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Oh Lord, where did July go..?! I’d hoped to publish my H1-2015 portfolio performance report a week/ten days ago, but I guess the days kinda slipped away – who can fault a bit of fun in the sun, esp. when my portfolio holdings are slowly but surely marching higher (despite all the China volatility & the fact the US market’s totally sucking wind this year).
Now, if you’re a regular reader, I recently detailed my (still) developing bubble thesis (Parts I to IV), suggesting an increased focus on large cap stocks (a new global Nifty Fifty) might be more profitable. [Though I’m also v conscious of certain small/micro cap successes in the past 12-18 months – a bar-bell strategy, in terms of market cap, may ultimately prove more compelling]. But in terms of immediate portfolio changes, I hastened to add: ‘I don’t believe there’s any great rush here, necessarily’. Well, that being said…let’s first kick off with some (end-June) portfolio changes!
Alternative Asset Opportunities (TLI:LN): TLI had a great H2-2014 run – gaining over 22% (inc. a 2p return of capital), making it my top holding at year-end (at 11.1%). Since then, the insured have enjoyed a real stroke of luck, with just one maturity announced. Not surprisingly, the shares are off YTD in sympathy (reducing my holding, in % terms). But I’d focus on TLI’s portfolio instead – adjusting for minor FX unfavourability, and an additional 2p ret. of capital, TLI’s underlying NAV decline was limited to just 3%.
And I see no change in prospects: We’re at the end of a long & painful life expectancy adjustment process (in fact, June NAV inc. a meaningful positive LE impact), and the insured are now 91.5 yrs old on average – maturities will inevitably accelerate (peaking in 2019-20). There’s little financial risk (with an available credit facility, zero debt & cash on hand), and TLI’s focused on regular returns of capital. Sure, we can debate valuations, but shouldn’t lose sight of the big picture – as per the latest results, the portfolio now consists of $132 million in death benefits vs. a current carrying value of $45 million.
But owning such a defensive & uncorrelated investment isn’t as compelling a requirement for me today, and I see equally attractive (albeit, more correlated) opportunities elsewhere. I’ve reduced my shareholding accordingly, from 9.1% to 7.0%. [NB: I normally don’t add to individual holdings beyond a 7.5% limit – TLI remains a substantial position for me].