Beginners Portfolio: Barclays plc, ARM Holdings plc and Rio Tinto plc take us to a 35% gain

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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 don’t constitute advice to buy or sell.

It can be nice to not look at our portfolios for a while — at least if we return to a pleasant surprise, that is. And when I updated the valuation of the Beginners’ Portfolio last week, I was pleased to see gains in most of our holdings taking us to a 35% gain since inception in 2012, after accounting for all costs and spreads.

Banking brightness?

I was especially pleased to see Barclays (LSE: BARC) coming back a little. At 165p, we’re still on an overall 34% loss, even after including dividends. But Barclays shares have picked up 16% now since their 2016 bottom on 5 April. The falling value of sterling in response to recent strengthening of the EU “Leave” campaign, however, has taken its toll on the banks, and Barclays shares have given up some of their recovery. I see a “Brexit” vote as possibly the biggest threat to Barclays right now — indeed, I fear it would devastate the UK’s banking sector in general.

Looking at Barclays itself, now that the market has had time to digest the true meaning if its recent dividend cut, I see sentiment as definitely having turned for the better. New boss Jes Staley is still in his honeymoon period, and he’s making the best of it to implement changes that will cause short-term pain but should set Barclays up for a stronger long-term future.

Technology boost

After staring the year weakly, shares in ARM Holdings (LSE: ARM) have been regaining ground — from their low of 11 February, they’re back up 12% now to 954p. Overall we’re up only a very modest 3% on ARM, but the shares have been in the doldrums for the past year or so, and as forecasts continue to strengthen we’re seeing a P/E multiple that’s looking increasingly attractive. If forecasts prove accurate, ARM’s P/E would drop as low as 24.5 for the year ending December 2017, and that’s lower than it’s been for years.

There really is no sign of ARM’s earnings growth falling off any time soon. First quarter figures released in April showed a 15% rise in normalised EPS after sterling revenue rose 22%, and the signing of new processor technology licences together with extensions of existing agreements is going strong — in the quarter, 4.1 billion ARM-based chips were shipped, for a 10% year-on-year rise.

And I remain insistent that mobile computing is still in its infancy.

Commodities recovery

Rio Tinto (LSE: RIO) has been a disappointment so far, as I greatly underestimated the depth and duration of the commodities downturn — and the portfolio is 28% down on Rio shares. But things have been starting to pick up, and since their low on 20 January, Rio Tinto shares have regained 23% to reach 1,945p. Figures from China have been better than expected of late, and the prices of some metals and minerals have been on the rise — Rio’s biggest product, iron ore, has been steadily picking up since its low point in December 2015.

I know I’ve said it before, but I really do think we could be past the bottom now for Rio Tinto.

Recovering commodities prices have helped our investment in BP too, with oil’s breaking of the $50 level helping the shares to a 20% rise since 11 February, to 369p, and boosting confidence in the dividend.

A storming rise for Sirius Minerals , to 18.7p, has taken us to a 29% profit so far. It’s still high risk, but multiple off-take agreements for the firm’s potash are helping boost confidence.

A solid recovery from Aviva has given us a 46% gain so far, including dividends, and I reckon this is one with a lot more to come. The shares are on a 2017 P/E of only 8.3, with a dividend yield of 6.2% forecast, and that still looks a steal.

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Alan Oscroft owns shares of Aviva. The Motley Fool UK has recommended ARM Holdings, Barclays, BP, and Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.