It has been a while since my last portfolio update, so I thought I would post a quick page about what I have been up to.
In terms of total return, I certainly can’t complain as the portfolio has brought in +5.7%. While that is pleasant enough, on the other side of the coin, I don’t see a lot of immediate upside for the foreseeable future, as valuations already look quite full in a lot of cases. In fact, for the likes of Reckitt, Altria, and Reynolds valuations look high. But if, in aggregate, my holdings carry on doing their thing by selling chocolate, cigars, beer, software, medicine, mortgages, and engines, while managing to raise prices occasionally, then I hope sure things won’t fare too badly.
Additions
I have continued to attempt to build up meaningful positions in companies that I think I will be able to hold for a long time. This, unfortunately, takes time due to the inconvenience of my employer paying me merely once a month (like everyone else, I suppose). This is topped up by sporadic dividend payments and I have been using the combined ammunition (peas, rather) to add to the following positions:
- JP Morgan (most recently 4.9% of portfolio)
This is my big hope for the coming few years and, if interest rates do ever begin to move up, and the backdrop of regulator hostility diminishes I see plenty of upside for JPM. There is also a natural hedge in place in case Dimon fails to get it firing on all cylinders again–namely, break-up. My main decision here is how big a percentage of my portfolio should be allocated to one bank. - IBM (3.4%)
I feel sorry for IBM. It seems to have been ticking all the boxes for what companies should do: divesting low-margin and unprofitable businesses, investing in high-margin areas, borrowing at historically low rates to buy-back undervalued (arguably) shares, partnering where necessary to leverage expertise into new fields (i.e. Apple), and so on. And what does it get for all this? Abuse! Revenues not growing, the wrong cloud, too bureaucratic… I don’t mind if they stay flat for another year or so yet, and I will continue to nibble away in the meantime. - Diageo (4.5%)
On an earnings yield of 5%, this isn’t going to make anyone’s fortune, but you are buying a stake in Guinness, Johnnie Walker, and Smirnoff. If this isn’t something that you can hold forever, then I don’t know what is–not even Google at its boldest and most clever could disrupt those businesses, could they? - PZ Cussons (1.93%)
Soap and shower gel sounds boring, but when you consider that Cussons produces tried and trusted brands (Imperial Leather and Carex) and earns more revenue in Africa than it does in Europe then things get a little bit more interesting. Nigeria, for example, is a country with a population of 175million and a median age of 17. Additionally, Cussons is still a family-controlled company and has increased its dividend every year for more than 25 years so this is a perfect holding for me. What would you buy an emerging markets fund when you can buy a real company? - Berkshire Hathaway (13.9%)
Check out the latest letter to shareholders, if you want to know anything about Berkshire. At a price/book of 1.4, this looks quite reasonable to me.
For full details, see here.
Disclosure: Long PZC, BRK.B, RB., IBM, JPM, DGE, MO, RAI.
Disclaimer: This post is not a recommendation to either buy or sell. Please consult your investment advisor.