Triggered by a hopeful reader, I’ve scribbled down some notes on Jean’s and my High Yield Portfolio.
Chances are that you know nothing about the portfolio and so let me give you some background.
About seven years ago, following a discussion with the Business Day editor, we reckoned that it would be interesting and, perhaps, fruitful for the readers and us if we invested a substantial amount of money into the market into and shared our anguish and possible joy with the audience.
Over some 18 months we selected and bought 10 counters , each about an equal weight and each with an attractive dividend yield. One counter, Stefstocks, was sold early on at a small loss, leaving the Portfolio with nine counters.
The Portfolio was begun with a purchase of Grindrod and the other counters, Hudaco, MMI, Pick ‘n Pay, Reunert, Spar, AVI, Famous Brands and Imperial were added – a total investment of a million rands by June 2013.
Mainly reinvesting dividends, we have added more purchases of Spar, AVI and Famous Brands, the latest in investment being a purchase of R60 000 in Famous Brands last month. In total, the Portfolio has invested R1,35m and its market value to date is R2,35m.
We have been silent on the Portfolio some three or four years but have decided because of the trigger above, and the fact the Portfolio’s vicissitudes are a good real life example of investment, to continue to tell its story.
The Portfolio has done reasonably well over the period. Its internal rate of return to date is 15.26% per year. The return means the Portfolio has more than doubled every 4,6 years since inception.
(Fortunately, Microsoft Excel has a formula for internal rate of return and the accompanying article could help those who are interested.)
The internal rate of return is our performance gauge. In deciding whether to invest in more shares – or selling some- we examine a wide range of investment fundamental and technical factors. The internal rate of return tells how well, or badly, we’ve analysed those factors.
I have overlaid the weekly closing price chart of Pick ’n Pay with fan-like speed lines and exponential moving averages. On two occasions the price dropped through the lower speed line during the four-year bleak period for the share. Then, in a strong recovery phase, the price moved quickly upwards into the higher section of the fan.
It then fell but was well supported at around R64. On its point-and-figure chart (not shown) several upwards breaks give us a possible count to around R83.
I have plotted Pick ‘n Pay’s moving average, red short-term, green medium-term and mauve longer-term. Presently stacked in this order, it illustrates a bear trend. However the short-term moving average is rushing upwards and likely to cross the other moving averages very soon. This will switch the stacking order the short-term, above medium term, above long term, confirming a new bull trend.