Tuesday, October 05, 2004
Portfolio review: cruel September
In August, I said September was going to be a crucial month for my portfolio performance. All but one of my holdings reported interim results last month and the market's reaction would play Caesar to my three brave gladiators Dana, Mayborn and Chaucer, gesturing thumbs up or down and sealing the fate of my cash.
Market reaction was muted in the end but negative sentiment on the UK housing market and an unusually severe hurricane season saw my two largest holdings wounded in combat. On Monday Chaucer confirmed the market's expectation that profits would suffer this year in the wake of hurricanes Charley, Frances, Ivan and Jeanne:
on the basis of a normal level of catastrophe activity over the remainder of the year, estimates that they will reduce budgeted profits before tax for the year ending 31 December 2004 by between £10m and £15m. These estimates do not alter Chaucer's intentions with regard to the dividend for the year.
I expect this to knock a third off Chaucer's full-year profits. Hits like this go with the territory when you decide to invest in a Lloyd's insurer and explains why the sector traditionally trades at a discount to the market. Chaucer's sector peers have all been making similar announcements this week, it's reassuring to know this affliction is shared. The company was keen to reassure shareholders the inclement Atlantic autumn could provide some uplift to future profitability, via increased premium rates:
These events are likely to have a beneficial effect on rates in the property and energy sectors. Chaucer had previously indicated that the capacity of Syndicate 1084 would reduce from £400m to £375m for the 2005 year. Chaucer will now work on revised plans to maintain capacity at £400m.
Meaning the company sees more profitable underwriting opportunities than previously anticipated.
The disappointment from Ben Bailey and Chaucer has again been ameliorated by a storming show from Dana Petroleum. At 413p to sell the shares have advanced 84% since purchase.
Values on 31st August:
Ben Bailey, 1281 shares on 20/02/03 at 178p (412p, £5277.72)
Ben Bailey, 890 shares on 21/06/04 at 390p (412p, £3666.80)
Chaucer Holdings, 8092 shares on 06/10/03 at 42.88p (46p, £3722.32)
Chaucer Holdings, 4075 shares on 06/04/2004 at 54.75p (46p, £1874.50)
Dana Petroleum, 1551 shares on 20/11/03 at 223.75p (338p, £5242.38)
Mayborn Group, 1406 shares on 15/03/04 at 282p (255p, £3585.30)
Cash holdings: £323.22
Total: £23,692.24
and today's closing prices:
Ben Bailey, 1281 shares on 20/02/03 at 178p (383p, £4906.23)
Ben Bailey, 890 shares on 21/06/04 at 390p (383p, £3408.70)
Chaucer Holdings, 8092 shares on 06/10/03 at 42.88p (40p, £3236.80)
Chaucer Holdings, 4075 shares on 06/04/2004 at 54.75p (40p, £1630.00)
Dana Petroleum, 1551 shares on 20/11/03 at 223.75p (413p, £6405.63)
Mayborn Group, 1406 shares on 15/03/04 at 282p (253p, £3557.18)
Cash holdings: £424.66
Total: £23,569.20
My returns achieved thus far in 2004 amount to a derisory 4%. Better than a loss, however.
The Artful Dodger
Market reaction was muted in the end but negative sentiment on the UK housing market and an unusually severe hurricane season saw my two largest holdings wounded in combat. On Monday Chaucer confirmed the market's expectation that profits would suffer this year in the wake of hurricanes Charley, Frances, Ivan and Jeanne:
on the basis of a normal level of catastrophe activity over the remainder of the year, estimates that they will reduce budgeted profits before tax for the year ending 31 December 2004 by between £10m and £15m. These estimates do not alter Chaucer's intentions with regard to the dividend for the year.
I expect this to knock a third off Chaucer's full-year profits. Hits like this go with the territory when you decide to invest in a Lloyd's insurer and explains why the sector traditionally trades at a discount to the market. Chaucer's sector peers have all been making similar announcements this week, it's reassuring to know this affliction is shared. The company was keen to reassure shareholders the inclement Atlantic autumn could provide some uplift to future profitability, via increased premium rates:
These events are likely to have a beneficial effect on rates in the property and energy sectors. Chaucer had previously indicated that the capacity of Syndicate 1084 would reduce from £400m to £375m for the 2005 year. Chaucer will now work on revised plans to maintain capacity at £400m.
Meaning the company sees more profitable underwriting opportunities than previously anticipated.
The disappointment from Ben Bailey and Chaucer has again been ameliorated by a storming show from Dana Petroleum. At 413p to sell the shares have advanced 84% since purchase.
Values on 31st August:
Ben Bailey, 1281 shares on 20/02/03 at 178p (412p, £5277.72)
Ben Bailey, 890 shares on 21/06/04 at 390p (412p, £3666.80)
Chaucer Holdings, 8092 shares on 06/10/03 at 42.88p (46p, £3722.32)
Chaucer Holdings, 4075 shares on 06/04/2004 at 54.75p (46p, £1874.50)
Dana Petroleum, 1551 shares on 20/11/03 at 223.75p (338p, £5242.38)
Mayborn Group, 1406 shares on 15/03/04 at 282p (255p, £3585.30)
Cash holdings: £323.22
Total: £23,692.24
and today's closing prices:
Ben Bailey, 1281 shares on 20/02/03 at 178p (383p, £4906.23)
Ben Bailey, 890 shares on 21/06/04 at 390p (383p, £3408.70)
Chaucer Holdings, 8092 shares on 06/10/03 at 42.88p (40p, £3236.80)
Chaucer Holdings, 4075 shares on 06/04/2004 at 54.75p (40p, £1630.00)
Dana Petroleum, 1551 shares on 20/11/03 at 223.75p (413p, £6405.63)
Mayborn Group, 1406 shares on 15/03/04 at 282p (253p, £3557.18)
Cash holdings: £424.66
Total: £23,569.20
My returns achieved thus far in 2004 amount to a derisory 4%. Better than a loss, however.
The Artful Dodger
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