INVESTMENT PORTFOLIO MARCH 2021

April 5, 2021 0 By bullheadedbear
Bull Headed Bear

MONTHLY PERFORMANCE:
+0.3%

2021 PERFORMANCE:
+3.7%

  • PURCHASES: #NKLA, #AMZN, #BABA, #QS, #BOO, #WKHS, #IBM, #GFIN, #ARB, #PLUG, #RDSB,
  • SALES: #T, #AV., #BP, #BARC, #RDSB, #BOO, #LLOY, #IBM, #INTC, #SWKS
  • DIVIDENDS: #APF, #INTC, #MSFT, #NCC, #SWKS, #IBM, #ULVR, #DGOC, #BP, #RDSB

BEST PERFORMERS (+5%)

Barclays Plc: +16.5%
Aviva Plc: +12.8%
Gfinity Plc: +12.2%
International Business Machines Corp: +12.1%
Nestle SA: +10.6%
Lloyds Banking Group Plc: +9%
Unilever Plc: +8.7%
AT&T Inc: +8.5%
GlaxoSmithKline Plc: +8.2%
Vodafone Group Plc: +8.1%
Entain Plc: +7.4%
Morrisons Supermarkets Plc: +6.8%
Diageo Plc: +6.3%
iShares FTSE UK Div Plus: +6.2%
Mirriad Advertising Plc: +6.2%
Intel Corp: +5.3%
LM Ericsson: +5.3%
Hemogenyx Pharmaceuticals Plc: 5.2%

WORST PERFORMERS (-5%)

Greatland Gold Plc: -20%
Virgin Galactic Holdings Inc: -17.4%
Diversified Gas & Oil Plc: -11.2%
Rio Tinto Plc: -10.3%
Reach Plc: -9.6%
Pan African Resources Plc; -7%
iShares Physical Silver: -6.8%

MONTHLY OVERVIEW

The Investment Portfolio March 2021 covers a very active month with multiple purchases and several sales. Some of the purchases and sales are for the same stock due to transitioning shares from one broker to a stocks and shares ISA I hold with a different broker. I have also opened new positions in a couple of growth stocks and several speculative stocks.

TRANSITIONING TO NEW STOCKS & SHARES ISA

As mentioned in other posts, I currently hold stocks with several brokers. There is my original investment broker, Hargreaves Lansdown, where I hold stocks and funds. I also have an account with Interactive Brokers which is mainly used for trading rather than investing. Trading 212 and Freetrade are two other brokers I have accounts with as I was keen to test the commission free brokers. Freetrade I have been really impressed with particularly since they introduced limit orders and expanded their stocks, fund and ETF selection.

This month, I opened an Stocks and Shares ISA with Freetrade and began transitioning some of my long term income stocks. I managed to sell several stocks held with Trading 212 and buy them back cheaper in my Freetrade ISA. Unfortunately, I made a big mistake with the Intel stocks I held with Trading 212. I sold as the price was decreasing with the aim to buy back the following day. However, the price increased significantly and has since continued to increase over 10% since I sold them. They are now above where I feel comfortable buying again therefore I need to wait in hope that they come back down again. The positive here is I did close the position with a 24% return on my initial investment.

SPECULATIVE INVESTMENTS – NEW TECHNOLOGY EXPOSURE

Electric Vehicles (EV) and Green Energy are two of the up and coming sectors I have been wanting exposure to. Previously, I have not invested in this area as it is highly speculative and I believed it to be over valued. Throughout March, there have been significant price drops in many of the EV (Electric Vehicles) & hydrogen energy stocks. This created an opportunity for me to take a closer look. I opened new positions in Nikola, Workhorse, Plug Power and QuantumScape. They all reached lower support areas (prices) that I had identified as a potentially acceptable risk levels.

I also added to Gfinity as it dropped below 4p before earnings and triggered a buy order. If that wasn’t enough speculative investments, I also got my first exposure to crypto and blockchain as I opened a position in Argo Blockchain Plc. I have now exhausted my allowance for speculative stocks as they currently stand at 11% of the portfolio (excluding cash). To manage risk, I generally keep speculative investments to around 5% of the portfolio. Therefore, I will closely monitor this.

BIG TECH

To finish off a busy month, I also opened my first positions in Amazon and Google. They both dropped below what I consider fair value and reached support levels. PayPal and Apple almost reached my buy price too but unfortunately for me, they started to rise again. As a fan of “big tech”, I am hoping there will be more price dips in the future.

DIVIDEND INCOME STREAM PROGRESS

Dividends for March were solid with a 17% increase verses March 2020. After a slow start in January, I am back on track for year on year income growth. This month did include dividends from Intel which as mentioned above is no longer in the portfolio. I will have to try and recoup this income for future months.

PURCHASES

There were multiple purchases made this month. Several of the sales and purchases were due to transitioning stocks in to my ISA which I will not cover in detail. As mentioned above, I also added to my position in Gfinity Plc. (#GFIN) as the price hit 3.8p just before earnings. Below are details on the new additions to the portfolio:

Amazon #AMZN

Amazon.com, Inc. (#AMZN)

Buy Price: $2,896.85

I am a huge fan of Amazon and have wanted it to be part of the portfolio for a long time. I haven’t invested previously because I have been waiting for a much cheaper entry point. Amazon has a current P/E Ratio (Price to Earnings) of 72x which is considered high. However that is at a 5 year low considering it was 292x in 2017. Back in 2012, Amazon had a P/E ratio of 2840x so 72x in comparison appears pretty cheap.

Amazon online shopping services have always been a popular choice with my family. The global lockdown has seen Amazon become even more popular with many households with a recent survey showing 93% of UK online shoppers buy from Amazon. I believe Amazon will continue to play a part in people’s shopping routines even when lockdown has been lifted. The convivence, speed and quality of service just cannot be matched in my opinion.

Amazon online sales may be their biggest revenue stream but there are many other areas to their business that are not as commonly known. AWS (Amazon Web-Services) is an on-demand cloud computing platform and their most profitable segment, growing at a rapid pace. AWS is used by companies such as Disney, Sony, SAP, Pfizer and many others. Amazon is best known for its e-commerce business they are primarily a tech company which is why they will continue to grow at pace. 2020 revenue was $386 billion which was up 38% from 2019. I just need them to keep that up which will justify that P/E ratio of 72x!

Google Alphabet #GOOGL

Alphabet Inc. (#GOOGL)

Buy Price: $2,021.69

Alphabet, or Google as it more commonly known is another company I have been watching for a while. Like Amazon, Google has benefited from lockdown with more people at home with time on their hands. P/E ratio of 33x is still higher than I would like but it is just below the 5 year average of 34x. You have to be willing to pay premium prices for consistent growth.

Google is another company that is part of my everyday life. If I use the internet, I use the Google search engine. Almost every platform used for BULL HEADED BEAR needs to be optimised for Google so that their algorithms can find my content. I am also a regular user of YouTube but in a different way to my kids. To them, YouTube is the new TV. Google has 90.46% of the search engine market share world wide (ref: seotribunal) and Youtube has 73.81% of the video sharing market share (ref: datanyze). Google is an advertising power house!

Google is not just about search engines and videos however. They also have Google Cloud Platform (GCP) which is a rapidly growing segment for them. In 2020, Google Cloud reached over $13 billion annual revenue which is a 47% increase vs 2019 (Ref: zdnet.com). Google Cloud Platform will continue to grow and will end up as another major contributor to their total revenue. It is also a highly profitable segment.

Google is involved in a number of other projects such as augmented reality (AR), autonomous driving, quantum computing and many others. In 10 years time, Google should have even more revenue streams in areas we don’t even know about yet.

Argo Blockchain #ARB

Argo Blockchain plc (#ARB)

Buy Price: £2.09

I am an old school stock investor and have to admit I am a novice when it comes to crypto currencies, crypto mining and blockchain. So far, I have avoided these investments as they are volatile and high risk. Now I realise I need to start adding some exposure to the portfolio. More and more companies are recognising crypto currencies as a source of value, banks are starting to work out how they get involved and major investment companies are starting to build positions. When researching blockchain I understand more how this technology is going to be used in so many areas beyond crypto currencies.

Argo Blockchain feels like a good first step to get exposure to both crypto and blockchain while staying within my comfort zone of equities (stocks). This allows me to continue buying shares in a company as opposed to buying crypto currencies and feels less daunting. Argo Blockchain are a cryptocurrency mining company and experts in blockchain technology. Whilst I don’t claim to understand the all the ins and outs of the technologies, everything I have researched seems very positive. It is also encouraging that this company are expanding aggressively with minimum new debt. Argo also own a significant amount of Bitcoin (501 as of Feb 2021) therefore if the value of Bitcoin continues to grow as projected, Argo will benefit.

I will continue to learn more about this area and keep my eyes open for other investment opportunities.

QuantumScape #QS

QuantumScape (#QS)

Buy Price: $42.00

QuantumScape (#QS) was originally pointed out to me by a contact who had recently started investing in them. This particular contact was very bullish on QuantumScape, claiming they will be the future of electric batteries. They are a battery development company that specialise in solid state batteries for electric vehicles. It is their focus on “solid state” which could revolutionise the electric battery. When I was introduced to QuantumScape, it was trading at over $100 per share which valued the company at more than $40 billion. For a company that has currently received no revenue to date, $40 billion seems extreme. I decided I would stay well away.

However, a couple of events encouraged to take another look and consider opening a position. Firstly, the stock price dropped from a high of $132 back down to around $48. Then, Volkswagen announced a huge expansion within their electric vehicle plans. Already producing electric vehicles, Volkswagen are now striving to be the global leader in EVs by or before 2025. To achevie this, they are building six gigafactories to produce batteries in Europe. The media and investment world were very impressed and the stock price was up over 50% in the following 3 days. So what has this got to do with QuantumScape? I maybe speculating but Volkswagen are one of the main investors and strategic partners for QuantumScape. Also 3 of the 8 QuantumScape board members are former or current Volkswagen staff.

Júrgen Leohold – Former Head of Volkswagen Group Research
Frank Blome – Head of Volkswagen Battery Center of Excellence
Jens Wiese – Head of Volkswagen Group M&A, Investment Advisory, and Partnerships

This information makes this speculative investment much more appealing. I opened a position at $42 on the 5th March after setting a limit order at what appeared to be a good support area.

Workhorse #WKHS

Workhorse Group Inc. (#WKHS)

Buy Price: $13.00

Workhorse Group Inc. (#WKHS) were the next EV stock I purchased this month. Specialising in electric delivery vehicles, they claim to have more electric vehicles on the road than any other company. Once again, these have been excessively priced particularly for a company not yet profitable.

On 4th Feb, Workhorse stock price reached $42.96 which was an all time high. On 23rd Feb, it became clear that Workhorse had failed to win the bid to replace the U.S. Postal Service’s (USPS) aging fleet. The stock dropped around 50% in one day to just under $17. This was more than 60% down from the high of $42.96. The winner of the contract was not an electric vehicle company and so Workhorse have challenged the decision with USPS following President Joe Biden’s drive to use clean energy.

I don’t believe the decision will be over turned. However, the push for green energy gives Workhorse increased leverage for future contract negotiations. The combination of growing e-commerce and increasing use of electric vehicles provides Workhorse with a real chance for growth.

They are still very much a speculative investment but I managed to open a position at $13. This seems a fair price for the potential reward and sits in the support zone of $12-$15.

Nikola #NKLA

Nikola Corporation (#NKLA)

Buy Price: $14.90 & $13.66

Nikola Corporation (#NKLA) is another company in the electric battery and electric vehicle market. Nikola, however, also deal with hydrogen power vehicles, store and infrastructure. At the moment there is much debate around electric power vs hydrogen power. Nikola have the opportunity to capitalise on both.

Nikola is a particular favourite of the social media investor which is one reason I have stayed away. These stocks are regularly hyped up on forums such as Twitter, Facebook and YouTube. The social hype can cause the stock price to rapidly increase and become way over valued. On 26th Feb, Nikola’s stock price was just over $10 a share and by 9th June it, was $93.99 – an increase of 800% in just over 3 months. Amazing for the experienced short term trader. Unfortunately, there will be inexperienced investors that have followed the crowd and bought Nikola for +$90. By the end of March Nikola was around $13. Ouch!

$13 – $15 looked to be a support zone that had been respected a few times previously. I opened a position first at $14.90 and then bought more at £13.66. Before March 2020, Nikola’s stock price had sat steady between $9 and $10 for over a year so that should act as strong support if it breaks below $13. I’m happy at this price to hold for the long term and see if Nikola comes out as one of the winners in this new industry.

Plug Power #PLUG

Plug Power Inc. (#PLUG)

Buy Price: $36.00

Finally, I purchased shares in Plug Power Inc. (#PLUG) – a hydrogen fuel cell solution expert covering a wide range of commercial and industrial applications. This company have been growing revenue although still not profitable. Plug Power already have an number of high profile customers including Boeing, NASA, BMW and Amazon. With the drive to carbon neutral and the push for green energy, there is a lot more potential.

Plug Power’s stock price is another that has seen dramatic increases over the last 12 months. The stock price reached +$75 towards the end of Jan. It then dropped to around $30 towards the end of March. The stock price was punished due to them having to republish the last 3 years financials. There are apparently some irregularities in the accounting methods. Personally this sell off has brought the price down to an acceptable buy level. I purchased a small position at $36 which in hindsight was a bit premature. However, I’m happy with that price for a long term hold. There are several analysts covering Plug Power and the forecasts look strong with an expectation of delivering positive EBITDA by the end of 2021. If Plug Power do achieve positive EBITDA by the end of 2021, I would expect the stock price to start increasing quite nicely.

SALES

As all the sales this month were due to transitioning stocks into my ISA, I will not go into detail of each sale as I normally would.

I will however point out that after selling shares in BP Plc. (#BP.), the price increased before I managed to buy them back. After looking closer at the valuation of BP, I am considering not buying the shares back at all. Their performance has been disappointing over the last couple of years and I am not overly confident with their future plans. I will wait for the next earnings call before making a decision.

I own shares in Royal Dutch Shell (#RDSB) and Diversified Gas & Oil (#DGOC) therefore still have exposure to this sector in my portfolio.

MARCH WATCHLIST VALUATIONS

The BULL HEADED BEAR watchlist contains a number of companies that are at different stages of analysis:

  1. Idea – Something has triggered an interest but no analysis done yet.
  2. Fair Value & IRR – I have reviewed the financials and identified a fair value and potential long term return. No research on the details of the company and its business model yet.
  3. Full Analysis – Fair Value & IRR calculation and further research on the company and business model completed.

I calculate the Fair Value & IRR before doing the full company research as this helps me prioritise my time. The full company research can take a lot of effort therefore, if the current stock price is way above what I deem to be fair value, the full research is not a priority.

Below you will find some of the fair value and potential return calculations as well as any other detailed analysis or earnings reviews.

FAIR VALUE & IRR CALCULATIONS:

DETAILED ANALYSIS / EARNINGS REVIEWS

THANKS FOR READING!
GOOD LUCK & HAPPY INVESTING

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