September was a tricky month. My underlying portfolio (stripping out cash added) fell about 4%. The market seemed jittery on a number of fronts, none more noticeably than the prospect of Evergrande, a major Chinese real estate developer, defaulting on debt repayments, with all the implications that may have for the Chinese and therefore the global economy.
Hopefully October will be better although a looming US debt ceiling, expected to be hit around the middle of the month is likely to be preceded by a lot of wrangling and uncertainty in the world’s largest economy. That could well throw markets off balance. News around shortages of lorry drivers, other staff shortages, cost pressures, end of furlough are also unlikely to abate. Despite that I’ve been investing through September, adding seven new positions. That takes my UK investment portfolio up to 24 positions, which is near the limit of what I want.
September buys and sells
The seven new positions include investments in: Somero, Property Franchise Group, Staffline, Sureserve, Marble Point Loan Financing Ltd, Made.com and Ferrexpo. The order reflects my level of conviction in each. Somero and Property Franchise Group represent long term growth opportunities and are part of my transition towards growth at a reasonable price investing (GARP) in small caps. Ferrexpo was more a case of trying to catch a falling knife, which, as is too often the case, is not going well. When will I learn!
No position was sold entirely although I banked some profit in Polar Capital and reduced my position in Gamma Communications. Although an analyst note from Equity Development calculates a fair value of 1,305p for Polar, so I may well add back in if the share price can stabilise. It’s very likely I’ll build my position in Polar back up over the coming months.
I added to shares I already held such as Diageo, Flutter Entertainment and HSBC FTSE All World Index.
Significant updates from holdings
Reckitt – said trading so far in the second half was in line with its expectations after warning in July that demand for cleaning products had peaked. The maker of Dettol and Cillit Bang said it was confident that annual like-for-like net revenue growth would be 0-2% with an adjusted operating profit margin of 22.7-23.2%.
Property Franchise Group – announced its interim results for the period ended 30 June 2021, showing that Group revenue increased 117% to £11.1m (H1 2020: £5.1m) and that profit before tax (PBT) increased 57% to £3.1m (H1 2020: £2.0m). Of which £0.9m arose from the underlying business and £0.2m arose from the acquisition of Hunters Property Plc. It was a 54% increase on H1 2019.
A video by management with PI World can be viewed here. I found it really useful as a new investor in the company.
There’s also a good article by Dark Horse Research which can be read here.
Somero – also released interim Results for the six months ended June 30, 2021. These showed H1 revenues were US$64.4m (H1 2020: US$35.3m) led by a very strong and highly active US market. Profits before tax rose to $23.5m (H1: 2020 $7.5m) – an increase of 213%. The dividend increased by 125%.
There was also an update from Diageo at the end of September, which was upbeat and sent the share price up at the end of the month. The brewer said that it’s business was recovering well across the board.
Ivan Menezes, Chief Executive, commented:
“We have made a strong start to fiscal 22, with organic net sales momentum across all regions. This reflects excellent execution, as we benefit from resilience in the off-trade and continued recovery in the on-trade. However, we expect near-term volatility to remain, including the potential impact of any future waves of Covid-19.
“Our North American business is performing strongly, despite some supply chain constraints, reflecting resilient consumer demand. We continue to invest ahead in marketing and innovation to underpin long- term growth. Our business in Europe is recovering ahead of our expectations. Off-trade demand has remained robust and there is good momentum in the on-trade. Our businesses in Africa, Asia Pacific and Latin America and the Caribbean are performing well, although volatility in these markets is likely to persist. Travel Retail continues to be disrupted.”
Dividends in September
In September there were three dividends in total, so this was a fairly modest month on the income front. There were dividends from Legal & General, Brunner Inv Trust and Reckitt.
I’m now quite happy with my portfolio after quite a bit of change in September so unless the markets really tank I’d expect to just add to more of the shares I already own. Although if the shares of 4D Pharma continue to fall, I may be tempted in.
If you enjoyed this article please share on social media. You can also read my update from the end of August here.
A good-looking portfolio, my friend. TPFG will serve you well, but I am not so sure about STAF. Management seem a bit sub-par to me; margins may be tight; and the lack of cheap EU labour may impact the business. Any opinion on DLG? Has slipped of late, but seems a sound business. There seems to be a sapping of confidence in the economy, and there may be some bargains about as a result.
LikeLiked by 1 person
Thanks Bill. My thinking is a lack of labour will force more businesses to use recruiters so I’m fairly happy with STAF and management team has changed in the last year or so, so hopeful of a turnaround. Realise in the past the business got into difficulties. Haven’t looked at DLG properly for a long time but is high yielding and arguably cheap. I already hold LGEN for a high yield along with a few trusts so don’t feel like I need Direct Line. Agree it seems like a sound business though (low EV to EBITDA), decent ROE and operating margin. Also, Admiral seems more expensive and a bit lower yielding but also strikes me as a quality business.
LikeLiked by 1 person