Twelve for 2012 – Interim Report
Just before Christmas I wrote about my twelve preferred investments for 2012. I broke them down into two parts – my core ‘conviction picks‘ and a higher risk ‘speculative six‘ portfolio. In this blog I look at how they have performed, and examine what lessons are there to learn from this.
But first, here are the 12 I picked and their price performance – for simplicity I’m ignoring currency movements and dividends.
- Origin Enterprises (was €3.05, now €3.60) +18%
- DCC (was €18.53, now €18.29) -1%
- Total Produce (was €0.38, now €0.40) +5%
- ICG (was €14.71, now €15.20) +3%
- Ryanair (was €3.75, now €4.00) +7%
- Gold (was $1608, now $1598.4) -1%
- PetroNeft (was 18.11p, now 6.95p) -62%
- Marston’s (was 89.85p, now £1.039) +16%
- Bank of Ireland (was 8c, now 10c) +25%
- Petroceltic (was 8.25p, now 6.65p) -19%
- Ladbrokes (was £1.234, now £1.572) +27%
- Aer Lingus (was €0.65, now €1.01) +55%
(Disclaimer: Of the listed companies mentioned above I own shares in Total Produce, ICG, Ryanair, PetroNeft, Marston’s and Bank of Ireland).
On average, my 12 picks gained 6.1% (core +5.2% / speculative +7.1%). This compares with the 1.3% rise the FTSE All-Share posted over the period but is below the 8.5% rise in the year to date for the ISEQ (Irish Stock Exchange). Overall I’m pleased with how the picks have performed, given the challenging backdrop.
Taking the two groups in turn, of the conviction picks Ryanair, Origin Enterprises and ICG have proven to be the most interesting. The past few quarters have been very encouraging for Ryanair, which will pay a special dividend of 34c (that’s an 8.5% yield on where the shares are currently trading) in November. The recent pullback in the oil price and the exiting of a number of rivals from the European airline space bode well for the carrier. ICG saw a sizeable secondary placing of stock a fortnight ago which removed the last overhang on the share register following the protracted (and ultimately unsuccessful) takeover battle from a few years back. This should improve the liquidity in the stock and presumably lead to some index-buying as its free-float has increased. Origin Enterprises has surged by 18% due to a combination of solid trading updates and, as I said in my original ‘Twelve for 2012’ post, it was due a re-rating given its anomalously cheap valuation.
For the more speculative picks, it was no surprise to see the huge range (from -62% to +55%) of price returns given the riskier nature of those stocks. Disappointing production figures and concerns around funding have had a severe effect on investor sentiment towards PetroNeft. Hopes of a resolution of the pension uncertainty and a takeover approach from Ryanair has propelled Aer Lingus shares higher. Positive updates from the UK pub sector and hopes of good performances from the Jubilee, Euro 2012 and the London Olympics have benefited Marston’s. Bank of Ireland shares have gyrated violently throughout the first six months of the year, tipping 15c in early February (a near 90% improvement over the 6 weeks after their inclusion on my list!).
In terms of my conclusions from this review, looking ahead to the second half of 2012 I see no reason to change the investment tactics I’ve deployed so far this year. In my opening comments for 2012, I identified five characteristics to look for when buying stocks – a strong balance sheet; a preference for defensives over cyclicals; significant non-Eurozone exposure; political/inflation risk hedging qualities; and attractive and well-covered dividends. I don’t see any merit in modifying those filters, particularly given how much volatility there is in the markets (my own portfolio rose 299bps yesterday alone!).