well as the more eco-friendly global index fund, iShares World SRI ETF.

In the past few months I have sold down my government bonds and Tesla and also reduced my renewable infrastructure sector. The proceeds have been used to top up several of my clean energy holdings including Vestas Wind, Orsted, Enphase and SolarEdge and also add the likes of the new L&G Hydrogen ETF.

Portfolio Returns

By the end of 2020, the FTSE 100 had lost 11% for the year and stood at 6,460. It has since risen to currently 6,750 or 4.5% plus dividends. Looking more widely, my iShares World SRI fund is up 5.4% over the first quarter.

Although no longer a part of my portfolio due to fossil fuel holdings, the Vanguard Lifestrategy 60 fund is a diverse mix of global equities and bonds and provides a good benchmark for a balanced global portfolio. The fund is up 0.9% over the past 3 months.

I had my best ever year in 2020 with a total return of 44% and over 50% from my green portfolio holdings so I have been expecting some correction or pull-back in the new year. The past couple of months have seen quite a bit of volatility in the technology sector and my clean energy holdings seem to have been caught up as well. As a whole my portfolio is down 7.2% over the quarter.

Green Funds

These holdings now make up around 85% of the total portfolio. They mostly had a stellar 2020 but have fallen back around 10% to 15% over the past couple of months. 

However, over the full year since last March many are showing remarkable gains - 

ITM Power share price was 110p last year and currently 470p, a gain of 325%, 

Ceres Power was 325p and now 1250p, gain 280%, 

McPhy was €4.60 and now €32.60 a gain of 590%, 

Enphase was $29.77 and now $162 gain 444% and 

Plug Power $3.30 a year back and now $35.80 gain 980%. 

Past 12m for Ceres and ITM Power
(click image to enlarge)

However over the past 3 months most of these shares are down...ITM  -9%, Ceres down 5%, McPhy down 11%, Enphase down 11% and only Plug gaining 8%.

So I am hoping this is a short-term correction and these holdings can get back on the rising escalator over the rest of this year and beyond.

Conclusion

It is getting on for 30 months since I started to move my portfolio towards more climate-friendly investments and it is reassuring to see they have held up reasonably well during this past year. I certainly feel much better investing in the likes of Orsted, a global leader in offshore wind, rather index funds with their fossil fuel companies and the big banks that finance their operations.

Our attention has been very much focused on Covid this past year but with a vaccine roll-out now underway I am hoping we can move on to tackle the far bigger crisis of climate change. There are encouraging signs that the global leaders are starting to sing from the same hymn sheet and work out how to cooperate to reduce emissions and meet the goals of the Paris Agreement to limit warming well below 2.0C. The transition from fossil fuels to clean energy is well underway. Huge amounts of financial support is being directed into this area as governments move to decarbonise their economies and this along with policy shifts should support the growth of those companies trying to provide some of the solutions to this climate emergency. 

Let's see how the rest of the year unfolds..."Survival as an investor over that famous long course depends from the very first on recognition that we do not know what is going to happen. We can speculate or calculate or estimate, but we can never be certain". (Peter Bernstein)

Take it easy...have a lovely Easter!

As always, if you keep track of portfolio returns, feel free to leave a comment and share with others how your investments have fared over recent months.

iShares Global Clean Energy ETF - Update

This exchange traded fund gives investors an opportunity to invest in a range of globally diverse companies involved in renewable energy.

It is an index fund and tracks the S&P Global Clean Energy Index which is made up of 30 of the worlds leading companies in the clean energy sector.

Why Clean Energy?

It is estimated that at least 50% of the world's energy will come from renewables such as solar and wind by 2050. This compares to around 7% just 6 years ago. In order to implement the Paris Agreement and limit global warming to well below 2C, governments around the world will need to invest huge amounts of capital - estimated over $3 trillion - over the coming decade and this obviously provides significant opportunities for the renewables industries.

Climate change and scarcity of resources is one of 5 megatrends identified by Blackrock which will shape the future.

The fund was added to my green portfolio in March 2019, shortly after I put my index funds under the spotlight and decided to move my portfolio away from fossil fuels. My initial purchase price was 433p and I topped up my holding during the Covid sell-off last March at 435p. The shares are held in my SIPP drawdown and also my ISA with AJ Bell Youinvest.

Fund Holdings

The ETF fund holdings include :

Plug Power (8.5%) a leading provider of fuel-cell engines and hydrogen-based solutions in the US. Some high profile customers include Amazon, BMW, IKEA, Walmart and Carrefour. The share price has grown rapidly over the past 12 months - under $4 last March to currently $39.

Enphase (5.8%) a global energy technology company and the worlds leading supplier of solar microinverters. these connect solar generation, storage and management on one intelligent platform. 

Solaredge Technologies (3.7%) another Nasdaq-listed US company providing inverter solutions across all segments of the solar PV market.

Vestas Wind (4.1%) and Orsted (4.1%) both of which I also hold as stand-alone holdings in my green portfolio.

Siemens Gamesa (4.6%) a Spanish-based renewable engineering company involved in the manufacturing of wind turbines and related servicing. Their products have been installed in over 90 countries all around the world with a current combined capacity of 100GW.

Returns

The fund had an amazing run over the past year moving from £4.00 last March and reaching a high point of £14.00 in mid February 2021 but there has been a significant pull-back over recent weeks with the share price falling back around 30%. At the current price of 985p my total return has been 127% for the year including dividends of 5.7p which gives a yield of 0.6% and subject to exchange fluctuations.

One Year Share Price INRG v RDSB
(click to enlarge)

I am hoping the set back in recent weeks is a temporary correction after such a good run but this is an emerging sector and I am prepared for some further volatility. However, over the longer term, my view is that the global renewable energy sector is likely to see continued growth as the world attempts to address the climate crisis and move to curb carbon emissions. We are weaning our economies off fossil fuels and the transition to clean energy such as wind, solar and wave power is well underway and likely to accelerate. As can be seen from the chart above, the global renewables represented by INRG has performed much better than the oil sector represented by RDSB.

I have taken a punt on a few individual companies such as Orsted, Ceres Power and Vestas Wind, Enphase and Plug Power for example but a diversified approach with the likes of this ETF probably makes more sense so I am very happy to continue holding these shares which currently make up around 10% of my green portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Allianz Technology Trust - 2020 Results

This trust was established in 1995 to give investors a chance to gain exposure to the technology sector. Although the trust is UK-listed, since 2007 it has been managed by a team based in San Francisco and close to Silicon Valley which is home to many of the world's biggest tech companies. The trust was added to my portfolio last September at the price of £22.50 when I decided to increase my technology weighting. 

The strategy is to identify a number of themes such as cloud computing, security, e-commerce and electric vehicles for example and hold some of the best companies within these sectors over the longer term.

Results

The trust has this week published results for the full year to Dec 2020 (link via Investegate).

It's been an excellent year with net assets increased by 76%...outperforming the benchmark Dow Jones World Technology Index by 34% and share price up 80%. By contrast, the FTSE All Share Index fell by 10% over the year. The Covid pandemic has been a severe challenge for all sections of society around the world however the technology sector has played a key role providing solutions for businesses, governments and individuals.

Some current top ten portfolio holdings include Google (6.0%), Micron Tech (3.9%), Amazon (3.8%), Samsung (3.1%), Apple (2.3%), Microsoft (3.6%) and Crowdstrike (3.0%).

The trust has a good performance record with returns of 80% in the past year, 25% last year, 41% in 2018, 42% in 2017 and just 15.8% in 2016. It is one of the top performing investment trust over both the past 5 years and also 10 years - just behind Scottish Mortgage and ahead of Monks, Biotech Growth and Linsell Train.

Commenting on the past year's results, investment manager Walter Price said:

"Global stock markets were volatile in 2020. There was a savage sell-off in March when it became clear that the virus would spread from Asia into Europe and the United States. The S&P 500, for example, dropped over 30% in a matter of days. While markets subsequently recovered, it proved to be a bifurcated market, with the winners and losers from the pandemic driving in opposite directions.

Technology remained at the top of the heap. Lockdowns forced individuals and businesses to rely on technology more than ever before. If companies didn't have the infrastructure for remote working, they needed to act quickly to ensure it was in place. They came to rely on communication tools such as Zoom and Microsoft Teams to keep in touch with clients and staff. In other words, technology kept the economic wheels turning at a time of crisis. 

This was reflected in share prices. The tech-heavy Nasdaq outpaced the S&P 500 and Dow Jones Industrial indices, rising 42.9%, compared to 16% for the S&P 500 and 6.9% for the Dow Jones Industrial Average. Our benchmark index, the Dow Jones World Technology Index, delivered 41.7%. Investors sought comfort from companies with reliable earnings and a well-established growth story".

ATT One Year Performance
(click to enlarge)

Post year-end results, the past few weeks have seen a significant correction for the technology sector. One of my former holdings, Tesla was down over 30% in a matter of weeks but luckily I sold out in early February before the drop when they decided to buy $1.5 billion of Bitcoin with reserves.

Over the past year or two I have been adjusting my portfolio and now prefer just two sectors - 75% is allocated to green/climate and the remaining 25% to technology. Holding individual tech shares can be lucrative but is also higher risk as well as more volatile. Obviously gaining exposure to a diversified basket of shares via a specialist fund or investment trust is probably the better option for the diy investor.

My Tech Portfolio March 2021
(click to enlarge)

Obviously it helps that I no longer require income from my investments as this trust is all about growth and does not pay a dividend. However, as I have pointed out in the past, it is possible to take 'income' from capital appreciation. For example, selling down shares to provide 4% 'income' from a trust which is growing at an average of over 20% each year should not be too difficult.

The shares dipped as low as £13 at the start of Covid last March and then climbed above £32 in February before the technology correction. The price is currently £28.75 so a handy 27% uplift on my purchase price last September and happy with progress so far. 

I have recently topped up my Polar Capital Technology trust and will be looking to top up this holding at some point this year.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

TRIG - Results for 2020

The investment trust was launched in 2013 and gives investors an opportunity to tap into the UK and European renewable energy sector - wind, solar and battery storage. They aim to generate sustainable returns from a diversified portfolio of renewables infrastructure that contribute towards a zero-carbon future.

It has grown steadily over the past seven years, from £300m at launch to become one of the largest funds in the renewable infrastructure sector with assets of £2.2bn. The shares were first purchased for my portfolio in 2019 and topped up with discounted shares from the share issue last March at the price of 114p.

The trusts works closely with InfraRed Capital who have extensive expertise in the renewable energy market and flag up opportunities for expansion and also with Renewable Energy Systems who manage the assets after acquisition and ensure they are operated safely whilst delivering maximum efficiency.

Since launch in 2013, TRIG has outperformed the FTSE All Share Index with total returns averaging 8% p.a. plus lower volatility. The shares are increasingly in demand from institutional investors wanting to respond to the demand from their clients for more climate-friendly ESG investments.

Results

Last week the company released results for full year 2020 (link via Investegate).

Profits came in at £100m (2019 £162m) with earning per share of 5.9p (11.4p).

Net assets per share for the period was 115.3p compared to 115p a year earlier.

The board have announced a final dividend of 1.69p for the end of March making a total of 6.76p for the year which provides a yield of 5.3% based on the current share price of 127p. However no increase is planned for the coming year which is not really a surprise.

The shares still trade at a 13% premium to net assets having reached 20% last year.

Conclude

The demand for more renewable electricity both in the UK and Europe will only be moving in one direction as governments come under increasing pressure to decarbonise their economies and meet their carbon emission reduction targets. The UK government have brought forward the date for all new cars to be emission free from 2035 to 2030. In a decade we could see 35 million pure electric cars on our roads which will require lots of clean energy.

One year share price (click to enlarge)

In addition, gas which heats 90% of our homes is due to be phased out for all new house build from 2025 so there will be increased demand for alternatives for space heating. Hydrogen from renewable energy will be part of the mix as well as electric heat pumps.

However, as we have seen this past year, this does not necessarily translate into higher power prices which is an important aspect of valuing these renewable energy infrastructure trusts. TRIG have been caught out this past year having failed to accurately forecast wholesale prices. As a result NAV has decreased and the trust has taken a hit to the tune of £137m. Power prices are one of the key risks faced by the trust. This post by Finumus last May outlines some of the potential downside to renewable infrastructure investments and inflated long-term power prices.

The higher weighting in my green portfolio proved to be a drag on returns in 2020. Sure they provide a nice dividend which is relatively secure (unlike the oil companies) but as I no longer require an income from my portfolio I decided to slim down my holdings this year and focus more on green growth. Therefore my holding in TRIG has been reduced from 10% to currently just 2%.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!