Saturday, August 20, 2005

August blues

It has been a pretty tedious August so far for investors. After a fantastic July the market has been taking a breather, slipping back week by week.

Amazingly, the bright light in my portfolios has been Vodafone! I first bought in to VOD in early 2004 with the share price (SP) at about 140p. I finally lost my patience in early 2005 and sold VOD, with the shares at about 140p. In the meantime I kept on buying monthly bundles of VOD for my college fund.

After 18 months of going nowhere the SP finally took a decisive turn upwards in mid July.

At the end of July I bought a chunk of VOD for my mortgage portfolio with the shares at about 142p and now they are up over 7%!

Vodafone is not an aggressive enough choice for my growth portfolio though. Instead of buying into Vodafone I am going to buy into another British company I have decided I like - Rolls Royce!

RR. has just had a great run but I think it has further to go in the long term. It is gaining market share with its superb Trent jet engines and is now second only to General Electric. The great thing about selling jet engines is once you have made the sale you are guaranteed more business throughout the life of the engine as the operator services the jet. RR. is selling loads of engines at the moment and that means reliable revenues from parts and services in the future.

Anyway I am going on holiday today. Hopefully the market will have finished its rest and be ready for some more bullish action when I return in a week or so!

Wednesday, August 10, 2005

Boring banks

Royal Bank of Scotland (RBS.L) reported their 2005 interim results last week. The results were good so why is it my eyes kept glazing over as I tried to read the report?

The problem with banks is that everything they report is quantitative and dry. BAA can talk about planes and Frontline can talk about oil tankers but all banks can talk about is numbers, numbers and more numbers.

Banks can also be hard to differentiate as they all seem to do roughly the same things, just by different amounts and in different markets.

These are not good enough reasons not to buy banks though! RBS are on a P/E of under 12 and reported profits up 14%, with the dividend up 15%. These numbers are very solid and show why no self-respecting income portfolio should be without a few bank stocks.

Banks have no place in my aggressive portfolio but they are perfect for my mortgage and college fund portfolios. Steady earnings growth is exactly what you want in a low-beta, high dividend account and that is what banks provide. I will be doing my best to stay awake and in time add more banks to these accounts.