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Diary of a Dumb Investor: I’ll settle for a 242% return

I'm hoping past performance is at least a bit of a guide to future returns.

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by Dumb Investor on Sep 03, 2012 at 11:42

Diary of a Dumb Investor: I’ll settle for a 242% return

I just need a repeat of the 242% return that shares in SSE (SSE.L), the utility company formerly known as Scottish & Southern Energy, have ratcheted up over the past decade.

I’ve learnt that investors live in a sort of parallel universe to everybody else. While consumers – I among them – raged at SSE’s latest electricity and gas price hikes, investors rubbed their hands with glee. Even as grandmas around the country were fretting over how to stay warm this winter, the shares rose.

Same goes for the banks; while everyone else was despairing that previously squeaky clean Standard Chartered (STAN.L) was being investigated for breaking US sanctions against Iran, investors – this time including me – were gleefully buying up shares, perhaps even glad the whole thing had gone down (yes, I’m holding onto my Standard Chartered shares; it’s the bright star in my portfolio. And the shares aren’t back up to their pre-scandal levels, which I fully expect to happen in the not too distant future).

My portfolio: Click to enlarge

So call it a hedge. I buy SSE shares to make a tidy profit, offsetting the increased price of getting my energy from them. I could, of course, change energy provider, but the other providers will blatantly all follow SSE. Plus I'm a bit lazy with household admin.

Why SSE? Well, categorise the company how you want – I was worried it might be a dull ‘income stock’, meant for the over 50s – but there is a place in my portfolio for a ‘dividend stalwart’, a high-yielding, bad-ass heavyweight share that seems to bulldoze through all obstacles. Past performance is a guide to future returns, isn't it?

SSE has piled money into renewable energy – wind and the like – an investment that will pay off in the future. The renewables programme ‘is about to move from a balance sheet drag to an earnings driver’, one City analyst apparently said.

Ostensibly heavily regulated, the watchdog never seems to actually lay down the law.

I also admit to feeling slightly nervous that I don’t have any of the shares that ‘every portfolio must have’, or however the wisdom goes. SSE definitely fits into that category.

Yes, I know I should have bought in a gazillion years ago, but I wasn’t even born then, so lay off.

Like any good investor I’ll be looking to pick up some SSE action in the dips. In the meantime, I need to offload something to raise cash. I'm getting impatient with BP (BP.L), waiting for news on the Gulf spill court case and sale of its Russian business. Look at it festering miserably in my portfolio screen grab above. I despise it. It's a blight on my portfolio, a black spot on my life, a scar on my beautifully crafted investment landscape.

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10 comments so far. Why not have your say?

DI,

SSE has seen very little movement in the last twelve months - do you know something I don't?

I am not too sure if you're likely to see a short/mid term return on this instrument. It's current investments seem rather wishful to say the least but then other ways to make a little money would be to maybe expand.

Is there some M&A coming in this sector since growth remains limited in the sector after all economic pressures seem to be everywhere.

Looking forward to what everybody analyzes!!!

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SSE has risen 8% over 12 months, in line with the market on a point to point basis, yet has a beta of 0.4 and yields just under 6%.

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still no info on what you are doing with the BP dividends as I raised in the last update - surely you must be looking at any income received from dividends since the became part of the portfolio and worked out how much income they had generated and then maybe use that as a guide to offset the drop in share price... you might find that you have either broken even or even made a measly profit!

If you want to sell it, work out the above and get rid of it... I for one think that might be hasty as the gulf and TNK issues will probably be resolved before the Eurozone will.

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Hi there D.I.

A few weeks back you asked for subs to highlight NS small Oilies.

I did - XEL. Then it was 75p - now 114p. You said you'd do some research.

Did you and did you buy any?

All the best,

Don H.

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SSE and BP, Two solidish companies.

I locked in SSE to my Sipps portfolio @£14.2, and then it did a passable imitation of a stone following Newton's Law! However I expect them to achieve better. In the meantime the income is not to sneeze at. Nevertheless, they do fluctuate a fair bit.

As for BP, Still on my radar, having bought @£4,27, and they were quite tasty enough a few of months ago. And then there is that dividend when the oligarchs stop their games. But then there is the Siberian litigation..........!

I am waiting for the correction (now that I have a few more pennies, well from Thursday-I do not spend what I do not have physical control of) which I think is coming, and if October lives up to its reputation, hang onto your hats and socks.

I missed the boat on STAN, no funds.

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Please Dumb Investor,compose your article in English.

GCSE assessment: Grade D.

You must work harder, or wait for marking regime to become less rigorous

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Care to be a little more specific, Anonymous 1? If there are errors I'm happy to correct them. Thanks.

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I don't see Anonymous 1's problem. Dumb Investor's informal English is fluent and readable, without any solecisms that I can tell. It doesn't fit the mould of academic writing---but does it need to in this environment?

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I wouldn't say BP is a dog of a share. You're predecessor just bought at a terrible time. It's a long term stock in that case....sit tight with it. Do not crystallise a loss!

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mike88

Sep 10, 2012 at 12:45

A Company that is subject to litigation on such a potentially massive scale is bound to have a depressed share price. BP shares will go nowhere until the many legal issues are sorted - and that will take years.

Buying BP is not a good idea. I would sell BP and buy SSE - an excellent long term investment.

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