Saturday, 18 April 2015

Shares Portfolio - Sales and New Purchase

Last month I started to put into place my revised strategy in relation to my individual shares portfolio - here’s the concluding part of my post :

New Strategy

I have asked myself a couple of questions -

Does my shares portfolio give me an edge over the other possible strategy options, and

Is all the time and effort I put into researching and running such a portfolio worth it?

If I am honest, the answer to both has to be NO.

Having regard to all of the above, I think it is fairly clear that my individual shares have been the weakest link of my income strategy to-date. I feel therefore the time has probably come to wind down the shares portfolio and redirect investment towards my investment trusts, ETFs and also to embrace the possibility of more low cost tracker funds such as my recent purchase of Vanguard UK Equity Income.

That’s not to say I will be selling all my shares, for the time being, I will maintain a slimmed down portfolio of what I regard as solid long term core holdings - the likes of Unilever, Next, Reckitt etc. I have however started to sell off some of my shares which have seen significant share price appreciation and which, as a result, have become lower yielding holdings.

Portfolio Sales

In the past week there have been a couple more disposals.

Firstly, my 'half' holding in Charles Stanley was sold following a pre close trading update in which the Company announced a final dividend of just 2p making a total of 5p for the full year. This is a significant reduction on the 12.25p paid the previous year. If this were the only holding to reduce its dividend, maybe it could be accommodated - sadly however, it is actually the fourth share holding to announce a cut over the past year.

Fortunately, the share price has seen a gain of 25% in a little over 6 months since acquisition last year. Sale price was 374p and net proceeds £1,841 after broker sale costs.

Secondly, I have decided to offload Diageo. The share price had advanced nearly 10% in a very short timeframe which brought the yield below 2.7%. I have held this share for some years and believe it is a really good company with strong brands so the decision to sell was marginal, however whilst I could afford the luxury of one or two lowish yielders last year, this is no longer the case.

I still have a significant exposure to DGE via my investment trusts - particularly Nick Train’s Finsbury Growth & Income.

The sale price was £19.79 giving net proceeds of £1,613.

New Purchase

I have a substantial holding in the Vanguard UK Equity Income fund so, for the time being, I will let that bed down and see how the income distributions roll in.

As equity markets are historically high and therefore yields on the low side, I have decided, for the time being, to go for some higher yielding fixed income.



I have seen some good reports on City Merchants High Yield trust and have therefore decided to add this to my portfolio.

The combined sale proceeds were £3,454 and I have therefore acquired 1,780 shares @ 193.4p. The trust has a quarterly dividend of 2.5p per share which will deliver £44.50 to be paid in May - the annual amount is currently 10p which gives a starting yield of 5.2%. The trust has recently issued its results for 2014 - here’s a link for anyone interested.



Hopefully, this should help to restore income lost due to dividend cuts from the likes of Tesco, Sainsbury and Centrica.

Take it easy this weekend!


6 comments:

  1. That's peculiar. I was just looking at City Merchants High Yield Trust today. I am keen to get a little exposure to the bond market somewhere. What have you heard related to it? I have struggled to find too much discussion of the trust. Be very interested to hear what you found out.

    Anyway, your new strategy is already in full swing. Good luck with it!

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    1. DD,

      That's a coincidence!

      This has been on my watchlist for a little while. I first read about it via the Morningstar site - http://www.morningstar.co.uk/uk/news/121223/investment-trust-for-income.aspx

      I note also it is a holding in one of the portfolios for John Barron and he recently topped up a similar holding NCYF which could be also a possibility - see 'importance of dividends' article
      http://www.johnbaronportfolios.co.uk/site/commentary%20-%20The%20importance%20of%20dividends.php

      Good luck with your research into bonds.

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    2. It certainly is.

      Thanks a lot for that. I will take a look at those links tomorrow. NYCF is interesting and I have always look at it alongside CHY. Obviously the yield is higher. But the assets they seem to invest in are, apparently, more risky.

      I would need to learn more about that before working out whether it is appealing or not!

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  2. Thanks for posting your strategy. I've only really just started building my individual share portfolio now but I can see me adopting a similar strategy when I retire - whilst there's an element of fun tracking shares now and doing research etc, I may not be so inclined when I'm older and of course, I hope I will be able to see that my being active is not beating the market (if that is the case) and I change my strategy.

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    Replies
    1. Weenie,

      Thanks for stopping by.

      I have always enjoyed the process of building and maintaining my shares portfolio but, over the years, I am not sure whether it has added much value compared to a collective approach. As you say, it can be good fun starting off and an absorbing and profitable 'hobby' - maybe there is value in that element alone.

      Good luck with your investing journey. BTW, sorry to read about your situation at work yesterday - I hope things work out OK - as you say, always look on the bright side! In my experience, when one door closes, another two open.

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    2. Thanks for your kind words - I am optimistic things will work out and do like the sound of the door closing and two opening!

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