BHB Investment Portfolio – JAN 2021

January 31, 2021 0 By bullheadedbear

MONTHLY PERFORMANCE:
+3.7%

2021 FULL YEAR PERFORMANCE:
+3.7%

  • PURCHASES: International Business Machines Corp. (#IBM)
  • SALES: None
  • DIVIDENDS: #MRW, #AV., #GSK

BEST PERFORMERS (+5%)

Virgin Galactic Holdings Inc: +87%
Gfinity Plc: +46%
Reach Plc: +34%
Nokia Corp: +17.4%
Intel Corp: +11.2%
Skyworks Solutions Inc: +10.4%
Entain Plc: +9.5%
Alibaba Group Holdings Ltd: +8.8%
Mirriad Advertising Plc:6.7%
BP Plc: +6.6%

WORST PERFORMERS (-5%)

Hemogenyx Pharmaceuticals Plc: -22%
Greatland Gold Plc: -20%
Banco Santander SA: -10.2%
Lloyds Banking Group Plc: -9.4%
Barclays Plc: -9%
Walt Disney Co: -7.5%
Centamin Plc: -7.3%

SUMMARY:

Welcome to the first 2021 BHB Investment Portfolio Review. Some major events coming to a close early this morning such as the new US President moves into the White House and takes control, and BREXIT finally done, in terms of the deadline anyway. These two events and the fact we have a vaccine being rolled out should surely create some stability in the markets? Nah.

The new year got off to a flyer with stocks rising rapidly. At one point the Bull Headed Bear Portfolio was up over 7%. Then everything went a bit crazy. The WallStreetBets forum on Reddit decided to pick a fight with the big hedge funds. This resulted in shares for struggling companies that should be cheap going up over 1000% in a couple of weeks, with Gamestop (#GME) being one of the biggest risers. Some Hedge Funds had to close their short positions (betting on the price going down rather than up) and ended up losing a lot of money. This group then started targeting other stocks that hedge funds had big short positions in, and so it escalated. It has now gone from a group of traders causing a few problems to a potentially historical event that could have a major impact on legislation and how things work in the future.

A lot of people start jumping on the band wagon as FOMO kicked in. I have managed to stay well away from this madness although there were times where the dark side was trying to take control. I did get a nice boost to Nokia as the Reddit crew took an interest and the price increased over 35%. There was a moment when I though it was going to keep going. A a 1000% increase on Nokia would have given my portfolio an amazing start to the year! 🙂 However it dropped back down the next day but still finishing the month up so can’t complain.

To finish of the month we also had some of the big earnings releases with Apple, Microsoft, Netflix, Skyworks, IBM etc. all posting their results. Netflix were first out and released some good results with subscribers rising much more than expectations. Apple and Microsoft also posted solid results however, stocks fell for the majority over them. Skyworks earnings results were huge and they did receive recognition with their stock price rising 14% at one point. So why did the stock prices drop for the others when they posted good earnings results? Some of this could be the fact they didn’t release future guidance due to virus uncertainties. The analysts don’t like that. It could also be due to the fact the stock prices are already overvalued and maybe it is time for them to pull back a bit. The final week in Jan was one of the biggest drops across the indexes since October last year. We will have to see this is a blip or the start of a bigger drop.

Last year I managed to increase my dividends received every month verse the previous year. Unfortunately I have started 2021 with Jan being down 21% vs Jan 2020. The dividends received this Jan are from completely different companies to last Jan so hopefully this is just a misalignment of payment dates. Fingers crossed next months is a beat.

PURCHASES:

International Business Machines Corp. (#IBM)

Buy Price: £86.89 / $118
Fair Value Calculation: $213
Analysts Estimates: $137
Dividend Yield: 5.47%

I added IBM to my watchlist at the beginning of the month and ended up buying within a couple of weeks.. Someone I know told me they have invested in a company called Quantum Computing Inc. (#QUBT). They advised me that because of my preference towards tech I should be investing in it too. I have had quantum computing stocks on my list to research for a while but hadn’t got round to it, so this pushed me to start investigating. Quantum Computing (#QUBT) currently has no revenue so would be a speculative play and the stock price was already up over 100% since the start of December. So I was a bit reluctant to invest. However I started researching what other companies are playing with quantum computing and found IBM were one of the big players. This is were I started to look into IBM in a bit more details.

They are currently going through a change in business models as they switch their focus from their traditional business and more towards cloud and AI. The margins in cloud are really good and this area is growing rapidly (working from home has escalated this). However a business of this size trying to change their focus is not an easy task, and their recent results have not been great. I looked at the financials and the Finbox Models as well as putting together my own models. IBM was trading fairly close if not under fair value (depending on which model you use and which assumptions). I added them to my watch list with a price target of $125 as an opener. Then with a target of $119 to increase holdings, feeling that would give me a good margin of safety.

IBM then released their earnings on 21st Jan and unfortunately they were not what the analysts expected and the stock price dropped 10%, to around $118. That was enough for me to buy in. I had already accepted IBM was in a transition period and I’m in this for the long term turnaround. Plus it give me the exposure I wanted to quantum computing (the reason I looked at them in the first place) but with the added security of an established business and a 5.47% dividend yield while I wait.

SALES:

None

BULL HEADED BEAR WATCHLIST

COMPANYTICKERPRICE TARGET 1PRICE TARGET 2PRICE TARGET 3
Activision Blizzard Inc.ATVI$81$75$68
Apple Inc.AAPL$90$80
Amazon.com Inc.AMZN$2,000$1,700
Alphabet Inc.GOOG$1,400$1,300
Facebook Inc.FB$202$180$160
JD.com Inc.JD$68$61
International Business Machines Corp.IBM$125$119$115
Twitter Inc.TWTR$40$30$26
Electronic Arts Inc.EATBC

I have recently posted my research on Apple Inc. where I review the company, the financials and the valuation. Take a look here.

Thanks for reading, see you next month!

Good Luck and Happy Investing