The Beginners’ Portfolio Buys Sirius Minerals PLC

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The Beginners’ Portfolio is a virtual portfolio, with all costs, spreads and dividends accounted for. Transactions are for educational purposes only and do not constitute advice to buy or sell.

We had some cash in the Beginners’ Portfolio waiting to be invested, and last month I was musing over three candidates, Lloyds Banking Group (LSE: LLOY), SSE (LSE: SSE), and Sirius Minerals (LSE: SXX).

Two down

I still think Lloyds is a great investment at today’s prices, but already having Barclays in the portfolio I don’t want to double up on two banks.

Energy companies like SSE are great for beginners with a long-term view, too, and we’ve already seen an uptick since the election wiped out Labour’s price-capping plans — although that would only have been a mere blip for long-term investors anyway. SSE’s 5% dividend yield is attractive, but we already have some strong dividends in the portfolio.

And I’m away from the spread I originally wanted, having ditched my two poorly-selected growth picks. So I’m back with a small cap growth stock, having plumped for Sirius Minerals.

What is it?

Sirius has just a single asset, but it’s a good one — in its York Potash Project, it has the largest, and highest grade, known deposit of polyhalite potash in the world. It makes for excellent fertilizer, and the company has a number of test results showing how good the stuff is for potatoes, corn and rice, and other crops.

The only question is whether Sirius will get approval to commercially develop the potash — and if it does, the profits are almost certain. That hopeful outcome came closer last month, after the firm’s consent application for the development of harbour facilities on Teeside took a step forward, with two key planning applications still awaited.

Next up, on 30 June, will be a planning meeting to examine the firm’s mine and mineral transport system application.

The price

We had £486.63 in the kitty after our latest dividends, so I’ve added 3,400 shares in Sirius Minerals to the portfolio at the bid price of 13.75p mid-morning on 12 May, for a total of £485.43 including dealing costs.

Newcomers to investing should put most of their money into blue-chip stocks, I reckon, but if you have a long investing horizon ahead of you then you can afford to take the odd smaller-cap growth risk from time to time, and it’s always been my intention to have one or two like that in the portfolio.

I’m now back to that happy state, and I’ll update the status of the portfolio to reflect the new purchase next time.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.