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.
The Beginners Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and do not constitute advice to buy or sell.
When I started the Beginners Portfolio my intention was to go for a combination of blue-chip dividend-paying shares and growth shares, and the success so far has been mixed with both approaches. Today Im going to look at the blue-chip portion of the portfolio, paying special attention to one share Ive since sold and two I still keep.
Telecoms profit
I sold Vodafone (LSE: VOD) back in December 2013 at a price of 234p, mainly because I thought its undervaluation was out by then, and partly because voice revenues were falling and I didnt see a clear forward strategy for the company. As it happened, the timing worked out pretty well, and the portfolio made a capital gain of 166.46 with dividends of 58.35 added to the pot a very nice overall gain of 45% over a 19-month period, after accounting for all costs.
Since then the price has been erratic and today is a little higher at 244p, but I think I made the right decision at the time.
Pharma laggard
GlaxoSmithKline (LSE: GSK) has not worked out as well as I thought it would have by now since I bought it in June 2012. In fact, if I sold at todays 1,409p level Id realise a loss on the share price of 6.6% although total dividends of 79.56 would swing that to a modest total 9.2% gain after costs.
I thought the prospects of a return to earnings growth in 2016 would have improved sentiment towards Glaxo by now, but until that happens Im happy to hold and keep taking dividend yields of around 6%.
Banking on banking
As the banking sector returned to health, I decided I wanted one to help give us a balanced portfolio, and I went for Barclays (LSE: BARC) in February 2014. Since then weve enjoyed a 6.7% gain (after costs) from a share price rise to 282p, with 15.75 in dividends taking the total gain to 9.6%.
One of my big reasons for choosing Barclays was its recovering dividend. It only yielded 2.7% in 2014 but it was very well covered. And we have EPS growth of around 33% forecast for this year, followed by another 20% in 2016, which makes me think were still in early days of Barclays recovery and it was a good time to get in.
Bottom line
How has the blue-chip portion of the portfolio performed overall? I couldnt finish without mentioning the overall 18% loss I took when I dumped Tesco, eased a little by some dividends in the early days. BP has been pretty flat with a total return of 2.8%, Rio Tinto is disappointingly down 13%, again softened by decent dividends, BAE Systems is sitting pretty with a very nice 54% overall gain, and Aviva has given us an even better 74% gain so far.
The blue-chip portion of the portfolio is up 16% after considering the effects of all costs (including the cost of selling the whole lot today). For an average holding time of around a couple of years, that compares reasonably well to the 10% or so wed have gained from a FTSE 100 tracker over a similar period.
Next time Ill take a look at the portfolios growth stocks.
The Beginners’ Portfolio follows an investment approach that has brought great long-term rewards for a century and more.
To find out more, get yourself a copy of the Motley Fool’s special 7 Simple Steps For Seeking Serious Wealth report, which shows you how investing in shares and reinvesting dividends has wiped the floor with every other form of investment over the past century and more.
It’s completely FREE, so click here for your personal copy and get started today.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and GlaxoSmithKline, and owns shares in Tesco. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.