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Model Portfolio: 14 May 2010
We take some profits, trade in-and-out of a new issue and add a holding in Goldman Sachs bonds................    
    

The last few weeks have seen some changes in our model portfolio. In some ways, the www.fixedincomeinvestor.co.uk model portfolio is more active than a traditional bond portfolio. This is a largely a side-effect of our desire to identify and illustrate opportunities in the market. Thus, whilst our approach is that of long-only investment, an element of trading creeps in from time to time.

Recent moves have included:

  • An "in and out" in £5,000 nominal of the Provident Financial 7% 2020. This new retail-targeted  issue met with strong demand in the secondary market and relatively limited supply (only £25 million was issued and this was placed directly with a predominately private investor base). We bought £5,000 at small premium (101) on the first day of trading. After holding for a couple of weeks we took a profit at 106.
  • A purchase of the subordinated Goldman 5,5% 2021. We have taken advantage of the recent negative sentiment on the company to lock in a yield slightly north of 7% on this ten-year bond. The bond has now recovered from the recent lows.
  • Taking a profit on our John Lewis 6.375% 2012 bonds. The bond has performed well for us but now yields just 2.8% and we sell our holding back into the market (luckily we kept the receipt!).

 

We continue to have cash to play with and an upcoming £10,000 redemption from our Merrill Lynch holding. Thus as is often the case with for bond investors, we will be better buyers than sellers over the summer. Hopfully new issues and "special situations" such as our recent purchase of Goldman’s debt will enable us to pick up some value.  

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 106

 10,600

 238

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

 101

 5,050

 250

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

 101

 10,100

332

9th Jan 2008

Marks & Spencer 5.625% March 2014

10,000

  95.82

 105

 10.500

 86

10th April 2008

Bradford and Bingley 11.625 PIBS

10,000

 112.00

 20

 2,000

 /

20 Aug 2008

Next 5.25% Sept 2013

5,000

 86.5

 105.2

 5,260

 166

18 Feb 2009

Tesco 5.5% Dec 2019

5,000

 103.64

 106.75

 5,337

 118

26 Feb 2009

Roche 5.5% March 2015

10,000

 99.37

 108.2

 10,820

 114

22 May 2009 UK Gilt War Loan 3.5% undated 7,000  73.6  71  4,970  112
09 Aug 2009 Rabobank 4% Sept 2015 10,000  99.75  103.25  10,325  275
16 Aug 2009 RBS "Royal Bond 5.3% 2015 100  £100

 

    /
04 Feb 2010 GKN 6.75% 2019 10,000 97.56  101.1  10,110  376
06 May 2010 Goldman Sachs 6,000    88  5,280  198

 

            

Category Sum            Notes
Securities

£100,622

Valuation of current holdings
Accrued

£2,265

Interest accrual on above 
Cash

£10,360

Including interest & coupons received. 
     
Total

£113,247