Monthly Roundup 29/01/11

It's been a fairly choppy month both for me and the markets with the FTSE100 index experiencing >1% swings on several days. Overall, however, little has changed. The shock news that UK economy contracted in the last quarter of 2010 by 0.5% and that there has been a steep fall in UK consumer confidence has unsettled things over the past few days, but conversely the markets have so far maintained a certain optimism on learning that, as far as interest rates are concerned, Mervyn is not for swervin'. Next month will be interesting, as the Egyptian troubles develop and the Davos summit is digested. Also, it must be about time we were worrying about the Euro again.

On the month, Sterling rose a little from €1.1612  to €1.1643 and from $1.5522 to $1.5846. UK 10 year gilts fell to give a gross redemption yield of 3.77%. Gold has fallen substantially from $1410 to $1319 per ounce. Brent Crude future rose from $92.53 to $99.39 per barrel and copper fell from $9662.50 to $9625.00 per tonne. The FTSE100 fell slightly from 5899.94 to 5881.37 and the FTSE250 ditto, from 11558.80 to 11546.02.

Equity Portfolio (+1.1% on month, +1.1% on year)
Renishaw (RSW), the metrology engineer, posted a sparkling half yearly report and the shares leapt around 25% to over £16.00. It makes my half sale of shares at around £10 in October look a bit silly now, but given my nearly fourfold gains until then, I'll bear the continuing upside manfully. With a continuing low pound, quality engineers with substantial overseas markets are likely to carry on doing well. I'll hold on to what I have in the sector but probably won't be buying any more.

I was pleasantly surprised by the trading update from building insulation supplier SIG (SHI) which was in the "not as bad as feared" category, indicating reduced debt and lower revenue declines. Mr. Market agreed with me and the shares added nearly 10% to £1.50 on top of a three month rising trend, although they have fallen a bit since. I first bought them in September 2009 at £1.26, which was far too early, since they have been below £1.00 in the meantime, having axed the dividend. So, is it turnaround time yet for the construction sector? As I suggested recently, probably not, given the recent GDP figures which were especially bad for the sector, but that hasn't stopped me from ignoring my own advice and dipping my toe in the water with another small purchase.

As it happens, my household budgeting over the festive period went pleasantly awry. I was embarrassed to find that I had accounted for the seasonal CC bill twice in my estimates. This hardly ever happens to me and certainly not that way around when it does! As a result, I felt a bit flush and what better to do than chance my unexpected cash on a bombed out sector?

My target was T. Clarke (CTO) which carries out mechanical and electrical systems work for construction projects. They posted a downbeat trading update which, in my view, was hardly unexpected. At the same time they announced a dividend reduction which, with a yield of 9%, was also more or less predictable. The shares dropped 20% and I bought in £1.06 including costs. A further dividend reduction may be on the cards since, after the price markdown, the yield is still an uncomfortable 8%. However, the company has no debt and seems to be well managed. This year will be a tough one for them as the Olympic work winds down, but 2012 may well see an upswing in business, especially in London where they stand a good chance of picking up several contracts for new commercial developments. They have since declined to 92p, which is sad, but I am not crying yet.