Once upon a time, Neil Woodford was the most celebrated fund manager in the UK. Today, Woodford bashing has almost become a national sport.
So what mistakes did he make and, more importantly, what can we learn from the great man’s downfall?
Continue reading “Has Neil Woodford lost it? (and his 3 big mistakes)”As dividend stocks go, Prudential and Legal and General both have mixed track records.
On the one hand, they operate in a sector which is relatively immune to the economic cycle (people don’t typically cancel their life insurance just because there’s a recession).
On the other hand, and despite their blue chip credentials, Prudential cut its dividend following the bear market of 2003 and Legal and General cut its dividend following the bear market of 2008.
However, if these insurers have learned the right lessons, and if their shares are trading at reasonable prices today, then I think the potential yield plus growth rewards could be worth the risk.
With that in mind, I used my latest article for Master Investor magazine as an opportunity to pit these two life insurance giants against each other to see who comes out on top.
Continue reading “Prudential or Legal and General: Which is the best dividend growth stock?”Braemar Shipping Services PLC joined the model portfolio way back in early 2011, just a couple of months after the portfolio’s inception.
Continue reading “Selling Braemar Shipping Services: Important lessons from a volatile investment”Over the years I’ve read a lot of books about investing and value investing in particular.
Out of all those books, only a handful had a major impact on how I invest.
So in this blog post, I summarise 39 of the most important things I learned from three books that had the greatest impact on how I invest.
Continue reading “39 Lessons from my 3 favourite investment books”The recent collapse in the share price of Carillion took many investors by surprise, but should it have?
Continue reading “Important lessons from the collapse of Carillion’s share price”We’re halfway through the year so that can only mean one thing: It’s time to re-calculate fair value for the FTSE 100 and dip a toe into the mystic world of stock market forecasts.
Continue reading “FTSE 100 valuation and forecast to mid-2018”This is just a quick update on recent events in the UK Value Investor model portfolio, including buys, sells and performance relative to a FTSE All-Share tracker.
Continue reading “Defensive value portfolio update: 2017 Q2”Neil Woodford strides across the equity income landscape like a colossus, gazing down upon his competitors as they scurry about like ants in the dust.
Okay, perhaps that’s taking it a bit too far, but Neil Woodford is without a doubt the UK’s best know income-focused fund manager.
And one of his largest and best-known holdings for the last 15 years has been GlaxoSmithKline, the pharmaceutical and consumer goods giant which is also a household name.
But now these two giants have parted ways, with Woodford announcing recently that Glaxo was no longer a holding in his portfolio.
However, Woodford’s sale of Glaxo was only a partial exit from the pharmaceutical industry. AstraZeneca, another Big Pharma company, continues to be Woodford’s largest holding, taking up more than 8% of his main fund.
I thought it was interesting that he decided to sell Glaxo but keep AstraZeneca, so I decided to have a look at both companies in this month’s Master Investor magazine.
Was he right to sell Glaxo? Should he have sold AstraZeneca instead? And, since I hold both companies in my model portfolio and personal portfolio, should I (and other dividend investors like me) follow Woodford, or not?
Continue reading “Was Woodford right to sell Glaxo?”Like banks, supermarkets were once seen as super-defensive investments, capable of delivering steady growth regardless of the economic environment.
That was still the mainstream viewpoint when Morrisons joined my model portfolio in 2013, and even the great Warren Buffett owned a significant slice of Tesco.
Of course, we now know that supermarkets are not quite as low risk as we thought.
Tescos, Sainsburys and Morrisons have all cut or suspended their dividends in recent years and Buffett sold all of his Tesco shares while wishing the company the best of luck for the future.
The problem was not so much that supermarkets are not defensive, because they are. Instead, these supermarkets ran into trouble because of a “perfect storm” of:
After several years in my portfolio, Morrisons is still in turnaround mode and I am not especially enthusiastic about its future. However, the share price has largely recovered so I have decided to sell and move on to better things.
Continue reading “Why I’ve finally decided to sell Morrisons”Phil Oakley’s new book, How to Pick Quality Shares, details a three-step process for selecting profitable stocks.
It’s the kind of investment book I like because it’s mostly focused on numbers and ratios, and it approaches the topic of investing in a down-to-earth and step-by-step manner.
I found the book particularly interesting because its general goals are very similar to my own (buy quality companies at attractive valuations) but the details of how to achieve those goals are almost entirely different.
Continue reading “How to Pick Quality Shares: A book review”One argument against investing in mega-cap dividend stocks is that elephants don’t gallop, and it’s true; they don’t.
However, as a dividend-focused investor, I’m not necessarily looking for companies that can grow at ten or twenty percent each year.
What’s important to me is a market-beating combination of income today and potential growth tomorrow, from companies that are less risky than average. And many mega-cap stocks, including some of the biggest dividend payers in the market, fit that description nicely.
That’s why in this month’s Master Investor magazine I’ve taken a look at the three biggest companies on my stock screen.
In other words, the three highest market cap companies from the FTSE 100 that also paid a dividend in every one of the last ten years.
The three companies (Shell, HSBC and BAT) are all very different, so which one will be the heavyweight dividend champion?
Continue reading “Who is the heavyweight dividend champion?”One million pounds is a lot of money. It’s more than enough for most people to retire, and becoming a millionaire remains a long-term dream for many.
That’s why I’ve chosen one million pounds as the new long-term goal for the UK Value Investor model portfolio.
Of course, any idiot can set a goal. What matters is whether or not you can achieve it.
Continue reading “The journey to a million-pound portfolio”In recent years, Diageo’s dividend growth and capital gains have been outstanding.
But Diageo’s share price has already gained more than 200% since the financial crisis, so is it too late to jump on board?
In this blog post, I try to decide if Diageo is an attractive dividend growth stock by looking at:
1) Its financial past, 2) its susceptibility to common risks, 3) the strength of its competitive advantages and 4) whether the shares are cheap, fairly priced or expensive at their current price.
Continue reading “Is Diageo still an attractive dividend growth stock?”KCOM Group’s dividend yield is currently more than 6%. That makes it attractive, but it also puts it squarely in yield trap territory.
For a high-yield stock, KCOM is interesting because it’s a company of two halves.
The first half can trace its origins back to the early 20th century, where it started out as the council-run Hull Telephone Department. This is a defensive but declining business, providing fixed-line telephone and internet services to the people of Hull and East Yorkshire.
KCOM’s other half is an internet services business, helping large organisations with complex and long-term internet-related projects. This business is far less defensive, far more cyclical and far more likely to generate long-term growth.
The question for KCOM’s high dividend yield is this:
Can the cyclical internet services business grow fast enough to offset the declining fixed-line business?
And even if it can, will the cyclical nature of that business undermine KCOM’s dividend, just when the yield is at its most attractive?
These are hard questions to answer with any degree of certainty, but you can find out what I thought of KCOM in the May issue of Master Investor magazine.
Continue reading “Can KCOM Group maintain its 6% dividend or is it a yield trap?”After almost six years BAE Systems, one of the first companies to join the UKVI model portfolio, has been sold.
In terms of raw numbers, the results look like this:
In the rest of this post, I’ll cover why I bought it, what happened during its time in the model portfolio and why I’ve decided to sell.
Continue reading “Sold: BAE Systems returns 141.5% over six years”In this post, I’m going to do a valuation and projection for the S&P 500 using Robert Shiller’s CAPE ratio.
I think this is worth doing on a regular basis because it gives you a good idea of where a particular market is in its valuation cycle and what sort of returns it’s reasonable to expect over the next few years.
Continue reading “S&P 500 valuation and projection: 2017 Q2”Consistent dividend growth is something that many dividend investors look for, and dividend champions are companies that have achieved it for 25 years or more.
However, it’s an extremely difficult feat to achieve and as a result, there are very few dividend champions in the FTSE All-Share.
To get around this problem, I’m going to temporarily redefine dividend champions as companies with a ten-year record of unbroken dividend growth. In the FTSE All-Share, there are about 40 such “mini” dividend champions, which I think is a good number to work with.
In addition, I’m going to limit that list to five companies with the highest levels of profitability, measured using the average ten-year return on capital employed (ROCE).
Why? Because combined with consistent dividend growth, I think consistently high profitability is an excellent way to search for high-quality companies with sustainable competitive advantages. And those are exactly the sort of companies that have a good chance of prospering long into the future.
So without further ado, here is that list of five highly profitable mini-dividend champions.
Continue reading “5 Dividend champions with high returns on capital”Last month I outlined six questions designed to help investors avoid potential yield traps. This month I’ll cover four more.
These four questions, plus the six from last month, look for a variety of warning signs including:
Although it can be difficult to define exactly what bad management is, for example, investigating these issues and drawing conclusions is still a very worthwhile activity.
That’s because it can help you build up a nicely rounded picture of a company, far beyond what you’ll get from just looking at financial statements.
Continue reading “Some more questions to help you avoid yield traps”Another quarter has flown by and so it’s time again for a review of the defensive value portfolio’s progress against its primary goals.
As well as just talking about performance, I’ll try to highlight areas of my approach to investing that you might find useful, especially if you’re interested in dividends and relatively defensive investments.
Continue reading “Defensive value portfolio review: 2017 Q1”If you’re a relatively defensive investor like me, you probably like to have a decent number of defensive shares in your portfolio.
But what number should that be? Or more correctly, what proportion of your portfolio should be invested in defensive shares?
One entirely reasonable answer would be to invest 100% of your portfolio in defensive shares. If you valued defensiveness and low risk above all else then that might be a good strategy.
But that could also be a bit restrictive as there are currently only 81 defensive companies in the FTSE All-Share out of a total of 626.
My approach to being defensive is a little more balanced. Yes, I want my portfolio to be less risky than the market, but I also want a market-beating dividend yield and market-beating capital gains as well.
In order to simultaneously achieve those three goals of low risk, high yield and high growth, I am willing to invest in cyclical companies because they can add a bit of rocket fuel to an otherwise dull portfolio. However, rocket fuel is dangerous stuff, so I wouldn’t want to overload on cyclical shares because they might explode during the next inevitable recession.
So what is the right balance between defensive and cyclical shares for an investor who wants to combine low risks with high yields and high growth?
Continue reading “How many defensive shares should you hold?”