Analysis & Comment  > Model Portfolio

Share |
Back to 2011

Model Portfolio: 14 July 2011

Model portfolio has increased cash holding, we look to reinvest................

    

In the six weeks since the last valuation we have made a couple of moves in the model portfolio. The Marks & Spencer has now gone and I have reduced our exposure to Lloyds. We were a bit overweight for this credit and I have sold the Lloyds 5.5% 2016 and the Natwest 9% prefs accordingly. All together, that gives us a spare 17,000 of cash that needs to be put to work at some point.

We have one new addition - the Places for People 5% 2016. This bond was a recent new issue and has traded up to a 2 point premium. Even allowing for the two-point premium, this bond offers a spread of 250 over gilts and remains very good value. I expect it to tighten further.

Credits, particularly financials, have been soft so the cash should enable us to get some value. However, the underlying gilt market has been strong and that rising tide is going against our re-investment plans. in absolute price terms, the portfolio is roughly where it was last month.

US bank credits are one possibity - see Bond of the week from the 5th July. In a perfect world, Id like to see gilts pull back before I invest, but I may not have that chance.  

Duration-wise we are bit underweight bonds in the short end. The problem is, yields for sub 3-year bonds are so low that these assets are not worth buying. This in turn forces one to be over-long duration, a situation that creates risk if we see an across-the-board sell-off.

 

Date of Purchase

Issue

Life (yrs) 

Nominal

Purchase Price

Current Price

Value  

Accrued

16 Aug 2009 RBS "Royal Bond 5.3% 2015 4 100  100  106  10,600 /
24 March 2011 Provident Financial 7.5% 2016 5 6,000  100.15  106  6,360 135
21 June 2011 Places For People 5% 2016  5 10,000  100  102  10,200  30

7 Mar 2007

Segro 5.5% 20 June 2018

7

5,000

  97.35

 104

 5,200

 21

16 Aug 2010 Enterprise Inns 6.5% Dec 2018 7 6,000

  83.5

 85.8  5,148

 45

04 Jan 2011 National Grid 2.983% 2018 7 7,000  144.71  155  10,850

 8

04 Feb 2010 GKN 6.75% 2019 8 10,000  97.56  107.5  10,750  489
28 July 2010 RBS Royal Bond  5.1% 2020 9 5,000  96.03  96.4  4,850  117
06 May/19 Nov 2010 Goldman Sachs 5.5% Oct 2021 10 10,000  87.9  95  9,600  421
04 Nov 2010 RBS Inflation-Linked (3.9% min) 2022  11 5,000 100  95.46  4,773 /
20 Sept 2010 Yorkshire Building Society 13.5% 2025 CoCo 14 5,000  116  120  6,000  201
08 Mar 2011 Italy 6% 2028 17 5,000  100.44  100  5,000  287
16 Sept/01 Dec 2010 Lloyds 6.5% Sept 2040 29 10,000  96.35  93  9,300  543
08 March Nationwide 6.875% U/D 5,000    88  93  4,550  8
12 Dec 2010 Ecclesiastical 8.625% prefs U/D 5,000   1.02    /

 

Category Sum            Notes
Securities

108,281

Valuation of current holdings
Accrued

2,305

Interest accrual on above 
Cash

17,771

Including interest & coupons received. 
     
Total

128,357