Beginners' Portfolio: Time For A Valuation

Published in Investing on 24 October 2012

We check up on the progress of our shares.

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

We had a quick look at the valuation of the portfolio a little while ago, but it was just a look at the price of the shares and took no account of selling costs.

So, I've now set up a proper valuation method, which looks at the total cash we would get -- after spread and dealing costs -- if we sold each position in the portfolio, and works out a profit or loss between that and the original total buying costs. Here's what it looks like so far...

CompanySharesBuy priceTotal costBid priceProceedsGain/loss% change
Vodafone (LSE: VOD)289168.5p£499.91174.7p£494.88-£4.63-0.9%
Tesco (LSE: TSCO)159305.5p£498.23314p£489.26-£8.97-1.8%
GlaxoSmithKline (LSE: GSK)341,440.5p£502.221,404.5p£467.53-£34.69-6.9%
Persimmon (LSE: PSN)79617.9p£500.55789.5p£613.71£113.16+22.6%
Blinkx (LSE: BLNX)1,31936.9p£499.6849.7p£645.54£145.86+29.9%
BP (LSE: BP)112434.5p£499.01435.2p£477.42-£21.59-4.3%
Rio Tinto (LSE: RIO)163,048.4p£500.183,114.5p£488.32-£11.86-2.3%
BAE Systems (LSE: BA)146332.3p£497.59305.4p£435.88-£61.71-12.4%
Dividends    £37.32+£37.32 
Total  £3,996.97 £4,149.90£152.90+3.8%

Dividends, too

We have a few dividends to account for so far, with an interim payout of 4.63p per share from Tesco, which went ex-dividend on 11 October, giving us £7.63. Prior to the ex-dividend date, buying the shares will entitle you the dividend, while buying after that date will not. It's the date on which the share price will be adjusted by the market to account for the difference, and so it's an appropriate date to account for it for portfolio valuation purposes.

We bought Vodafone on 18 May, and it went ex-dividend on 8 June, so we have a final dividend for 2012 of 6.43p per share to account for, giving us an extra £18.58.

We also have an interim dividend of 17p per share from GlaxoSmithKline, which went ex-dividend in 8 August, after we bought them on 12 June. That's another £5.78.

And by buying BP on 2 August, we just sneaked in ahead of a 5p per share interim ex-dividend date of 8 August. £5.60. Kerrching!

It's dividends that should make the the core of any new investor's long-term portfolio I reckon, and Neil Woodford is an acknowledged expert on the strategy. I heartily recommend the free Motley Fool report 8 Shares Held By Britain's Super Investor for followers of our Beginners' Portfolio. Click here to get your free copy, while it's still available.

What do we think?

My biggest two surprises here are that Vodafone has fallen, and that Persimmon has risen so quickly. Analysts are still forecasting a 7% dividend from Vodafone, with the shares on a forward price-to-earnings (P/E) ratio of only around 11 and the following year's payout estimated at 7.3%. Those dividends will be less well covered than previous years, which is a risk, but I think we're still on a safe long-term bet.

And I was convinced that housebuilders were undervalued (and I think they still are), but I didn't expect the recovery to be so strong so quickly. Getting the timing right was purely by chance, but it's a nice boost.

A mention for our best-performing share, Blinkx, is in order -- it's early days and we're in it for the long term, but the market's reaction to our small-cap growth share has been pleasing so far.

Please share your thoughts on how we're doing below, or on the Beginners' Portfolio Discussion Board.

Are you looking to profit from this uncertain economy? "10 Steps To Making A Million In The Market" is the very latest Motley Fool guide to help Britain invest. Better. I'd urge you to read the report today -- it's free.

More for beginners:

> Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Tesco and has recommended shares in Vodafone.

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Comments

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ANuvver 24 Oct 2012 , 3:26pm

Interesting that the bottom-line gain so far has been driven by forays outside the FTSE100.

Vodafone yield is a thorny one, but how about including TTM (trailing twelve month) yield for the p/f as a whole? This would seem logical to me, since the bulk of the holdings have strong income characteristics.

You can then give an idea of running total return. Cap gain, of course, blown daily by the winds and income, of course, estimated. But it's a useful indication, nonetheless.

As I've argued elsewhere on here, I prefer to use historic yield even though most of my investments are chosen with an eye to dividend growth. That way, your surprises are more likely to be the pleasant kind.

At any rate, some kind of estimate of annual income is worthwhile as, in tandem with watchlists, it allows a degree of reinvestment planning.

ANuvver 24 Oct 2012 , 3:36pm

Ahh...

I was going to sit down and doodle out the yield for you, but there seems to be something very wrong with your table.

Reversing Shares and Buy Price is given, and you've obviously included stamp and brokerage in Total Costs. Thereafter, it all gets a bit strange...

ANuvver 24 Oct 2012 , 3:39pm

Doh! Scratch that - you've put trade-out costs into Proceeds.

ANuvver 24 Oct 2012 , 3:55pm

Okay, after consulting with a fag packet, I reckon this portfolio generates around £141 per annum, giving a yield on cost of 3.53%.

apprenticeDRL 24 Oct 2012 , 4:05pm

The columns buy price and no of shares seem to have been reversed.

Are the dividends being re-invested?

TMFBoing 25 Oct 2012 , 12:45pm

The columns buy price and no of shares seem to have been reversed

Thanks for spotting that - I'll get it fixed.

Dividends are just being accumulated at the moment, as it's not real money - but we can think of what to do with them once the cash builds up a bit.

Foolish best,
Alan
TMFBoing

TMFBoing 30 Oct 2012 , 1:13pm

Folks,

I've started posting news links for Beginners' Portfolio shares on the discussion board, at...

http://boards.fool.co.uk/beginners-portfolio-51822.aspx

I'll try to keep up to date with it as things go, but others are welcome to post updates if I'm not around.

Alan

Gengulphus 30 Oct 2012 , 11:38pm

My biggest two surprises here are that Vodafone has fallen, ...

That's a rather interesting surprise, because Vodafone has not fallen - its share price has risen from 168.5p to 174.7p, or about 3.7%!

The value of the portfolio's Vodafone holding has fallen, but that's not due to Vodafone having fallen. Instead, it's due to trading costs having more-than-cancelled Vodafone's rise. Specifically, the round-trip (i.e. buy plus notional sale) trading costs on a £500 purchase are two £10 commissions, totalling 4% of the amount invested, plus about another 0.5% in stamp duty, and that total of about 4.5% trading costs lost is more than the 3.7% rise in the value of the actual shares...

Gengulphus

TMFBoing 31 Oct 2012 , 10:18am

That's a rather interesting surprise, because Vodafone has not fallen

Yes, sorry, I lost some words (and some meaning) in my copy editing - I meant to say I was surprised that Vodafone has fallen so much over the past couple of months.

Best.
Alan

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