BHB Investment Portfolio Update – OCT 2020
- PURCHASES: #BOO, #AML, #INTC
- SALES: #TSG, #HGM, #HHPD
- DIVIDENDS: #DGE, #GSK, #ERIC, #CSCO, #RCH
BEST PERFORMERS (+5%)
Reach Plc (#RCH): +42%
Gfinity Plc (#GFIN): +35.7%
Greatland Gold Plc (#GGP): +14.4%
Barclay Plc (#BARC): +9.2%
Banco Santander SA (#BNC): +9.1%
Aston Martin Lagonda Global Holdings (#AML): +6.5%
Diversified Gas & Oil Plc (#DGOC): +6.5%
Lloyds Banking Group Plc (#LLOY): +6.4%
Mirriad Advertising PLC (#MIRI): +5.8%
WORST PERFORMERS (-5%)
Centamin Plc (#CEY): -38.8%
Anglo Pacific Group Plc (#APF): -16.7%
Intel Corp (#INTC): -14.5%
Nokia Corp (#NOK): -13.8%
Pan Africa Resources Plc (#PAF): -12.7%
BP Plc (#BP.): 12.7%
GlaxoSmithKline Plc (#GSK): -11%
Aviva Plc (#AV.): -9.9%
Cisco Systems Inc (#CSCO): -8.9%
Virgin Galactic Holdings Inc. (#SPCE): -8.6%
Hemogenyx Pharmaceuticals Plc (#HEMO): -8.5%
Unilever Plc (#ULVR): -7.8%
Rio Tinto Plc (#RIO): -6.4%
Take-Two Interactive Software Inc. (#TTWO): -6.2%
Apple Inc. (#AAPL): -6%
Diageo Plc (#DGE): -5.7%
Welcome to the BHB Investment Portfolio Update for October which has taken a bit of a hit finishing -2% for the month. This is not too bad though considering the FTSE 100 dropped -4.9%, NASDAQ 100 dropped -3.2% and the S&P 500 dropped -2.8%. The BHB Investment Portfolio held up relatively OK in comparison to the overall markets.
The portfolio is still +3.7% for the year, but I’m expecting a shaky November. The increase in coronavirus cases and national lock downs starting again are creating fear in the markets. Then there is also the US elections next week which creates scenarios of who wins, possible blue wave and if Trump loses will he step down graciously or kick up a fuss? There is also the continued up and down news from the Brexit talks hanging over the UK markets. Plenty of headwinds, scenarios and risk around so I’m expecting further drops next week – but who knows.
I did make a few purchases this month taking advantage (hopefully) of some price drops and news. The first purchase I made was topping up my holdings of Aston Martin Lagonda Global Holdings (#AML) which is one of my speculative holdings. I also added more to my Intel Corp (#INTC) holdings after it got yet another hammering and then I open a brand new position in Boohoo Group Plc. which I mentioned in the September BHB Investment Portfolio Update.
There were also a few sales this month. 2 gold miners, Trans-Siberian Gold Plc (#TSG) and Highland Gold Mining Ltd (#HGM) and I also sold my full position in Hon Hai Precision Industry Co Ltd (#HHPD). Fairly happy with all these sales as they were all profitable investments.
October was a decent month for dividends but nothing too exciting. October has often been the month of the year where I receive the lowest dividend payments and this seems to be the case again. However I have still managed to double what I received last year and continuing my run of 100% month v month improvement vs 2019.
Boohoo Group Plc (#BOO)
Buy Price: £2.70 / £2.40
Fair Value Calculation: £2.93
Analysts Estimates: £4.60
Dividend Yield: N/A
I first heard of Boohoo Group PLC (#BOO) on social media where it was getting a lot of mentions within investment forums. I was also noticing my wife, sister and people at work using Boohoo a lot more since Covid and so I was intrigued.
Then in July Boohoo hit the investment headlines as it dropped 45% in 12 days for allegations of unacceptable working conditions and underpayment of workers. I then watched the Boohoo earnings call at the end of September where I was really impressed with the effort and speed of the internal investigation and the commitment to solve the issues.
After the CEO put my mind at ease with the ongoing issues, I started analysing the financials. The fundamentals looked very promising with revenue and EBITDA both growing nicely and consistently. Long term debt is reducing with debt/EBITDA at 0.2 and free cash flow is also growing nicely. The current P/E ratio is higher than I would like, but as a long term investment this has potential to have excellent returns.
Then mid October Boohoo were in the headlines again as their auditors resigned due the recent supply chain governance issues which now started to include allegations of money laundering. This resulted in another drop of 20% after the price had just started to rise again.
I believed there was genuine commitment from the CEO to sort out the governance issues and the financials of the company look good with high growth showing. Boohoo are also in the perfect position to capitalise on the accelerated ecommerce environment so I started purchasing on the drop and then added more as it dropped further.
Intel Corp. (#INTC)
Buy Price: £34.40-£33.90 / $44.37-$43.73
Fair Value Calculation: £50.73 / $65.43
Analysts Estimates: £44.55 / $58.75
Dividend Yield: 3.0%
I have mentioned Intel Corp (#INTC) a few times in the last few post as I started buying towards the end of July. They announced in the earnings release in July the delay of a project which the market was not impressed with resulting in a 21% drop in a week. The recent earnings report beat estimates top and bottom line but showed a slow in growth. The stock dropped over 18% over the next week.
Investors are obviously nervous with Intel as their growth is slowing and much lower than competitors like AMD who are taking share from Intel. However, Intel are a power house compared to their competitors. AMD’s growth is around 3 times the size of Intel’s Growth as a % (roughly 10% vs 30% in last 12 months) but that 10% growth from Intel is almost equal to AMD’s total revenue for the last 12 months. So I believe there is risk and some things to keep an eye on, but the recent drops in price feel extremely over done and Intel feels like a bargain opportunity at the moment for a company of this size and position.
Aston Martin Lagonda Global Holdings Plc. (#AML)
Buy Price: £0.4974
Fair Value Calculation: £0.65
Analysts Estimates: £0.35
Dividend Yield: N/A
Aston Martin Lagonda Global Holdings Plc (#AML) is a speculative investment which was initially a small position as a bit of fun. I am an F1 fan and heard the Racing Point team was changing to become the Aston Martin Team and Billionaire Lawrence Stroll had injected cash and was taking over. I was interested to see what happened next.
Since then there has been more news with one of the top Mercedes bosses moving over to Aston Martin to replace the CEO. Then Mercedes-Benz announce a strategic partnership allowing Aston Martin access to it’s top technologies. Mercedes-Benz will also raise their stake in the company to 20% over the next few years. Aston Martin are aiming to have a least 20% of their models electric which shows they are moving in the right direction, and have released forecasted figures with profitability highlighted.
So even though this started as a small holding for a bit of fun, it is now looking like there is a potential turn around story brewing. I just need to be careful not to let personal bias get involved as that could lead to making bad decisions due to seeing what I want to see rather than the reality.
Trans-Siberian Gold Plc (#TSG)
Sale Price: £1.03
Trans-Siberian Gold Plc (#TSG) engage in explorations, development and production of gold and silver in Russia. I hold several different metal miners and Trans-Siberian Gold are one that I have had for a few years now. They are not a bad company and their fundamentals are not too bad either but there is just something in my gut that doesn’t sit right. The share price is very volatile and at one point I was 60% down. The share price has gradually risen and put me back in profit and they have just gone ex-dividend for 6.18p. This latest dividend is a 6% yield on an interim dividend payment alone. So I cashed in and took my 18% return and now have cash available for a stock I feel more comfortable with.
Highland Gold Mining Ltd (#HGM)
Sale Price: £2.996
Highland Gold Mining Ltd (#HGM) are another gold miner that I had in my portfolio. They have just been bought out by Fortiana Holdings Ltd for £3 per share so the shares are now due to be cancelled from the stock exchange and share holders paid out at £3 per share. I could have waited for the process to complete but I decided I would rather sell at £2.996 and have the cash available to take advantage of any situations that can arise – after all there is a fair amount going on at the moment that can result in some big price drops and good opportunities. I liked Highland Gold Mining and if it wasn’t for the take over I would have kept this for much longer, but I can’t complain at returning just short of 60%.
Hon Hai Precision Industry Co Ltd (#HHPD)
Sale Price: £4.03 / $5.20
I have been debating closing my position in Hon Hai Precision Industry Co Ltd (#HHPD) for a while now. I could have sold at a better price and was really hoping to close closer to $6. The price has been volatile ranging from $4.30 to $6.30 for the last couple of years and with the recent drops in the markets and the risk around at the moment I decided to close the position now and take the money.
Hon Hai have been getting harder to understand fundamentally as they have different trading names and release their earnings in different currencies – this might be just me having this issue! It also seems that their debt is growing faster than their revenue and debt/ebitda now exceeding 4 which is higher than I like for what I class as an income stock. They have recently announced they are branching out into the electric car manufacturing market. I actually like the sound of this and it has great potential, but how do they finance this new section of their business when they are already growing debt. Either way if I can’t fully understand the fundamentals so can’t trust my opinion anymore I need to remove the risk and put the cash to use somewhere else.
BHB PORTFOLIO RADAR & WISHLIST
CURRENT HOLDINGS TO GROW:
Gfinity Plc (#GFIN)
Microsoft Corp (#MSFT)
Intel Corp (#INTC)
BooHoo Group Holdings (#BOO)
Predictable I know, I just can’t help it.. their financials are ridiculously good.
Amazon.com Inc (#AMZN)
Alphabet Inc. (#GOOG)
Facebook Inc. (#FB)
Activision Blizzard Inc. (#ATVI)
I already sold Trans-Siberian Gold Plc. (#TSG) and Hon Hai Precision Industry Co Ltd (#HHPD) that I called out in the September BHB Investment Portfolio Update. I am also still considering cutting my loses with Banco Santander SA (#BNC).
The oil industry and my holdings in BP Plc (#BP.) and Royal Dutch Shell Plc (#RDSB) are starting starting to make me a bit nervous. Both holdings are currently running at lost and I was going to hold on to them with the hope for a post Covid recovery. However the road to recovery could be a long one. There is increasing pressure on the oil industry and the move to green energy and the oil prices are very unpredictable at the moment. I am really stuck with what to do with these two stocks but need to make a decision soon either way.