What a year 2020 has been for investors — Covid-19, lockdowns, dividends passed, a see-saw stock market and now vaccines on the horizon.
My biggest financial mistake this year was investing too much in insurer Aviva. I was seduced by the high prospective dividend yield on offer early in 2020, only to see the shares slump when the top team, somewhat cravenly, pulled the payout. A few weeks later, chief executive Maurice Tulloch was replaced by industry veteran Amanda Blanc, who appears much more shareholder-focused.
Thankfully, this costly error was balanced by a 50 per cent rise this year in Treatt, by far my largest holding. Although I slightly trimmed my stake in this cutting-edge maker of flavouring and fragrances as the price rose, I remain excited about its prospects.
We should see its new £41m Bury St Edmunds headquarters come on stream next year — I hope to visit — after a recently opened £12m Florida facility. Apart from bringing likely efficiency and cost savings, these state of the art investments should enthuse prospective customers. My understanding is that investors in continental Europe, home to many large flavours and fragrances companies, are increasingly taking notice of Treatt.
Lockdowns have caused many to reflect on their lives. I am now 78, with, I hope, many years left, but one never knows. It is 33 years since I first took out a personal equity plan (Pep), a precursor of individual savings accounts (Isas), in 1987. So far, I have fortunately not had to withdraw any money, allowing all dividends to be reinvested. In 2003 it passed the £1m mark and has headed northwards since.
While this has been satisfying, I feel it’s now time to take stock. I have decided to withdraw future dividend income for the benefit of family and others including, I hope, myself. I have also elected to use a portion of my Isa to establish a charitable trust where I will be the prime administrator during my lifetime, with my two daughters later, I hope, taking it forward. Isa benefits have been very good to me; it is now time to benefit others. This will be our second “family” charity — the first, established more than 30 years ago, was focused on north-west England where we then lived.
Returning to portfolio performance in 2020, I was pleased, in the circumstances, to deliver modest capital appreciation of 3.5 per cent and an approximate 2.5 per cent dividend income, giving a combined 6 per cent return. Mid-year, things looked depressingly different, even with the help of takeovers of my two property holdings, Daejan and Hansteen, early in 2020. The autumn stock market surge has certainly been very welcome.
Having lived through a number of stock market crashes, including the secondary banking crisis in the 1970s and the global financial crisis of 2008, I had learnt two lessons — to stay aboard and pick up bargains when others are selling.
So I either added to or opened new positions in Air Partner (air chartering) at 62p, Anpario (animal feed additives) at 347p, Christie (professional services) at 80p, MP Evans (palm oil) at 570p, Goodwin (engineering) at £24, Jarvis (stockbroking) at 108p equivalent, Legal & General at 201p, M&G at 133p, and STV (television) at 220p. I also returned modestly to Aviva at 241p.
All these were my lowest purchase prices and all now show useful appreciation. However, other purchases, such as Appreciate (incentive gifts) at 29p, Nichols (Vimto maker) at £12.35 and Tate & Lyle at 670p have not yet progressed.
Sales in 2020, save the big loss on Aviva, have been outside my Isa to help with a family home purchase — all my Gooch & Housego (photonics), and a slice of FW Thorpe (lighting) and of an earlier investment in Nichols. As these have been held for many years, a nasty capital gains tax bill looms.
Dividends in 2020 were very unpredictable with nearly half of quoted companies passing them. However, for me it has not turned out too badly: Anpario, Jarvis, Lokn’Store, and Treatt pleasingly increased dividends, as has Cerillion (billing services), which has taken top spot with a 12 per cent increase. I wish I had bought more.
Some companies which halted dividends have now restarted, albeit at lower levels including Aviva, Air Partner and Nichols.
As we approach 2021, we should be moderately optimistic, assuming the Covid-19 vaccines are effective and are rolled out successfully. There should be a sharp rise in economic activity, dividends should pick up, and we will probably see significant M&A activity. Also, most businesses have cut costs during lockdown, potentially boosting bottom-line earnings.
Finally, an award for the most original company announcement. Anpario, from which I expect great things, put out a statement headed: “Lady Oregon Goes Aloft”. This referred to a racing pigeon, raised with Anpario’s Orego-Stim liquid in her drinking water, winning the 565km Sydney Gold Ring Race at an average speed of 84km/hour and arriving an hour ahead of the runner-up. Perhaps we should all have a sip of Orego-Stim to help us through these challenging times.
Lord Lee of Trafford is a private investor and author of “Yummi Yoghurt — A First Taste of Stock Market Investment”. He is a shareholder in the companies indicated.
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