April Stock Purchase – GSK, ABF, PZC, SGE, INF


There is only one place to start this post and that is the snap general election called by Teresa May. What surprised me the most was a lack of volatility in the wake of the announcement. Sure the pound surged to a yearly high and stock prices in overseas earning companies dropped, but besides that, markets were relatively calm.

It appears as though the markets like a political shock for once. But this may be because everything points to the conservatives being elected with a substantially increased majority – which will give the government a firm mandate and put it on a steadier, more solid grounding as it begins the difficult and complex work of navigating Brexit.



I will leave you with Neil Woodfords views on the election and how it will affect markets as he succinctly explains how most analysts are thinking right now:

“Theresa May’s decision to take the UK electorate to the polls again in June looks very astute. I expect the Conservatives to win with an increased majority and, from that perspective, it looks like a no-brainer for May to capitalise on opposition weakness and secure a new five-year term in which to negotiate and deliver the UK’s exit from the European Union.

 

I’ve said before that I am now more optimistic about the outlook for the UK economy than the market consensus, which has become increasingly negative since the EU referendum last year. The snap election does nothing to change this view – in fact it is positive as it should give us, as investors in the UK economy, much greater clarity and stability on domestic monetary and fiscal policy over the years ahead.

 

Clearly, the election process will attract a lot of attention and generate a significant amount of column inches. From the perspective of financial markets, however, I don’t think it will prove to be as important as other elections – not in the near term at least. That is in part a function of the global nature of the UK stock market, but it is also because there is a reasonable amount of certainty around the outcome.

 

The same cannot be said about other elections taking place elsewhere in Europe with, for example, the first round of the French elections just about to commence. There is very little certainty about the likely outcome of that contest and the possibility of another populist political surprise has the potential to make markets somewhat nervous in the weeks ahead. In the UK, however, and with a longer-term time-frame in mind, I believe the prospect of a snap election removes much of the political risk that could otherwise have been present in the Brexit negotiations. I see a lengthy period of improving economic stability in the UK – one which is now much less likely to be derailed by politics.” Neil Woodford, Woodford Funds.

April Stock Purchases

The following are the shares I bought in April using my monthly stock purchase programme:

  • Sage: Bought 24 shares at 631p a share. Dividend Income:  £3.39
  • PZ Cussons: Bought 50 shares at 320 a share. Dividend Income: £4.08
  • GSK: Bought 10 Shares at 1640p each. Dividend Income: £8
  • ABF: Bought 7 shares at 2520p each. Dividend Income £2.57
  • Informa: Bought 27 shares at 645p a share. Dividend Income:  £5.35

From the above list, Informa and Associated British foods (ABF) are the new additions to my portfolio. I will give my views here on ABF as it provides great value at these levels – I have no idea why I didn’t buy more!




ABFs prized asset is Primark ands the value-for-money retailer offers investors compelling exposure to secular growth trends in retail over the coming years. In the UK where Primark collects the majority of its earnings, retailers are out of fashion due to a number of headwinds such as inflation and low spending on clothes. But Primark is in unique position and would actually gain from a slowing economy as consumers trade down. Mind you, trading down in this case does not mean foregoing quality as anyone who has shopped at Primark will tell you.

Apart from doing well in the UK, Primark is expanding in Europe and the US and has seen first half sales grow by 21%!

Whilst Primark gets the lion’ share of attention whenever ABF is discussed, it is certainly not the only asset in the conglomerates portfolio.

ABF has a large presence in the sugar spec via its ownership of Illovo sugar. This business has not had the best performance over the past few years. But Sugar prices have began to rise as of late and you can expect this segment to contribute handsomely to ABFs bottom-line.

ABF also owns a number of defensive consumer facing brands. Some names include Kingsmill, Ryvitta, Pataks, Dorset Cereals, Blue Dragon and Twining.

The only thing that concerned me at the time of purchase was the valuation. With the shares trading at more than 20 times current years earnings, I was hesitant to take a large position in the clothing to food retailer. But results last week showed ABF trades at a premium for a reason and has a long runway of growth ahead of it. Should the share price drop again, I will vastly increase my stake in this wonderful company.

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