|keep calm and carry on|
I suspect the recovery, such as it is, will continue in fits and starts but because there will be such low growth, it probably won’t feel like one.
The FTSE 100 is down -5.6% in June at 6,215 and down just over 3% for the quarter. However, since the start of 2013, the FTSE 100 is up 5.4% - if we add on another 1.6% for dividends paid, this will give a ballpark figure of 7.0% total return for the half year.
My portfolio is allocated between fixed interest (40%) and equities, which in turn are divided between individual shares and investment trusts.
Over the past 3 months, I have taken the opportunity to take profits on one or two holdings - Aberdeen Asset, IG Group, RPC and this week, DS Smith. As the markets pulled back, I have recycled the proceeds into new holdings in Vanguard All World High Dividend ETF, Finsbury Growth & Income IT and Nat West Bank Preference shares (see recent posts).
Individual shares have been a little mixed, defensives seem to be holding on to gains but cyclicals including commodity related shares are continuing to lose ground - maybe things will turn around during the second half of the year. The better performers were again Reckitt & Benckiser (22.0%), and Unilever (18.6%) and also GlaxoSmithKline (25.9%). On the naughty step were Carillion (-9.0%), BHP Billiton (-19.4%) and BSkyB (-9.0%).
As a result of locking in some gains at the top of the market in May, the shares portfolio is up 8.5% over the past 6 months (slightly better than the investment trusts - which makes a change).
Total income on shares so far is 2.5%.
Most of the trusts have lost a little ground in recent weeks but remain in positive territory for the half year under review. The total return to 30th June was 7.2% - the better returns came from smaller companies specialist Aberforth (19.0%), followed by Law Debenture (15.7%), Temple Bar (15.5%), Bankers (15.5%), Edinburgh (13.1%) and Murray Income (13.4%). Losing ground this quarter have been recent addition Aberdeen Asian Income (-11.1%) and fixed income specialist New City High Yield (-4.8%).
Income from the trusts portfolio has been steady at 2.0%.
The PIBS and preference shares have all been affected by the problems at the Co-op Bank over the past month. This so called caring, ethical bank which avoided ‘casino banking’ was supposed to be an example of how all banks should be run. It was even promoted by the Government as the preferred bidder for the Lloyds Bank branches so there was due diligence undertaken at the highest level and never any suggestion from the regulator that they had any concerns - makes you wonder sometimes about these so called ‘financial experts’.
Another area of concern was an announcement by the Prudential Regulation Authority last week requiring several banks and building societies, including Nationwide and RBS, to strengthen their balance sheets with further capital. The Nationwide is now considering the issue of new bonds to raise an additional £1bn.
Because of the above concerns, all mutuals - Nationwide, Skipton, Coventry etc. - will need to work harder to reassure investors and institutions that there is no danger of them defaulting on their existing bonds and PIBS. In the meantime prices have fallen and margins have widened however, for the adventurous (or foolish!), the additional risk premium has offered opportunities to secure yields approaching 10% on some PIBS.
Capital values on my holdings have fallen in recent weeks - around 5% or 6% bringing them down to just below their value at the start of the year. This has been offset by income of 3.5% so, all in all just around breakeven for the six months.
As a whole, the portfolio has advanced 4.9% over the first 6 months of this year including the payment of 2.6% income. Steady if unspectacular (but at least I don’t hold gold which has fallen around 30% in recent months!).
As always, I would be interested to hear how others have done - leave a comment if you keep track of your portfolio.