Thursday 19 March 2015

Alea Jacta Est! (Portfolio Buy/Sale)

 Alea jacta est.

So said Julius Caesar (reportedly) when he marched his troops across the Rubicon river on to Rome. The die is cast - a decision has been made and it's too late to change.

A couple of times in my life I have taken a fairly large financial gamble. Being naturally cautious, it is usually not a 'bet the farm' type of gamble - but rather one that could gain or lose a substantial amount of money.

So it is today...

I have written a lot recently about nice, 'safe', diversified Exchange Traded Funds; they currently make up around 50% of the DIY Income Investor portfolio, The other half is a collection of high-yield (or formerly high yield) dividend shares or fixed-income securities. It is these investments that have in the past made big capital gains (and - let's be honest - sometimes losses). It is this part of the portfolio (the riskier side) that I hope will grow the size of the portfolio - and therefore the income that it produces.

My two biggest gambles so far were to buy shares in my employer (Atkins). I bought them initially for pence when they were unquoted. Price today: £13. Although I sold too soon, it was more than a ten-bagger. The second gamble was in the very same shares; after I had sold my initial purchases, the company faced financial melt-down and went to the banks for support. At that time - for a few days - they cost around 50p as the market feared the worst (a common pattern, I was soon to learn). I scooped up what I could afford - bought (expensively) at my local bank. Ultimately I sold these again at very satisfactory profits (and again, too soon).

So started my second, secret life of  DIY investment; secret because I used to do a bit of research and trading at work during the 'quiet' times. Which led to this blog.

Rewind to the present: looking at the portfolio a couple of days ago, something caught my eye. Regular readers will be aware that I have been buying more APF (Anglo Pacific Group - the only mining royalty company quoted in London) as a) the price fell and b) the open offer for new shares was made. I could not understand why, although the successful purchase of a huge new royalty and been announced, yet the share price continued to fall.

APF looks like a solid company; it has just raised a large amount of money to expand. Yes, the incomes depend on stuff being dug out of the ground - and some miners might not be inclined to do that so quickly, given the current low commodity prices. The current (historical) dividend yield is 12.5% - a huge yield for such a (literally) down-to-earth company. And yes, it might scale back its dividend, but the yield will surely still be attractive?

It struck me that this might be one of those moments when decisive action is needed. My own portfolio rule is that I should not put more than 5% of the value of the portfolio in any single security. However, such was my confidence in APF that I was already overweight in APF (as the 'professionals' put it) - if not actually obese.

After some reflection I decided - yesterday - to buy more APF. As I didn't have much available cash in the portfolio I chose to sell a couple of 'winners' early:

The CLIG decision was easy (even if premature); XGSD was less obvious, given the objective to increase the share of ETFs in the portfolio. Ultimately, the low-ish yield (just under 4%) was the decider - I can do better with more targeted dividend ETFs.

Having made my sales yesterday, I bought my additional APF shares today in two tranches (for different accounts). The price went up a couple of percent between the purchases; it looks like I helped to move the market!

The die is cast. Nearly 15% of the DIY Income Investor portfolio is riding on this one share. As the ancient wisdom says: "Err in haste, repent at leisure".

(Don't do this at home kids...)

[Sale prices: CLIG £3.40; XGSD £21.172: purchase prices APF £0.8088 and £0.8205]

Update 25/3/15 - 2014 Results published: confirms that the dividend is likely to be (broadly) maintained, despite the 'impairment losses'.

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


  1. Good luck...fortune favours the brave!!!!

  2. yikes - you got more guts than me - I umed and ared over the share issue. cant decide or russia or europe as my next play.

  3. I see someone bought £1.1M today, was that you!!

    1. Haha - no! But he/she obviously reads the blog!

  4. Think price shifted after L&G declared a >£10m investment - a good bet, but give your monkey friend a slap over paws for gambling >%5 portfolio.

    1. He's off somewhere eating lots of bananas...

  5. you've got more guts... and nuts than me

  6. I was under the impression that the dividend forecast has been cut with the acquisition of the new royalty...?

  7. Vamos a ver, viejo platano.....Tengo solo 7% - cobarde!!

    Suerte y platanos...