Progress at last on the Eurozone debt issues. The new deal for Greece almost certainly does not draw any kind of line, does not prevent further crises and will not stem market nerves, but it does establish the principle that partial defaults are the way to go from here. These, and the steady march of inflation, are going to be the tools that eventually dig us out of the debt hole.
As for the developments (or lack of them) in America, it is difficult for mere mortals to know how the poltical posturing will affect the markets from here. I am surprised that values have not fallen further. Perhaps this is a reflection of an underlying phoneyness. I suppose that it's just possible that the US government could stop paying its employees, but I don't see them not paying interest on bonds. No doubt we will see many more cliffhangers in the weeks and months to come.
All this uncertainty means that investors will probably continue to sell equity funds and buy those related to gold or perhaps commodities or selected sovereign bonds/currencies, thereby creating buying opportunities for shares. It's certainly an interesting time to be an investor.
On the month, Sterling rose strongly from €1.1076 to €1.1428, and from $1.6070 to $1.6435. UK 10 year gilt redemption yields plunged from 3.30% to 2.90%. Not surprisingly, gold soared to $1629 per ounce. Brent Crude future rose from $110.52 to $116.3 per barrel and copper continued to rise from $9435 to $9738 per tonne. The FTSE100 fell from 5989.76 to 5815.19 and the FTSE250 from 12040.28 to 11552.06. It seems odd that gold and UK currency and stock should rise together.
Equity Portfolio (-1.14% on year, FTSE all share +0.55%)
My only new purchase this month was the construction and regeneration group Morgan Sindall (MGNS) at £6.69. Times are lacklustre for the building sector and likely to remain so for the foreseeable future which is why I am looking for small staged purchases of solid, well financed companies in this sector on the assumption that they won't all go bust or have their stock diluted into oblivion. The attractions of MGNS are: i) a wide range of capabilities; ii) net cash; iii) P/E of 9.4; and a dividend yield of 6% covered 1.75x, a little lower than I would like, but it's hard to get all the boxes ticked these days. A disadvantage is that, like the smaller Costain (COST), the company works exclusively in the UK and is, therefore, a riskier bet than larger, international contractors like Balfour Beatty (BBY).
I also topped up on Standard Life (SL. ) when they dipped below 200p as part of my plan to diversify away from Prudential (PRU) in the life assurance sector. By virtue of being major investors, such companies are somewhat geared to equity markets, so volatility should be expected.
Shortly I will have more cash to play with, but I need to be disciplined and not splurge on every little price fall. We could go into an extended bear phase and the good results being reported this year may not last.
Hmm, I bought MHNS recently too. Paid around 640p. A great company, though I'd treat the net cash with a pinch of salt (construction firms need working capital in abundance, and do all sorts of things with payment schedules) and the margins are horrid. On the plus side, it did a great job picking up work from rivals that went bust, which is very good for the long-term. Founder still at play, too.
ReplyDelete@Monevator, I take your point about net cash. I think the small margins in construction are what is chiefly depressing the sector in general, as many firms seem to have good order books. -SG
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