Beginners’ Portfolio: The Investor’s Dilemma

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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.

I’m firmly in the long-term-buy-and-hold camp.

But I also like the occasional high-risk punt, and there’s nothing wrong with that providing it doesn’t take up too much of a portfolio — that’s why I went for Blinkx.And despite its well-publicized problems and recent share price crash we’re still up 57% since purchase — and I’ve seen no fundamental reason not to keep holding.

A new purchase?

quindellI would love to add Quindell (LSE: QPP) to the portfolio. The insurance outsourcing firm has been hit hard by things that really are not of fundamental importance, and the share price has suffered — after a bull run that took the shares up 350% earlier this year, they’ve crashed back down to 250p today (N.B. that’s after a 1-for-15 share consolidation).

Quindell has suffered a short-selling attack, failed in its attempt to gain a main market listing, and is facing questions about corporate governance. To me, this all smacks of maximum pessimism, and I really can’t see anything actually wrong.

If we had significant cash in the portfolio, I’d be investing today. But without that cash, what could I sell to fund a purchase?

Cut losses?

I could cut our losses on Tesco (LSE: TSCO). But that could turn out to be spectacularly bad timing, selling at what I really think will be close to the bottom — and I’d be very reluctant to sacrifice what to me is an obviously oversold share yielding nearly 5% in dividends.

baeBAE Systems is another that I think is badly undervalued, but which I suspect will take a little while yet to get back to fair value — and we are up 23% since purchase at 428p. So would it make sense to take that profit to fund an investment in Quindell?

Again, we’re looking at a share offering nearly 5% per year in cash, and again my instincts scream at me not to sell a solid long-term blue-chip investment to chase a smaller-cap growth prospect.

GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) has been a bit of a plodder since I added it to the portfolio, and we’ve seen a measly 6% rise to 1,595p since buying in June 2012 while rival AstraZeneca has stolen the limelight. But you know what I’m going to say… 5% yield, and great long-term potential. I don’t want to sell.

Looking at profit-taking, how about Persimmon (LSE: PSN)? We’ve doubled our money with the FTSE 100’s biggest housebuilder, and with a big cash handout coming soon and strong earnings growth forecast for the next two years which puts the shares on a lowly P/E of 9 by the end of 2015, it’s another great share that I want to hold on to.

Or maybe top-silce?

But that does give me an interesting possibility — we have around £150 in cash sitting in the portfolio, so I could top-slice Persimmon to raise some cash for a Quindell purchase. That would take us to 11 holdings when I really want to stick to 10, but we should not be hidebound by rules — as long as I aim for a long-term holding of 10 stocks, I think we’ll be fine.

I have plenty to ponder.

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Alan does not own any shares in any companies mentioned in this article. The Motley Fool owns shares in Tesco and has recommended shares in GlaxoSmithKline.