Access July's monthly recap to get an intro into the BBB Fund.
(Part Time) Fund Manager’s Report
After a blistering outperformance in July, the portfolio really struggled in August for any direction, and ended the month slightly negative and underperforming the FTSE benchmark.
My shares could be summed up into two camps; those that stayed flat or drifted due to the lack of newsflow and muted August trading volumes. And those that were hit by the Delta and China wobbles, like Rio Tinto (LON:RIO) .
It is an incredulous story that Rio Tinto (LON:RIO) currently trades at an in-year dividend yield of 17.3%, of which c.40% has already been confirmed and paid as an interim dividend in August. It is also at a bargain PE ratio of 4.9x, despite broker forecasts steadily rising the entire year and very well covered by 24 brokers. Something must give by the end of the year; either iron ore and copper prices crash, or we see a re-rating that takes the shares double, or even triple. To think that 20 years ago, investors would be wetting themselves if presented with a super-blue-chip like Rio Tinto at a price representing 4.9x PE or 17% dividend.
Anyways, I am contemplating whether to top up or not, but think we are going to have a bit of a rocky ride over the next month, with two major things that will dominate the conversation; inflation and the US debt ceiling. On inflation, we are going to see a few months of even higher inflation reads. Might be transitory, might be permanent, but either way it will shake the tree and I will not be surprised to see wild swings in markets, both in bonds and shares. On the US debt ceiling, we know that Congress will wait till the last minute for a deal. In the meantime, the financial media is going to go click-bait crazy with doomsday stories, and again we will see the weakest investors shaken out of the markets, and some good buying opportunities.
In August, I have been busy selling some holdings, and accumulating more cash. I said in last month’s report that I really wanted to deploy more capital, but instead I’ve ended up doing the opposite. I am now 50% cash in my ISA, and 58% in my SIPP.
