Tuesday, 17 March 2020

Legal & General - Back On Board!


Readers may recall that this shareholding was added to my portfolio last August however it seems to have been edged out a few months later when I needed additional funds to purchase my AFC Energy shares. I continue to follow sold investments and what sparked my renewed interest was the announcement that they were launching a new fossil-free pension fund later this year - something I have been pushing for over the past year or so.

Although far from perfect, LGIM have a decent record on climate-related issues and try to hold companies to account at their AGM and push directors of the large oil companies to comply with their obligations under the Paris Agreement on climate change. In a recent survey, Shareaction examined the record of 75 of the world's most influential asset managers on issues of responsible investments, climate change and human rights. L&G and Aviva were two of only five managers to be awarded an A grade. However 50% of managers had a very limited or substandard approach to ESG issues - in fact the six largest global operators including BackRock (D) and Vanguard (E) were all in the bottom two catagories and all based in the US which suggests the Americans fund managers under the Trump administration are far less progressive on ESG issues.

Obviously when investors can choose where to invest their long-term pension savings, many will be attracted to a fund that excludes the sort of companies like Exxon, Shell and BP that continue to compromise the very future those savers will be looking forward to in retirement.

50% fall in Shell and BP 2020 Year to Date
(click to enlarge)

During the recent market turmoil, these fossil fuel multinationals have been hammered with the share price falling by over 50% since the start of this year. Personally I don't really see them recovering any time soon without a fundamental shift in strategy to embrace renewable energy and phase out oil and gas to meet their obligations to the wider global community.

Of course LGEN has been caught up in the market turmoil and its share price has fallen by over 40% since January so I was able to pick up the shares for my portfolio at 168p on Monday. That was a considerable discount - 39% - to the 275p when I sold them last November.

The company released results for the full year 2019 (link via Investegate). Profits increased by 12% to £2.1bn with earning per share of 28.6p which supported a 7% uplift in the dividend to 17.57p which makes a nice dividend yield of over 10% at my purchase price. The final dividend of 12.64p will be paid 4th June and the shares will go XD 23rd April.

I must admit to having underestimated the seriousness of this outbreak and its impact on the global markets. In February, I was thinking it would not be so dramatic and possibly we would all be over the worst by Easter. As a result I have jumped in too early with some of my recent additions. Of course, this outbreak poses threats but it is also an opportunity to gain experience and to understand more about ourselves. These are the most testing of times and the markets are understandably jittery so it would not surprise me at all to see further weakness in the coming couple of months. 

Coronavirus takes down the global economy...

However, this pandemic will start to blow over, the pressure will ease and we will all resume our normal routines and the markets will bounce back...they always do. So it's just a question of patience, trying to keep calm and maintaining a sense of perspective - of course, easier said than done!

Stay safe.

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!

6 comments:

  1. I would have added more LGEN to my portfolio if I had the cash available... Pretty much like you I entered the markets on the first drop in February, news about this virus were not so terrible. In reality they are not terrible even now, the major problem seems to be the impact on the hospitals and ICUs. Anyhow, great addition I must say!

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    1. Yes, I imagine a lot of people would not have thought this new virus would become such a huge global problem. Hopefully it will make us reverse the trend of globalisation and rethink economics. We need to build in far more resilience to these shocks and bring back more self-sufficient production.

      The situation in Italy has been very dramatic and I hope you will be past the worst of this pandemic soon. We are possibly 2 or 3 weeks behind you!

      Stay safe Stal.

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    2. I agree completely, surely this shock was good for the environment as it lowered level of pollution massively. On changing the course of the economy, it's a "long way to Rome", but if we don't start changing the mind of the people there is no way we can get it done. I hope that I will still have a job at the University and that I will get given to teach a course on sustainability as they kind of told me I was going to get given... There's a lot I want to tell the students, especially on frugality and self sufficiency. On a global scale I don't see globalisation disappearing, but maybe a "lower level" form of it...

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  2. Long term hold for me but I don't have spare cash so have only managed to pick up a few more when I got some dividend income the other day.

    Absolutely no reason really for the share price to go down by so much - sounds morbid but this company will likely profit from unfortunate elderly dying earlier than planned.

    Hope you and yours stay safe.

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    1. I agree weenie, there's no logical reason for the wide fluctuation in share prices but I think the automated robotic trading system plays a big part in this. I guess with it being a market place with buyers and sellers, there are always tempting bargains on offer at times like this but when you are out of cash there's nothing to be done.

      I topped up my UKW today as the SP fell below 120p (143p only last month) and also a small stake in Marstons which has obviously been hit by the restrictions announced yesterday evening...down 80% in just one month!

      Likewise look after yourself and hope the relatives in HK are getting through it OK.

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    2. Totally agree with you guys, part of this crash is really without logic. I see companies now being below 2008 valuations when the crisis was much more "real" under financial points of view... But panic and bot and I'd add speculators are doing the rest. Surely someone is profiting, but not from me selling, that's for sure! Hoping that you all are safe and sound, we'll surely come out of this period sooner or later, surely stronger!

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