Fund Performance Update June 2018 – Frankie Flailing Despite Wonderful Woodside

OK – you know the drill by now.

I review my monthly portfolio performance.  I glance over and see how much further ahead Indexing Ian is.

I remind myself that it’s very early days still.  My unloved stocks will come through eventually and leave Indexing Ian eating my dirt.

I wait patiently.

And so the same story goes this month…

Current Portfolio

The end of June makes two quiet months with no purchases.

Another $2,000 of cash has gone in, increasing the cash balance to $19,485, and the share portfolio has increased by $328, sitting at $40,295.…

Fund Performance Update May 2018 – A Bounce from Baby Bunting, but Trumped by Telstra Trouble

Well if this was the NBA finals series, Indexing Ian would have taken the title in a clean sweep.  And nowhere near as exciting a contest as the Cavs vs Warriors Game 1 in overtime!

0 from 4 months now Ian has been ahead. And it pains me to say that as of the end of May, he’s never had such a commanding lead since we started.

Let me share the gory details with you for this month…

Current Portfolio

May has been a quiet month with no purchases.

An extra $2,000 of cash has gone in, increasing the cash balance to $17,485 (including dividends), but the share portfolio has gone backwards this month by $715, sitting at $39,967.

That puts the cash balance at just over 30% of the total portfolio – definitely time to find another opportunity to put some of that cash to work.

And speaking of work – many of the current Fund constituents certainly have some work to do……

Fund Performance Update April 2018 – Woodside to the Rescue

We’ve just ticked over into May, so it’s time to see how the Fully Franked Fund performed during April. Has the Fund clawed its way back from a slow start? Or is Ian storming ahead and having a good ol’ laugh at all my analysis, wondering why I’m wasting my time?

First, let’s check out the balance of the Fund at 30 April 2018.

Current Portfolio

There’s only been one purchase this month – a top-up on Telstra with $3,488 contributed. Doing the maths on the share balance in the chart below, which has increased by $5,177, you can deduce that it’s been a month of positive performance for the Fund – more details on that shortly.

There’s only $8,850 left of the original $50,000 capital to be deployed into shares. Combined with the $2,000 of cash contributed to the Fund at the end of each of the three months to April, the current cash balance is $14,850.

Add in the $635 received in dividends, and we have nearly $15,500 to play with over May. Perhaps soon I can sit back for a couple of months with Ian in that hammock?

Time to Top-Up on Telstra, or a Thinking Trap?

I said when I initially bought Telstra at $3.61 in mid-January that it wasn’t necessarily a screaming bargain, but deserved a place in the Fund as a solid Fully Franked dividend payer. I also started with a smaller investment, and said at the time I’d love to add to the holdings if the price fell below $3.40 or so (or low $3.20’s ex-dividend).

Well, that time has well and truly arrived.

Telstra closed at $3.10 on Friday 6th April, down around 14% from my initial buy (or 11.6% including the recent dividend). At this price it’s offering a dividend yield of 7.1%, or 10.1% Fully Franked.

Whenever you see a dividend yield that high, it’s usually a big sign that the market doesn’t believe it will sustain its dividend. It wasn’t long ago that Telstra made a whopping cut to its previously rock solid dividend, expected to be $0.22 per share for FY18, compared to $0.31 for the prior two years. The market seems to think that there’s more to come.

Whilst the market may have some further thoughts on this since mid-January, nothing has really changed in my mind since my original investment case. It would take another pretty big cut to the dividend to change my mind, and I don’t see that happening.

But of course, my premonitions means nothing in the world of investing! Absolutely anything can happen. I’m simply betting that the long-term value on offer is better than what the market is saying right now.

I have no special insights into the industry or inner workings of Telstra. However, what I find much more interesting is the psychology of buying another tranche of a stock you already own – especially when the price has fallen……

Fund Performance Update – Miserable March 2018

It’s not quite the official end of March yet, but thanks to the Easter long weekend, stock markets are now closed until 3rd April. That means our March results are already locked in, so why waste any time checking out the results!

February’s First performance update showed Frankie Floundering against Indexing Ian in the early days of the Fully Franked Fund’s life. Have things improved at all during March?

You’ll probably have guessed by the post title that the answer is a Big Franking Fat NO. Lucky we’re in this for the long haul, and not playing one of those silly ‘6 week stock return’ competitions…

Markets in general were a bit wobbly this month, particularly the last week or two. Surely even ‘Invincible Ian’ hasn’t been immune to this – we’ll see shortly.

Before I anxiously open the results of our head-to-head performance, let’s check out the balance of the Fund at 31 March 2018.

Current Portfolio

Around 75% of our initial $50,000 capital has been converted to shares so far, and with the $2,000 of cash contributed to the Fund at the end of February and March, the current cash balance is $16,338.

Investment #7 – Impeccable timing, or a warning not heeded?

You’ll probably know by now that I’m a bit of a sucker for out-of-favour companies and stocks. Godfreys was on my list a few weeks ago, and was very tempting as far as an unloved stock and absolute bargain basement valuation goes, but there’s just too much going wrong for the company at the moment.

The first 6 additions to the Fund I see as decent quality businesses, contributing a solid dividend foundation, and none quite on the brink of collapse like Godfreys. However, the one thing they have in common is they’ve all had some recent issues to deal with, which Mr Market has not been so happy about, hitting the share prices very hard:

Thorn Group (TGA) is joining the Fund as investment #7, and whilst maybe not as high on the ‘quality’ scale as the other 6, it’s certainly also suffered at the hands of the Market over the past couple of years:…

First Fund Dividends and Sustainability

If you’re been around since the very beginning, way, way back at the start of 2018, you might be familiar with my investment F’hilosophy by now:

  1. I’m a big Fan of Index Funds – so yes, I respect Indexing Ian for what he does, even though there will be no index investments in the Fully Franked Fund;
  2. I don’t think the market is fully eFFicient, and as a result it’s possible to find great individual stock opportunities where price and value diverge (although this is no easy task); and
  3. Fully-Franked dividends are a Fantastic Foundation.

A core part of my investment strategy is the Focus on Fully Franked dividends – as well as the Fantastic tax benefits they provide (of course, this might be impacted slightly if the Government is successful with its $59 billion tax grab on Franking cash refunds).

I’m just about to pull the trigger on Fund Investment #7, but before I do, let’s look at the Fully Franked dividend potential of the Fund so far…

Upcoming March Dividends

Most Australian shares pay dividends only twice a year – around March / April, and again in September / October.

Of our 6 Investments so far, 5 of them will catch the March / April round of dividends. Woodside Petroleum will have to wait a few months for its maiden dividend contribution to the Fund.

Let’s have a look at what is coming our way in March…

Fund Investment #6: Woodside Petroleum (WPL)

Yes, that is the share price chart of Investment #6 in the Fund. What sort of crappy company is this? 10 years and it’s been slowly going backwards!

The company is Woodside Petroleum (WPL), which explores, develops, produces and supplies oil and gas. It’s Australia’s biggest independent oil and gas company (primarily Liquified Natural Gas, or ‘LNG’), and represents around 7% of global LNG supply. It’s also one of the biggest companies on the ASX, sitting just outside the Top 10 by size.

For an Aussie company, it also has some fantastic international exposure through assets around the world. (Who says I’m only investing in Australian companies!)

But rather than get into the nitty-gritty of its global oil and gas assets, let’s start with seeing how this fits in with my broader portfolio so far.

There are many ways you can dissect a portfolio – by geography, industry, income versus growth, big versus small – or in the case of my portfolio so far, baby related (65%!) versus non-baby related (35%). Some serious diversification is required here, and fortunately the oil and gas industry is somewhat uncorrelated with the baby goods and assisted reproductive services markets.…

Frankie’s First Performance Update – February 2018

The first investment in the Fully Franked Fund was made on 11 January 2018, with the most recent on 16 February 2018. That’s a very short holding period so far, as we’re still essentially in the ‘setup’ phase.

So it’s fair to say that any performance so far is relatively meaningless… which is especially the case when that performance has started in the wrong direction!

Despite this, I’m keen to get the performance review process up and running, and this is as good a time as any for a Pilot Post.

With that in mind, welcome to the First Fund Performance Update For 28 February 2018!

Current Portfolio

We’ve converted half of our initial $50,000 capital to shares so far, and an extra $2,000 in cash has been set aside for the Fund at the end of February, to add to the remaining cash balance of $25,298.

 

Fund Investment #5 – Oh Baby! (Bunting)

OK, so Godfreys didn’t quite cut the mustard for our Fully-Franked Fund. What appears to be a potential bargain basement priced business is also a debt-laden company hanging on for dear life by a thread.

Retail is a dangerous environment these days – not so much for the customers, where discounting and bargains abound – but for investors.

We’ve had a number of well-known retail brands go bust recently:

  • Oroton (November 2017)
  • Live Clothing (November 2017)
  • Topshop Australia (May 2017)
  • Payless Shoes (April 2017)
  • Howards Storage World (December 2016)
  • Pumpkin Patch (October 2016)
  • Dick Smith (January 2016)

A few others look to be on the ropes, including the great department store Myer, having been on a downward slide for years.…