Despite temperatures in August getting into the mid-thirties, at least here in London, the performance of my portfolio was less hot. More a case of cloudy with a chance of rain. The big changes during the month were the sale of my Barratt Developments (LON:BDEV) shares which didn’t bounce as I expected them to following the Stamp Duty cut.
I also sold off all the shares in my LISA, bar Team17 (LON:TM17). This was for no reason other than a desire to take risk off the table after some decent gains, given my timeframe has shortened and I will likely buy a house before March 2021. That meant I sold off shares in Diageo, Schroder UK Mid Cap Fund, Baillie Gifford Global Alpha Growth and a negligible amount in ASI Global Smaller Companies.
In terms of updates, the biggest news came from Diageo. At the beginning of the month it had results out showing took a £1.3bn charge for the reduced value of businesses hit by the Covid-19 pandemic as it reported a near-halving of first-half profit. Operating profit almost halved to £2.1bn from £4bn in the six months to the end of June as net sales dropped 9% to £11.8bn.
Later on in the month, Diageo announced it had reached agreement to acquire Aviation American Gin. This was for an initial payment of $335 million with a further potential consideration of up to $275 million based on the performance of Aviation American Gin over a ten-year period.
The transfer of my holdings from the SVS Securities administrator to ITI capital (I mean has anyone even heard of them before?) has been far from smooth. I still have no access to those shares which is frustrating and hopefully a situation that can be resolved soon. It means I’m locked into my underperforming HSBC and Merchants Trust shares (the former of which I’m keen to offload), but on the upside it has also stopped me selling AstraZeneca shares during the last 13 months, which is a positive.
My holdings are now as follows:
Income shares (some of which I realise have suspended dividends for now)
- National Grid
- Legal & General
- Merchants Trust
- Intermediate Capital Group
- DS Smith
- Lloyds Banking Group
- Reckitt Benckiser
Funds, trusts and trackers
- Lindsell Train Global Equity
- Marlborough UK Micro-Cap Growth
- HSBC FTSE All World Index
- Murray International Trust
- HSBC S&P 500 ETF
- Scottish Investment Trust
- Artemis Global Growth
Future strategy and thinking
The strategy now is to invest increasingly into growth shares, especially within my SIPP. I’m also looking increasingly into some micro caps but am yet to complete my research and pull the trigger. For too long I’ve fought the market with my share picking and it’s clear income funds and trusts are having to invest in a small pool of poor quality companies to maintain yield at an artificial level. As a private investor I don’t need to do this. Increasingly I want to be more flexible and follow momentum to some degree. The market has a clear preference for growth shares at the moment so I’ll move towards buying growth at a reasonable price. Team17 for me being a prime example of this.
I’ll always maintain income investing at my core because I want to have dividends to reinvest to create a snowball effect, known as compounding. Investing in this way is tricky at the moment though, hence the need for flexibility and to invest in growth industries rather than looking for higher yield in industries with structural challenges. This requires a bit of a mindset shift for me but it’s one I’m in the process of adjusting to. The mix in my portfolio is likely to change going forward. Most investments though will be dividend-paying, with Team17 being an exception to that.
I’m also likely to make more use of investment trusts in areas where I’m not as comfortable investing and to try and overcome biases I may have. As such I’ll let professionals do much of the legwork finding hidden gems and investing in long term turnarounds, allowing me to focus on compounding income and transitioning to direct holdings in growth companies.
I don’t plan to sell holdings to do this, but gradually use cash I can invest to build up a more growth-focused portfolio that can provide dividend growth, alongside share price appreciation. Over a long timeframe I think this combination is the one that will help me achieve my goals and retire early.
You can read my previous article on why I’ll add to my Lloyds holding at some point.