BHB Investment Portfolio Update – AUG 2020

September 5, 2020 0 By bullheadedbear

MONTHLY PERFORMANCE:
+3.8%

2020 PERFORMANCE:

+7.0%

  • PURCHASES: #MSFT, #IUKD, #ISF, #GFIN, #INTC, #GSK
  • SALES: None
  • DIVIDENDS: #T, #VOD, #APF, #HHPD

BEST PERFORMERS (+5%)

Gfinity Plc (#GFIN): +30.5%
Apple Inc (#AAPL): +21.4%
GVC Holdings (#GVC): +21%
Diversified Gas & Oil (#DGOC): +14.5%
Alibaba Group Holdings (#BABA): +14.4%
iShares Physical Silver ETC (#SSLN): +12.8%
The Walt Disney Co (#DIS): +12.7%
Barclays Plc (#BARC): +11.3%
Microsoft Corp (#MSFT): +10.%
Banco Santander SA (#BNC): +9.67%
Greatland Gold Plc (#GGP): +9.6%
Lloyds Banking Group PLC (#LLOY): +7.9%
Aviva Plc (#AV.): +7.2%
Intel Corp (#INTC): +6.8%
iShares FTSE UK Div Plus (#IUKD): +6.7%
NCC Group Plc (#NCC): +6.5%
HL Select Global Growth Fund (#M11FU32): +6.5%

WORST PERFORMERS (-5%)

Virgin Galactic Holdings Inc (#SPCE): -20.3%
Reach Plc (#RCH): -13.5%
Anglo Pacific Group Plc (#APF): -10.6%
Diageo Plc (#DGE): -10.4%
Cisco Systems Inc (#CSCO): – 10.4%
Walgreens Boots Alliance Inc (#WBA): -6.61%

SUMMARY:

Another crazy month in the markets with some big moves up as optimism resumes. However, I have to admit I am still struggling to understand why the markets are rising so strongly when there is clearly still so much risk around. For instance, Covid-19, GDP declines, poor jobs numbers, increasing government debt, US Election uncertainty, Brexit uncertainty – In other words, a lot of head winds; yet the markets are bullish? I am confused. It feels like bad news is the new normal therefore is now standard and so no news is good news and more importantly anything remotely positive is seen as great news resulting in a surge in prices.

Even though I believe the general markets are over priced verses the risk I have made some small purchases. I am certainly reducing my risk and have put money into some funds as well as small top ups on current holdings.

No sales were made this month however there are a few that I am currently reviewing and may result in me having to face the music and cut my loses. What do you do if the events of the last year negatively impact the fundamentals of a stock you own, but the price has dropped so far that it is actually undervalued? Do you cut your loses now as it no longer fits with your strategy, or do you wait and see if the price gets somewhere nearer to fair value and take less of a hit? This is the analysis and thought process I’m going through now. Please feel free to share you comments on this!

We have received some welcome dividend payments this month from the likes of AT&T Inc (#T), Vodafone Group Plc (#VOD), Anglo Pacific Group Plc (#APF) and Hon Hai Precision Industry (#HHPD). I have built on my positions with AT&T Inc (#T) and Anglo Pacific Group Plc (#APF) over the last 12 months but I am still really pleased to see the dividends received in August 2020 are 27% up vs August 2019. This means my dividends have increase every month of 2020 vs the same month last year and considering how many dividends have been cut, suspended or cancelled this year, I am especially pleased with this progress.

PURCHASES:

iShares FTSE UK Dividend Plus (#IUKD)

Buy Price: £5.76
Dividend Yield: 5%
Style: Value
Risk: Medium

I prefer to invest in individual stock I select myself but have convinced myself I should put some in to safer funds. This particular fund has taken a beating this year and not been favoured over the last few years either. The UK market in general has had Brexit hanging over it’s head for the last few years, and the sell off this year has seen the price drop to 10 year lows. Don’t get me wrong this has potential to go lower but in the long term once the head winds are gone and the UK can focus on rebuilding, I believe this has plenty of room for growth. It is also still yielding a 5%+ dividend while we wait for it to mature. This is one I will leave for 10+ years.

iShares FTSE 100 (#ISF)

Buy Price: £6.02
Dividend Yield: 3.9%
Style: Value
Risk: Low

For the same reasons I purchases the iShares FTSE UK Dividend Plus Fund (#IUKD) I believe the price has been hit hard but has potential in the long term to increase significantly. These are both more retirement investments so very long term giving them plenty of opportunity to growth while hopefully being relatively lower risk.

Intel Corp. (#INTC)

Buy Price: £37.75 / $49.45
Fair Value Calculation: £51.27 / $66.34
Analysts Estimates: £44.73 / $57.87
Dividend Yield: 2.4%

Intel Corp. (#INTC) is a new addition to the portfolio this month and one that I am really pleased with. In the recent Intel earnings release they announced the delay of one of their major projects which the market did not like at all causing it dropped over 21% in a single week. Now delaying this project is not good news but in my eyes this sell off was way over done. They still grew revenue and EBITDA while in the middle of a global pandemic, and they are a huge company.

There are some strong competitors such as NVIDIA Corp. (#NVDA) and Advance Micro Devices Inc. (#AMD) but the free cash flow of these combined is around $6B compared to Intel’s $22B. So Intel is a beast of a company with continued growth in Revenue, EBITDA and Free Cash Flow, there is some debt increase but debt is still really low with Debt / EBITDA ratio at less than 1. It also has a PE ratio of less than 10 now which is low compared to it’s own history and crazy low compared to a tech industry that is currently in overdrive – both NVIDIA and AMD have PE ratios over 100!

My calculations shows that even with a steady decline in growth over the next 10 years at this price you could earn around a 20% annual return, which will do nicely. So while the market under appreciates Intel, I’m loading up.

Gfinity Plc. (#GFIN)

Buy Price: £0.038
Fair Value Calculation: £0.04 (*low confidence)
Analysts Estimates: £0.12
Dividend Yield: None

Gfinity plc (#GFIN) is a speculative position I have been building this year. Out of all the speculative higher risk stocks in the portfolio this is my favourite. I am very bullish for the gaming industry in general but especially the esports sector. Gfinity seems to be doing all the right things, getting contracts and partnerships with F1, BT Sports etc. and finding new revenue streams within it’s business. Revenue has been growing well and they are expecting to hit positive EBITDA early 2021, and with no debt this could be a big catalyst for the business and the share price.

GlaxoSmithKline Plc. (#GSK)

Buy Price: £14.72
Fair Value Calculation: £18.48
Analysts Estimates: £18.65
Dividend Yield: 5.6%

Another stock that I have been adding to throughout the year for the income/value element of the portfolio. GlaxoSmithKline Plc. (#GSK) are a huge company with +£33B revenue a year which has steadily increased year on year along with EBITDA. They have a strong 5.6% dividend yield with good cover and payout ratio and although this has been static for a while now I can’t see any reason for this to reduce.

This might be the last purchase I make of Glaxo for a while though as their recent earnings highlighted a significant reduction in vaccines due to people avoiding the doctors and hospitals. Vaccines are the second biggest segment for the company so this is a concern. Hopefully it is more of a delay in revenue rather than missed revenue. Their debt has also increase slightly but has taken the Debt / EBITDA ratio above 3 in Q1 and above 4 in Q2 I prefer to invest when levels are below 3 so will now hold off and make sure it’s in control. Pharmaceuticals do often have higher debt than average but with the current environment having a negative impact on EBITDA and driving an increase in debt I will wait until the next earnings release and see what direction things are going.

SALES:

No sales this month, but I’m expecting some next month!

BHB PORTFOLIO RADAR & WISHLIST

GROW HOLDINGS: Gfinity Plc. (#GFIN):
As previously mentioned, this is my favourite speculative play at the moment therefore, I’m hoping to buy more, but preferably under £0.03.

GROW HOLDINGS: Microsoft Corp. (#MSFT):
Microsoft Corp. (#MSFT) is already a holding in the portfolio but I really like the fundamentals and the growth potential. I would like to add to my position but I would really like to be adding at around $180 so need a significant drop.

GROW HOLDINGS: Intel Corp. (#INTC):
As mentioned above, I like the size and scale of Intel Corp. (#INTC) and believe it’s fundamentals to be good. While it is hovering around the $50 mark I will keep buying and building this position for the long term.

NEW INTEREST: Boohoo Group Plc. (#BOO):
Boohoo Group Plc. (#BOO) is getting a lot of attention on social media at the moment and I have also notice my wife, sister and their friends starting to use their services more and more. This has caused me to take some interest and so I want to start reviewing the fundamentals and get a better understanding of what the company is all about.

NEW INTERESTS: Activision Blizzard Inc. (#ATVI) & Electronic Arts Inc. (#EA):
I am very bullish on the gaming industry and two stocks I like are Activision Blizzard inc. (#ATVI) and Electronic Arts Inc. (#EA). I need to do more fundamental analysis but initial reviews interest me. I might have missed the boat though from a value point of view as the price of these stock have sky rocketed this year.

NEW INTERESTS: Amazon.com Inc. (#AMZN):
Me and my whole family use Amazon services regularly and I really like the business. This is one reason I have been interest in owning the stock for a while, however the reason I haven’t purchase before now is because I have always been waiting for a bigger pull back that never seems to come. There is more analysis I need to do to really get my head around fair value but I like the business and the current environment has just escalated it’s growth to new levels.

NEW INTEREST: Alphabet Inc. (#GOOG) & Facebook Inc. (#FB):
I know my watchlist is starting to look fairly obvious but Alphabet Inc. (#GOOG) and Facebook Inc. (#FB) are two tech company’s I don’t own and would like to. I have recently looked at their financials and they are insanely good. No debt, masses of cash, growing revenue, EBITDA and Free Cash Flow monsters – they are perfect. They are continuing to growth and will continue to grow. There are some political and legal head winds with potential scenarios either wanting to split the companies, tax them more or sue them in legal battles but these have been around for years so you can’t wait for them to go away. I need the prices to drop a little more before I can pull the trigger with targets looking like #GOOG @ $1400 and FB @ $230.

SALES: Reviewing Holdings
There are a few stocks in the portfolio that are currently running at a loss and some at quite a big loss! This is niggling me and so I want to review these which could result in me cutting my losses on a few of them. See next months update to see what decisions I make.

Thanks for reading, see you next month!

Good Luck and Happy Investing

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