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Model Portfolio: 23 October 2013

A2 Dominion and another Paragon bond added...

    

At last, a new issue on ORB and thankfully something that we could get our teeth into.  Not the most attractive coupon at 4.75%, as most retail buyers are looking for something above the 5% mark.  But this did not stop the A2 Dominion ORB issue from being one of the fastest closing issues so far.  We managed to get our full position size of 10,000 and were happy with the initial premium as the bond listed at just over 103.  It’s tough bargain hunting in the ORB as all bonds are trading above par, so we shall be looking further afield for capital appreciation opportunities.

As such we covered the Paragon 3.729% in a previous bond of the week and have picked up 10k in the hope of some price gain.  There are however, two issues with this bond, firstly that it is subordinated debt and secondly that it is illiquid and can be hard to buy. This means of course, that it will equally be hard to sell should holders wish to exit.  Both are important facts especially when comparing it to the Paragon 2020 6%that we already hold.

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The overall value of the portfolio has increased from £154,628 to £156,674 and we still have around £19k in cash and continue our hunt for value in the market…

Highlights of the portfolio this month include our Nationwide 1.25% being tendered and we received £5k back (the position value) as cash along with £66 in accrued interest.  The Italy 6% 2028 has had a nice move up, currently trading around 103.5, nearly a 5% rise in worth since the previous write up.  Although, not quite near the 52 week highs in May when it was trading above 108.  It will be interesting to see if many retail bonds around par manage to get above 110 over the next year or so.  The bond market (FTSE ORB) has, after all seen record highs this year, followed by a sharp correction that seems to have levelled out for now…

Our Co-Op position is looking slightly better, although we are still smarting from the purchase at 90.  This has been well covered on the blog and in previous bonds of the week, herehere and here.  But at least the price is up a little from last month, up at 66 from 57. Unite Group has had a small move up (2%) trading at 106 with a current yield of just over 5%.  Again, we watch to see how much further up it can go.

Most bonds have moved less than 1%, but National Grid, has seen the most significant drop in value, losing 2% since last month, down at 110.3 from 113.8.

Note: The portfolio is operated with real money initial deposit of £100,000 and traded through our live bond account. This is to accurately reflect the performance and holds a mixture of credits and bond types, from the AA-rated Places for People bond, down to more speculative holdings such as the BB- rated Enterprise Inns bond. The Portfolio also has a small proportion of its holdings in fixed income preference shares and “bond-like” instruments. Fixed Income ETFs may be added from time to time.

Buy Date Issue Life (yrs) Nominal Buy Price Price Value Accrued
24.3.11 Provident Financial 7.5% 2016 3 6,000 100 107 6,422 34.62
31.7.12 ICAP 5.5% July 2018 5 5,000 100 103.9 5,193 66.51
3.9.12 CLS HLDGS 5.5% BDS 2019 6 12,000 101 101 12,120 215.22
10.10.12 Workspace 6% Sept 2019 6 5,000 100 104.3 5,216 15.66
5.3.13 Paragon 6% 2020 6 10,000 100 103.8 10,375 87.85
16.5.12 Tesco Bank 5% 2020 7 5,000 100 104.5 5,226 108.7
20.9.12 ICG 6.25 Sept 2020 7 12,000 100 105 12,594 80.8
8.5.13 IPF 6.125 % 7 7,000 100 101.4 7,098 201.56
26.3.13 Unite Group 6.125%  7 10,000 104 105.9 10,590 230.94
13.10.11 National Grid PLC 1.25 2021 8 10,000 100 110.3 11,030 8.2
27.3.13 Provident Financial 6% 2021 8 5,000 100 104.8 5,241 25.63
31.1.10 Places for People 1% RPI 2022 9 6,000 100 109.7 6,581 15.43
8.3.11 Italy 6% 2028 15 5,000 100 103.5 5,175 70
16.5.13 Co-Op 13% Perp. U/D 5,000 90 66 3,300 0
20.07.13 Bruntwood Investments 6% 2020 7 10,000 100 103.3 10,330 156.5
4.10.13 A2 Dominion 7 10,000 100 103.1 10,312 0
17.10.13 Paragon 3.729  U/D 10,000 93 89.65 8,965 8.2
            135,767 1,326

 

Category Sum Notes
Securities 135,767 Valuation of current holdings
Accrued 1,326 Interest accrual on above
Cash 19,581 Inc. interest & coupons received.
Total 156,674