Portfolio Review to end March 2020

I don't usually review my portfolio at this point however, given the dramatic start to the year, it seems worthwhile taking stock and seeing how the dust has settled.

We are clearly now in the midst of a crisis - pubs, cafes, theatres and gyms ordered to close; all sporting events on ice with the Olympic Games postponed for a year; the chancellor borrowing hundreds of billions to support businesses and pay 80% of everyone's wages; the Bank of England base rate reduced to the lowest ever 0.1%; the death toll rising exponentially - currently up 381 563 in the past 24 hrs to a total of 1,800 2,352...these are extremely worrying times.

Before the outbreak, the OBR were forecasting government borrowing for the coming year 20/21 at £55bn. The scale of increased borrowing is currently unclear as we don't know how long before business as usual resumes but the estimates are that borrowing could easily exceed £200bn next year. As with the financial crisis of 2008, the long term effects of this current crisis could be just as long-lasting.

Naturally there has been extensive volatility on the markets these past few weeks - possibly the worst I have seen. I must admit that I underestimated the impact this would have when the outbreak started in January. In early March 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

The price of Brent Crude crashed from a high of $60 in February to under $25 in the space of just a couple of weeks. The oil stocks have been particularly hard hit with the likes of Shell and BP down around 60% at one point... all in just the past month. So, I am very pleased I decided to make my portfolio fossil-free last year. These oil majors make up a large part of the FTSE 100 and the index is down around 25% since the start of the year whereas the S&P 500 has retreated just 18%.

  

Portfolio Additions

Of course, these dramatic market drops provide an opportunity to pick up a few bargains...be greedy when others are fearful! Unfortunately I am not so good at timing these acquisitions, jumping in far too quickly - I added SSE in late Feb at £16...a couple of weeks later it was down to £12, Ceres Power at 427p...dropped to 250p and then a week later added Unilever at £43.40, National Grid at 875p, repurchased Legal & General at 168p and then Smart Metering for 558p.

I have also topped up various existing holdings as the market tanked including TRIG, UKW, INRG and TR Property.

Bargains exist in this market. Opportunity seekers waiting for the “right” time to buy will never find it. At some point, just do it. You’re practically guaranteed to be wrong in the short term, but right in the long term. It just takes courage. (Novel Investor)

So, quite a few additions to my portfolio over recent weeks, all of which stemmed from the market falls. For the time being, my spending spree has come to an end as all the spare cash has now been deployed but of course the new ISA allowance starts next week.

  

Portfolio Returns

The FTSE 100 started the year at 7,542 and following the sell-off during just a single month, dropped 1,870 points to 5,672 if we add back in say a further 1.0% for dividends paid, this will give a ballpark total return loss of 23.9% for the past 3 months.

  

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 down 11.1% over the year to date (the VLS 80 down 15%).

  

Green Funds

These holdings now make up 90% of the total portfolio and appear to be holding up reasonable well compared to the wider market.

The better returns have come from ITM Power up 69%, largest share holding Orsted up 5% and Proton Power 15%. My largest renewable energy trust TRIG has fared reasonably well and is down just 4% including the quarterly dividend paid today. Recent addition Smart Metering is up 15% and Legal & General up 16% however these have been offset by SSE down 14% and Ceres Power down 16%.

The total return including dividends for my green allocation is -1.5%.

The Complete Basket

My only other holdings are TR Property -25% and Mid Wynd IT -8%.

I have just updated my spreadsheet with the returns including dividends of my actual investment portfolios - sipp flexi drawdown and ISAs - for the 3 months to end March.

As a whole, the portfolio has delivered a total return of -3.2% over the past 3 months.

Conclusion

It is getting on for 18 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 market storm. 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.

I imagine there will be volatility in the markets for some weeks or even months as this pandemic unfolds but at some time, hopefully sooner rather than later, optimism will return, the restrictions will be removed and we get back to something like normality.

What we are left with is the experience of a sudden market crash and the feelings it brings. Fortunately, storms like this don't come around very often - maybe once a decade or so but when they strike it's often very sudden and there is no time to react. As usual it takes courage to invest during such a dramatic downturn, patience to ride out the storm and humility to accept that the markets will often make our decisions to buy or sell appear foolish.

"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)

For me there are a few positives from all this:

1. The pandemic has shown that it is possible to change global-scale patterns of human behaviour very quickly when threats appear. I am therefore hopeful that a similar response can be made in relation to the climate emergency. I suppose the acid test will be whether governments and enough people appreciate the scale of the climate threat in the same way as Covid-19.

2. The crisis is bringing out the very best in us - 2,000 former doctors and nurses return to the front line whilst 750,000 volunteers sign up online within a couple of days - and I believe it will help to unite the country after the division of recent years due to Brexit.

3. The traffic is much lighter, air quality has improved and it's so much quieter everywhere - something I really appreciate and such a contrast to normal times.

But investments aside, what I think I take away from the crisis is the increased sense of valuing the things that really matter - the health and well being of family and friends, a roof over your head, a warm comfortable bed at night, clean safe drinking water, food in our shops and supermarkets (despite some shortages at times), a first class national health service, a walk in the fresh air and just hearing the birds sing and see the green leaves of the hawthorn and the wildflowers. It's good to keep a sense of appreciation of these simple things we all often take for granted and retain a sense of perspective.

"All of humanity's problems stem from our inability to sit quietly in a room alone" Pascal.

(Click to enlarge)

Stay safe, stay at home wherever possible and help to take the pressure off the NHS which will be tested to the limits these next few weeks.

Feel free to share your thoughts on the crisis...and if you keep track of portfolio returns, feel free to leave a comment and share with others how your investments have fared over recent weeks.