Down to Mexico

With Gold Resources Corporation, a seriously out of favour gold mining stock that is listed on the New York Stock Exchange and operates in Mexico.

Why / how did I find this one?  Well, I started tracking it a few months ago having spotted it has a strong dividend orientation (particularly for a gold miner).  If it can maintain its current 3c a month payout that puts it on a 5% yield (pretty impressive for a gold miner, which actually produces a lot of silver - about 100 times as much by weight according to the quarterly release on 8th May).

Year to date it has lost 54% of it's value and cut its dividend in half - but it has a reputation to maintain as a monthly dividend payer so it's likely management will be doing all they can to keep the dividends flowing.

It owns six properties in the Oaxaca state in Mexico, of which five are exploratory and one is operating as a mine.  A key metric for gold miners (especially with the recent drop in the price of gold) is the cost to produce each ounce.  In Gold Resource Corporation's case the total AuEq cost (gold equivalent cost - Au is the atomic symbol) was reported as $515 in May.  Compare that to today's spot price for gold, $1,287.80.  What was also interesting in the May release was that the company has paid down all its debt.

So, to go over that again:

1. The company has no debt
2. It produces gold at less than 40% of the market price
3. It has paid a dividend every month for the last 36
4. It's yielding 5%
5. Its share price is down 54% this year

A pretty compelling selection if you ask me.

One of the ones I have had my eye on

An early entry for July 2013 - I bought a decent volume of the Jardine Matheson ADR on Wednesday afternoon.

Having been to the Far East last year, I was particularly impressed by Singapore.  It is an impressive place for several reasons - it has a very strong state, as well as an appetite for trade (in fact, the main reason it was founded by Sir Stamford Raffles in 1819). 

Jardine Matheson ('Jardines') is one of the oldest companies that operates out of Singapore, and boy is it involved in a lot of things.  Pulled straight from Wikipedia: 

'Today, Jardines is a Fortune Global 500 company^[2] that consists of Jardine Pacific, Jardine Motors Group, Jardine Strategic, Dairy Farm, Hongkong Land, Mandarin Oriental Hotel Group, Jardine Cycle & Carriage and Astra International.^[3][4][5] It also owns Jardine Lloyd Thompson Group and has an investment (21%) in Rothschilds Continuation Holdings, the merchant banking house.'

Impressive stuff - a real classical conglomerate.  Looking through the list you will see if is a play on Far Eastern growth - or at least that's the theory behind my purchase.

It's not the most generous of dividend companies - the 12 month trailing dividend is 2.25% for the main listing (remember, I have bought an ADR), but it has huge exposure to a part of the world that is going to be more and more consumer orientated during my lifetime.

Laura was enthusiastic about the stock too (she liked Singapore....), and I was lucky (time will tell?!) enough to time my buy as the UK stock market was tumbling - so I picked up 20% more than I would usually do.

 

Back into negative territory

 I am back to that thing I thought I had left behind - losing money!  The slump in the gold price in the last quarter has been a real kick in the proverbial for me.  As a reminder, I am exposed to the price of gold via the ETFS Swiss Physical Gold ETF (down 26.85% since 1st January 2013; 13.6% of my total portfolio investments) and African Barrick Gold (down 78.21% 1st January 2013; 4% of my total investments).  Simply, gold has really stitched me up this quarter.  Luckily I am retaining a lot of my assets in cash (37.4%) so that has placed a brake on a ridiculous drop.

The impact of my buy and hold strategy is becoming obvious as the my TER reduces gradually (down to 0.81% from 0.88% three months ago), and my yield increases (12 month trailling is up 0.12% to 1.41% in three months).


As to individual share performance, African Barrick Gold is the naughty child in the corner (down 74.95% excluding its dividend) and Games Workshop sits high up there with a growth of 28.68% (excluding it's chunky 5.34% dividend).

Mark Carney kicks off at the Bank of England tomorrow; I understand the property bubble he maintained in Canada is looking fit to burst, so how long he survives running the British economy I do not know.  What I do know is that I will be moving out of sterling stocks in the next few weeks (my eye is on getting some Singaporean stocks, although I am not yet entirely sure how I will manage that through Hargreaves Lansdown) - I am nervous about the value of the pound as the quantitative easing race to the bottom continues apace....

Another Carnival Cruises crash?

It certainly was this morning, but not in the same vein as the Costa Concordia disaster in the Mediterranean at the start of 2012.  No, this morning the shares started 15.5% down on yesterday - and when I see that kind of share performance, I start to get excited!

Why, you ask?  You already hold CCL shares from the last time the company crashed something - how can a big drop be good?  Well, first things first - Carnival hasn't dropped as far as it did last time and it's been happily paying dividends since then.  It remains a solid long term company too - it's the biggest in a market which has huge barriers to entry (can anyone lend me the cash to buy a cruise liner?  I didn't think so), it's attractive to the oldies - and there are plenty of those in the world - and more importantly there will be loads more in the developing world who want to take advantage of the self-contained hell that is a cruise.  I cannot imagine anything worse.

The financial fundamentals are important in a business this size, so let's have a quick look at what reassured me once the markets were open this morning. Firstly, bookings grow - but in order to make this happen, ticket prices are down.  The earnings guidance is down by between 9% and 31% - so probably down 20%.  Sounds bad, but I do not think this is a position that will sustain - as I said above, this is a service for old people and there will be lots more of rich ones of those in future unless we all go Logan's Run - not a particularly attractive concept for a 31 year old!

I was thinking to pick up something distressed in Europe about now, particularly in Italy which totally stinks at the moment (wife said no to Greece :-(), but I am also getting twitchy about 12 year highs in the London markets.  Although, that said, if you consider all the money the Government has printed then actually the markets could go a lot higher - purely on the basis that so much money is washing around the system.  I digress.

The other company I am really interested in getting involved with is Jardine Matheson - an old family business with lots of interesting exposure over South East Asia.  Probably good until a war kicks off over the South China Sea!

Who ate all the pies?

I appear to have done so.  Ask my wife - I love Greggs, and it might be starting to show.

Sadly for Greggs, the stockmarket did not love their latest results .... and it showed.  On the 29th April the share price dropped more than 10% off the back of some fairly tedious results - like for like sales were down 4.4% during the last quarter.  Why?  Well, bad weather has been blamed.

I already held Greggs in my portfolio before the drop ... and I am very happy to load up on some more.  Why, you might ask?

Well, look at my investment criteria:

• Be contrarian - I bought in as others sold out
• Seek dividends greater than 3% - tick, Greggs is at 4.88% and the board will be keen to defend that 'rising dividend every year since listing' reputation
• Exposed to lots of markets - not really, these guys stick to the people they know, who tend to be Scots and those from northern England
• Get Laura's approval - aside from the obesity issue, she's very happy with Greggs
• Never buy on a Monday - nope, bought these bad boys on a Tuesday

A handy addition to the portfolio, let's hope.

Unlike African Barrick Gold, which continues to pile in - my investment has now lost just shy of 61% of it's value.  How annoying.

I have the POOOOOWWWEERRRRRR

Eleven days ago I made my latest buy.

I'd been feeling a bit funny about the 'always up' effect that seems to be going on in world stock markets these days, so I wanted to leave this purchase a bit longer than normal.

I don't think I previously mentioned, but I have been looking to get into a 'purchase logic' rhythm.  By this I mean that I have identified the main drivers of decision making, and will now rotate through the reasons that drives each purchase.

When I reflected on what and why I was looking at particular shares, I came up with three primary levers:

• Exposure to an undervalued market
• 'Safe' companies
• Technical drivers

For the first, think of Energias de Portugal.  A big reason for considering the stock is that it is closely associated with one of those countries in southern Europe that everyone is worrying about.  Portugal sucked on a cyclically adjusted price-to-earnings measure when I bought EDP - yet in fact it has exposure to Brazil and to the world's third largest renewable energy company.

Unilever was my latest 'safe' company - well know, sustainable (?) dividend grower that it is.  The world would have to go very wrong for Unilever is tank - although som enthusiastically bad management could cause it to go wrong (a problem I believe it is over).

My third lever for selection is the technical drivers.  I previously indicated my attraction to technicals like dividend cover, dividend levels, numbers of countries operated in, free cash flow, dividend growth rates, and earnings per share growth rates.  Well this the basis which I bought on most recently.

I review my weighted portfolio (exempting my gold ETF, which I hold to protect value haha recent gold slump!) against a set of criteria.  I then apply coefficients to make the average of each set of company fundamentals equal the difference between the currently owned shares average yield minus 3%.  This anchor point was sitting at 1.50 prior to my latest buy.

So I looked at currently held companies and a shortlist of others that I also fancied.  For companies those not currenlty held in the portfolio I expect a significantly higher (yet undefined) performance about those held.

I got to a shortlist that included African Barrick Gold (recently bought so disqualified), Games Workshop Group, Aviva, XP Power, and Vodafone (in that order).  Looking at these, I have bought into all but XP Power and Games Workshop Group twice already.   And out of the two I liked XP Power more (although it scored quite a bit less than Games Workshop Group) - this was mainly 'push' away from Games Workshop Group, which has a tight (as in bad) dividend cover of 1.08 versus 1.76.  So that's where I ended up - more XP Power.

So going back to my cycle - next month I need to be looking for stocks in undervalued markets - I can only imagine I will be digging around the Mediterranean region, given how much life sucks down in those parts. 

I hate gold .... miners

The elephant in the room to recognise this month is African Barrick Gold.  I rue the day I discovered this stock, which is a majority owned subsidiary of Barrick Gold Corp.  Since I came across these guys and bought in, then bought some more after the price drop post-Chinese pull out, my shares have lost 50% of their value.  Add in that costs are going up at their operations and it looks like the dividend might be history (although Barrick Gold Corp can't really afford to not have the cash flow).  Contrarian as I am, I think I might have three months off these guys before I consider getting back in.

So, what are the highlights for the last three months?  The gain has ticked up to 1.34% since the start of 2012 - although the market has zoomed up recently and is up 18.29%.  Not great really.

However, I am not the only manager who has had a bit of a crappy three months - I have moved from the 90th percentile up to the 83rd percentile of managers as listed by Trustnet.  And importantly, that's for the funds that haven't been cancelled or merged due to poor performance (a great trick I learned that happens with our friends in the City).

My dividend yield is on the uptick - very important given that dividends have been the primary contributor to wealth growth via the stock market over the last 100 years.  It's up to 1.29%; as time goes on I would hope this would head towards the market average - which is 3.3% today.

The absolute best is saved to last this quarter - and that is the likely output of my current strategy, which will deliver 59% of today's income when I retire at 65 should everything else remain equal.  I can live with that idea!

What else? The lunacy in the markets will probably continue for some time as free money juices stocks upwards.  I am going to stick to doing what seems to make sense - which other than African Barrick Gold - is my current stock selection strategy.

Thanks readers!