Another negative month (-1.53%) for the portfolio in July and the boring Sell in May and go away theorists are beginning to pop up with their trusty charts and musty data sheets.
A lot of companies reported results in July, before their grand fromages depart for the Mediterranean. Of these, the most healthy for my mixed bag was Capita, with its usual dividend increase (10%), and bulging order book of dull projects that, unlike Google, will not change the world. The only problem with Capita is that it looks too expensive to add to (as usual).
Reckitt Benckiser Group, or RB as we should now call it, the condoms-to-painkillers consumer healthcare company is a similar story with targets being achieved. They seem to have been unsuccessful in touting their heroin substitute drug Suboxone and so are divesting themselves of the problem by spinning it off to shareholders. Assuming a tiny portion of this rump does wind up as a splinter in the lower regions of my portfolio, I will decide what to do with it in due course. Hopefully it will be run for cash and simply return profits via dividends–ideal for ISAs. In the meantime RB is another company I would like to own more of, but also looks too expensive. But don’t companies always, when they are delivering the goods?
Which brings me to the mighty Glaxo which is having a total ‘mare, as footballers say. As if being dragged into the obscure labyrinth of Chinese regulation was not enough, now Sir Andrew W has a good old-fashioned sales problem to deal with–there was a fall of 16% in revenues in the second quarter. Its asthma drug Advair was a notable contributor to this fall, with its sales dropping 12% due to that time-old enemy of decent investors: competition.
The good news is that Glaxo now looks cheap and offers a prospective yield of 5.5%. There are two questions about Glaxo for me:
- How safe is that chunky quarterly dividend?
- Is it too big to be a takeover target? If so, should it be broken up? Either way, I am sure that there is no lack of investment bankers with ideas. Hopefully they will be ignored and Sir Andrew will plan for the next ten or twenty years.
I would definitely like to buy more Glaxo but am trying to resist on the basis that I already have a high exposure to the industry, and there are other reasonably sensible looking alternatives: JP Morgan, IBM, and Diageo.
AstraZeneca, on the other hand, is still operating on turbo following the rocket that was helpfully inserted by Pfizer, and surprised with a 4% increase in second quarter revenues its second consecutive quarter of growth. In contrast to Glaxo’s problems in China, Astra’s sales there rose 23%.
The most heartening aspect of Astra’s revival for me is that its directors are backing it with their own money, and rightly so given their almost rudely hasty dismissal of Pfizer’s doubtlessly well-intentioned proposition. In fact since June, no less than 6 of them have invested, led by their French CEO Pascal Soriot who has bought a cool £2 million’s worth. Tres bien.
What will August bring? Will it complete a hat-trick of down months? We shall see.