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As of market close on 12 November, the Beginners Portfolio is up 34% since inception including all costs the FTSE 100 is up approximately 27% over the same period, including dividends. When I started out, I went for a mix of what I saw as safe blue-chip stocks, together with some riskier high-tech growth ones and ironically, its these safe ones that have held us back and we have the growth stars to thank for our outperformance.
Oil crunch
When I added BP (LSE: BP) to the portfolio in August 2012, the big risk I saw was that the Gulf of Mexico disaster could hang over the company for some time, and things actually turned out worse than I expected on that score. But thats not the reason behind the 20% share price fall since purchase, to 366p.
No, its the oil price crash, of course. Back then, Brent Crude was up over $110 a barrel, while today its down around $45. BP has offloaded assets, shelved expensive developments, and essentially entrenched to sit out the storm. The big saving grace is that BP has managed to maintain its dividend, and that has offset the share price fall and were down only a couple of percent overall.
The dividend wont be covered by forecast earnings this year or next, but BP seems very keen to keep the annual payment going, and Im reasonably confident well get the 6.5% on offer.
Commodities crash
The Rio Tinto (LSE: RIO) story has been a worse one, with the shares down 31% to 2,238p. In this case dividends have helped a little, but were still looking at an overall loss of 21%.
The commodities crisis has simply gone on much longer than I feared and has bitten much harder, and what started as a relatively small oversupply of things like iron and copper has been exacerbated by slowing Chinese demand. And the analysts dont see any end to it yet, with a 50% fall in EPS forecast for this year and a more modest single-digit drop to follow in 2016.
What to do now? Im just gritting my teeth and hanging on. The cycle will come back, demand will one day exceed supply once more, and metals (and miners) prices will rise again. Ive no idea when, mind, but I reckon Id be mad to sell now.
Pharma rebound?
One of my big early hopes was GlaxoSmithKline (LSE: GSK), and I thought I was adding it to the portfolio at a period of serious pessimism back in June 2012 as patents were expiring and generic competition was hotting up. The firms financial clout and its beefed up investments in rebuilding its drugs research pipeline would, I was confident, get the pharmaceuticals behemoth back to growth before too many years were out.
I still think that, although the market seems to have lost its patience with Glaxo at 1,330p, the share price had fallen 12% since purchase (and its further down as I write, the day after my valuation snapshot was taken). In this case, dividends have actually turned that loss into a modest 5% gain, so its the least disastrous of these three.
And forecasts are still on for a return to EPS growth next year a year sooner than many were thinking just a couple of years ago. And you know what? On a forward P/E of 16 based on 2016 forecasts, Glaxo could even be a takeover target!
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.