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The Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and do not constitute advice to buy or sell.
It’s been a pretty dreadful start to January all round, and it’s left the Beginners’ portfolio reeling a little – recent share price falls have pushed our overall return down to 25%, against the FTSE 100‘s 8.5%.
Pharma wobbles
One of my early long-term hopes, GlaxoSmithKline (LSE: GSK) dipped to 1,373p in the past week, taking the price down 9% since purchase in June 2012 (and down 17% just since last April), which is not a great return at all. Having said that, we have actually enjoyed strong dividend yields from the pharmaceuticals giant, and they’ve actually led us to an overall 9.4% gain including the cash.
Glaxo was always going to be a longer-term recovery position, with no return to earnings growth likely for a few years. But the firm has been beefing up its development pipeline quite nicely, and where once there was no uptick in earnings expected before 2017, the City’s analysts are now predicting an 11% EPS rise this year.
The big debate right now is whether giants like Glaxo should remain the multi-pronged behemoths they are or whether they would be better broken into their constituent divisions. Ace investor Neil Woodford is in the latter camp, but I think there are also good arguments for strength through size. Either way, I think Glaxo has shown that it’s a pretty safe stock to own and is hardly affected by short-term panics such as the one we’re in.
GlaxoSmithKline is still very much a portfolio Hold.
Housing surge ending?
Our biggest winner has turned against us a little, as Persimmon (LSE: PSN) shares have now dropped 10% since their September peak, to 1,892p. The fall is probably down to a renewed feeling of gloom, with folks fearing the contagion will spread to the housing market.
But there’s no sign of business falling off, with the firm’s year-end trading update telling us of an 8% rise in housing completions, leading to a 13% jump in revenue after average selling prices picked up 4.5%.
Special dividends have given us a four-bagger from Persimmon so far, and with forecast P/E multiples dropping to 11 this year while there’s a dividend yield of 5.4% on the cards, Persimmon is still a definite Hold.
Oily madness
I opined recently that oil could crash as low as $20 a barrel, and events are making that gloomy suggestion look more and more realistic as Brent Crude has dropped to $28.93 as I write. And that’s inevitably hurt our investment in BP (LSE: BP), with a 30% price fall since April.
If you were to guess the size of our overall loss on BP since purchase in August 2012, what would you say? 20%, 30%, 40%? Actually, what’s pretty remarkable is that, thanks to BP’s having kept its dividend payments going, our overall loss actually only stands at 5%! And that accounts for all charges too.
Sell BP? That would be madness now.
