Beginners’ Portfolio: What Have Vodafone Group plc, GlaxoSmithKline plc And Barclays PLC Done For Our Blue-Chip Prospects?

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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.

When I started the Beginners’ Portfolio my intention was to go for a combination of blue-chip dividend-paying shares and growth shares, and the success so far has been mixed with both approaches. Today I’m going to look at the blue-chip portion of the portfolio, paying special attention to one share I’ve since sold and two I still keep.

Telecoms profit

I sold Vodafone (LSE: VOD) back in December 2013 at a price of 234p, mainly because I thought its undervaluation was out by then, and partly because voice revenues were falling and I didn’t see a clear forward strategy for the company. As it happened, the timing worked out pretty well, and the portfolio made a capital gain of £166.46 with dividends of £58.35 added to the pot — a very nice overall gain of 45% over a 19-month period, after accounting for all costs.

Since then the price has been erratic and today is a little higher at 244p, but I think I made the right decision at the time.

Pharma laggard

GlaxoSmithKline (LSE: GSK) has not worked out as well as I thought it would have by now since I bought it in June 2012. In fact, if I sold at today’s 1,409p level I’d realise a loss on the share price of 6.6% — although total dividends of £79.56 would swing that to a modest total 9.2% gain after costs.

I thought the prospects of a return to earnings growth in 2016 would have improved sentiment towards Glaxo by now, but until that happens I’m happy to hold and keep taking dividend yields of around 6%.

Banking on banking

As the banking sector returned to health, I decided I wanted one to help give us a balanced portfolio, and I went for Barclays (LSE: BARC) in February 2014. Since then we’ve enjoyed a 6.7% gain (after costs) from a share price rise to 282p, with £15.75 in dividends taking the total gain to 9.6%.

One of my big reasons for choosing Barclays was its recovering dividend. It only yielded 2.7% in 2014 but it was very well covered. And we have EPS growth of around 33% forecast for this year, followed by another 20% in 2016, which makes me think we’re still in early days of Barclays’ recovery — and it was a good time to get in.

Bottom line

How has the blue-chip portion of the portfolio performed overall? I couldn’t finish without mentioning the overall 18% loss I took when I dumped Tesco, eased a little by some dividends in the early days. BP has been pretty flat with a total return of 2.8%, Rio Tinto is disappointingly down 13%, again softened by decent dividends, BAE Systems is sitting pretty with a very nice 54% overall gain, and Aviva has given us an even better 74% gain so far.

The blue-chip portion of the portfolio is up 16% after considering the effects of all costs (including the cost of selling the whole lot today). For an average holding time of around a couple of years, that compares reasonably well to the 10% or so we’d have gained from a FTSE 100 tracker over a similar period.

Next time I’ll take a look at the portfolio’s growth stocks.

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