may '01

News and Comment

The Chuffy totals are now back in profit by 1% and in just three weeks the deficit sustained virtually the whole of the year so far has been eradicated. On the surface a good result but a closer look reveals that all the main equity holdings are still showing a loss since January and in effect they are only half way to getting back on course.

The change in fortunes is down to the cuts in the Federal Reserve’s interest rates and nothing to my investing abilities. I just hope it continues and that my holdings are beneficiaries of the upswing in Global Markets.

I find that probably like most investors it is not the identifying of companies with excellent prospects but it is the method of valuation and its effect on the price paid that I have most difficulty with.

Investors like Warren Buffet have made vast fortunes from being able to correctly value businesses to invest and hold them for years. I have no problem with the holding part but hindsight has a great knack of pointing out that I should have purchased at a later date. This has happened time and time again and I am still further no-way forward in avoiding these situations.

I make some sort of an effort at valuation with a very simple formula of multiplying the current profits, less extraordinary gains, by 10 with a 10% growth rate added in, this is then added to the net assets. I see the difference between the end result and the market valuation as the value put on the management’s ability to achieve a growth rate above that 10%. Hardly an exact science method but it does give me some form of a yardstick, the search goes on and if any visitors care to let me know of more efficient strategies I would be glad to hear them.

I am nearing a decision on which way to go when it comes to investing in the Health Care and Pharmaceutical Sectors, I feel I will be coming out for a mixture of strategies to gain exposure.

The Portfolios

The portfolios have performed well this week and one of the worst effected by the current Bear Market performed a nice little rebound.

The acorn portfolio carried on the task of clawing back the losses incurred this year. Even though Imagination Technologies unveiled its new Metagence technology, the shares dropped back. The details of this latest move by IMG can be found at metagence.com.

The spartan portfolio did well also but still has a negative return to correct. The funds pulled together one direction for a change with only a couple of exceptions. I have also added another £500 to the Witan Investment Trust holding.

The pensions portfolio produced the largest gain of all three active portfolios on the back of the re-rating of First Property Online. The shares have risen since I topped up my holding but breakeven is still some way off. I am unaware why the shares should have performed so well in last two weeks but I have noticed quite a number of large buys going through the market. There was a couple of articles in last week’s press concerning Property Internet and their efforts to link up with larger concerns, BT being one of those touted. The share price duly shot up and this may go some way to explaining the interest in FPO.

News and Comment

After the gains made over the previous three weeks, it was not that surprising for this week to show a small loss although the wafer thin gain still remains in tact.

The shaving of 25 basis points off interest rates is welcome but it still appears that the BoE have still to grasp the depth and strength of the downturn in the US and the effect this will have on the UK economy. I have no doubt that they are working to the best information available affecting the UK economy as a whole but an element of pre-emptive action, greater than their efforts already seen, could save a lot of pain later. In any case, this should help create a more benign environment for equities.

I have made up my mind in which direction I will take to gain exposure to the pharmaceutical sector, as I indicated last week I have gone for a mixture of direct equity holding and regular investment in a specialised managed fund. The spartan portfolio will begin to build a holding in the Finsbury Worldwide Pharmaceutical Investment Trust and I have made a purchase for the youngest of the portfolios.

I have made an addition to the micro chuffy portfolio in the form of Skyepharma PLC. The company has been on my watch list for two years but I have never been confident enough to invest with the company regularly missing forecasts, but after a lot of digging I am in favour of backing them. I must admit to slightly bending my self imposed rules; the choice of Skyepharma doesn’t exactly conform to the criteria I have set for entrants into the portfolio but recent developments and a more realistic forecast of a move into profit by end 2001 has made me take the chance. The other “confession” is that I have been paying in slightly more into the kitty than I first envisaged. The sums have been small in amount but large in number making the total invested so far £816.

The Portfolios

The portfolios have had a mixed performance this week with two falling and one chipping a small gain.

The acorn portfolio was pulled in two directions; Imagination Technologies fell back with most other high-techs but Chorion rose after a very positive AGM where the Chairman gave a very upbeat review on the current position and future plans.

The spartan portfolio made a small amount of headway this week with the Fidelity American holding making good ground. The addition of the Finsbury Worldwide Pharmaceutical Investment Trust has meant transferring £100 from the feeder account and I will be paying £100 per month to the fund.

The pensions portfolio fell back after the good run recently as the price of First Property Online was marked down on no trades. The website is beginning to increase the number of properties available at a heartening rate and it will prove interesting to see if the company can convert these into revenues.

News and Comment

This has been another one of those "push-me/pull-you" weeks with holdings heading in different directions and the overall result showing a slight fall. There hasn't been that much activity really and given the fact that I am preparing to go on holiday next week I didn't want there to be any major situations occurring until my return.

I have had to take a good look at the direction in which the micro chuffy portfolio is going to take. My original thoughts were to create a stable base from which to move on but my own impatience and the appealing prices that some equities are trading at has made me re-think a little.

I have made seven purchases for this new portfolio in the form of Cable & Wireless, ARC International, Parthus Technologies, Imagination Technologies, ARM Holdings, Tadpole Technology and Atlantic Telecom. The cost of these additions has been met from a major desk tidying exercise in which I have closed all the remaining bank accounts that I accumulated during the demutalisation frenzy of the last few years and then deposited the proceeds into the new venture.

As you can see the new entrants could hardly be described as "risk-free" in the true sense of the word with three of them still in the loss-making development stage. Atlantic, Parthus, Imagination, ARM and ARC have fallen a long way since the bubble burst last year but after following them for quite a number of months I felt that we will probably see a general rise in the Technology sector and now would be as good as time as any to take the plunge. Cable & Wireless also must be considered fairly volatile in these conditions but the large cash element of the market valuation makes me feel a little more easier. 

The Portfolios

The portfolios have been treading water with one up, one down and the other unchanged.

The acorn portfolio retreated as Chorion continued their slide back to below the 30p mark. There hasn't been any bad news but the exodus of disappointed punters expecting an early windfall from the demerger of their two divisions continues to take its toll. 

The spartan portfolio had a better week as two of the holdings, Fidelity American and Ivory & Sime ISIS, made good headway. I have transferred another £500 into the Witan Investment Trust as the loss on this holding continues to diminish.

The pensions portfolio had a very quite week as the holding in First Property Online failed to move in any direction. The company's site is getting busier in the sense that the number of properties listed continues to expand. The results due next month should be able to give us a better idea on the amount of successful transactions which is what the site is all about.