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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.
I don’t update the Beginners’ Portfolio valuation very often, because I’m very much a “buy and forget” investor and I only really look at shares when there’s some news or if I want to write about them. At the moment the portfolio is up 30% since inception, including dividends and allowing for all costs. But individually it was a pretty mixed bag.
Strength in bricks
The big winner continues to be Persimmon (LSE: PSN), which is still benefiting from the recovery in the housing sector after blind panic sent housebuilder shares down to crazily low valuations in the midst of the financial crisis. At 1,962p now, our investment in Persimmon has more than trebled, once dividend payments are included.
The firm’s third-quarter update in November was upbeat, reporting a 12% rise in private sales over the same period a year previously, on top of a healthy summer. But even after such a massive price gain, the shares are still on a prospective P/E of only around 12 based on year-end expectations, and with earnings growth set to continue next year, that would drop only as far as 11.
Dividends are strong and well covered too, with a 5.2% yield on the cards this year followed by 5.4% next. I can only conclude that Persimmon shares are still cheap, even at today’s price.
Oily slide
Set against that success, we sadly have a plunging BP (LSE: BP) share price again. But at 341p we’re still only looking at an 8% loss (a 25% price loss, but offset by dividends), and that’s based on what we’d have in cash if we sold now, including all charges. Considering the turmoil of the oil and gas business, that’s a surprisingly light punishment, and it serves as a sober reminder to me that the underlying investment reality is often nowhere near as tough as the headline drama.
The BP pain is all about the falling price of oil, with Brent Crude having hit an 11-year low of $36.05. More and more people are expecting it to fall below $30, and I think that’s looking increasingly inevitable. But I reckon it would be madness to sell BP now, even if the dividend is looking like it might come under some pressure if low oil continues for much longer.
Tumbling dirt
And even BP looks good compared with Rio Tinto (LSE: RIO), which at 1,882p is sitting on a 32% loss even after adding dividends (the ‘raw’ share price is down 42%). What can I say? The Chinese slowdown is looking deeper and more prolonged than I expected, and the country’s property bubble is looking scarily similar to the one that nearly brought down the Western banking system when it burst.
There are at least two more years of falling earnings predicted, and the strong dividend is surely pretty risky. But is all the potential bad news already built in to the share price and are we at a time of maximum pessimism? I’ve thought so several time before at higher levels, but I hope it won’t be too long before I’m finally right.
