Beginners’ Portfolio: Christmas At Tesco PLC

How has the news from Tesco PLC (LON: TSCO), Persimmon plc (LON: PSN) and Rio Tinto plc (LON: RIO) affected our valuation?

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The Beginners’ Portfolio is a virtual portfolio, which is run as if based on real money with all costs, spreads and dividends accounted for.

We’ve had some important news from a few of our Beginners’ Portfolio companies since I last reported before Christmas, but before I take a look at them let’s see a quick recap of the latest overall performance:

Company Shares Buy Cost Bid Value Change %
Vodafone* 289 168.5p £499.51 233.9p £665.97 £166.46 +33.3%
Tesco 159 305.5p £498.23 323.9p  £505.00  £6.77 +1.4%
GSK 34 1,440.5p £502.22 1,637.5p £546.75 £44.53 +8.9%
Persimmon 79 617.9p £500.55 1,272.0p £994.88 £494.33 +98.8%
Blinkx 1,319 36.9p £499.68 182.5p £2,397.18  £1,897.50 +379.7%
BP 112 434.5p £499.01 489.5p £538.24  £39.23 +7.9%
Rio Tinto 16 3,048.4p £500.18 3,152.5p £494.40  -£5.78 -1.2%
BAE 146 332.3p £497.59 437.9p £629.33 £131.74 +26.5%
Apple 2 $458.40 £605.98 $551.10  £646.48  £40.50 +6.7%
Aviva 146 321.4p £470.71 468.4p £673.86  £203.15 +43.2
Dividends         £319.51 £319.51  
Total         £8,469.95 £3,396.29 66.9%

* sold, Bid = sale price

We’ve seen the FTSE faltering a little in the last week or so, but a 66.9% overall gain since we added our first share in May 2012 is really not bad going.

As it happens, that first share was Vodafone and it was the first to be dumped, but by the time we sold on 10 December we’d made a 45% overall profit — the 33.3% capital gain shown in the table, plus 11.7% in dividends.

But on to the news…

Tesco’s Christmas

TescoTesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) recorded a fall in like-for-like sales over the Christmas and New Year period, blaming it on “weakness in the UK grocery market“, although the company did take more than £1bn in the five days leading up to Christmas.

Things in Europe are improving, but political unrest in Thailand has hit Tesco’s Asian business.

The company says that overall, results for the full year to February should be in line with market expectations, suggesting a 15% fall in earnings per share to put the shares on a P/E of under 11.

What do I think? I think that’s just fine. With twice-covered dividends of around 4.5% trickling in, and a return to EPS growth expected over the next couple of years, I’m happy to keep holding for the long term.

Year-end for Persimmon

houseWe’ve done very well so far with a near-doubling from Persimmon (LSE: PSN), and the price spiked up after the housebuilder released a year-end trading update on 8 January telling us of a “strong finish to the year“. The firm delivered 11,528 house sales during the year, which is 16% ahead of the previous year, and saw a 4% rise in its average selling price to £180,900.

The share price has dropped back a bit since then, to 1,272p, but a 99% gain in 18 months is not to be sniffed at — and with very strong earnings growth forecasts suggesting a P/E as low as 10.3 by December 2015, Persimmon is still one of my favourite investments.

Up and down for Rio Tinto

opencast.miningThe mining sector has had a bit of an erratic time recently, and since our last portfolio update our holding in Rio Tinto (LSE: RIO) (NYSE: RIO.US) has dropped back to a small loss of 1.2%, which is definitely not the best of starts — the price is slightly up on what we paid, but we haven’t covered charges and spreads yet.

But we’ve finally seen analysts staring to turn bullish on the mining sector, and we’ve also had a production update from Rio that reported record production of iron ore, thermal coal and bauxite.

We have a pretty flat year for earnings for 2013 expected, but 2014 sees analysts forecasting 16% growth again, with a further 11% penciled in for the year after. That would drop the P/E to only 8 by 2015, and there are dividend yields of around 3.5% on the cards. I reckon that’s silly cheap.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Tesco.

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