Peter Temple: Time to reassess the investment situation

Over Christmas and New Year, I often indulge in a bout of portfolio reshuffling, to take account of anticipated risks and opportunities in the year ahead. This year has been no exception.

So I have been quite active in the past month, by my standards. One course of action has been to take a 20 per cent profit on an exchange traded fund (ETF) invested in European high-yield equities, which paid quarterly dividends.

Why this particular move? I think the coming year may be a year of drift for equities. I am also concerned not to be too exposed to the euro. I think it may weaken in the months ahead as the dollar strengthens.

I have also reluctantly concluded that Indian equities, even if accessed via an ETF, do not fit my personal investment objectives at present. I think the long-term prospects for this market are extremely good but, for the moment, I prefer to get my exposure to emerging markets through the dollar denominated iShare that tracks the JP Morgan Emerging Markets Bond index. This is invested in a diverse range of sovereign emerging market bonds. The yield is similar to the one foregone in the European high yield equities ETF that I sold at roughly the same time.

Avarae Global Coins is now developing into a solid long-term holding in my portfolio. It has edged up significantly in the past month on the back of some soothing statements from the company’s management team. I doubled my holding in this stock in the course of last year. A share repurchase scheme in recent weeks has removed a significant uncertainty. I also know, from my own trades in the rare coin market, that the top-quality rarities in which the fund invests continued to appreciate in value at auction in 2009. Avarae’s NAV is in the region of 12p, yet its price is still around 8p – in my view, an unduly large discount.

Avarae provides no dividend yield, but I did add two UK equities to my portfolio in recent weeks that are both high yielders.

● United Utilities . Recent planned power cuts in my local area have been irritating, but were evidence that the company’s capital spending, modernisation and cost-cutting programmes are proceeding. So I bought the shares. However, recent comments from brokers led me to rethink whether I wished to be exposed to this share over the Christmas period and in January, so I have since exited at a small profit – but may buy back the holding in due course.

● Cineworld . This cinema multiplex chain is chaired by Tony Bloom, a South African industrialist whom I first met more than 20 years ago. Then, he ran Premier Group, a food company based in Johannesburg which, at that time, held a sizeable minority stake in South African Breweries (part of the present SABMiller).

Cineworld is one of those cash-based consumer businesses that should do well in the current financial climate. It stood out from the crowd by virtue of an attractive and reasonably well-covered dividend yield.

I came close to selling my modest gold bullion holdings in early December when the price reached more than $1,400 an ounce, but other priorities intervened and I missed the opportunity. Even so, while the dollar value of gold has slipped substantially since then, in sterling terms the fall from the peak has been much less dramatic. For the moment, I am holding on. With some pundits predicting a further round of the banking crisis in 2010, the appeal of tangible liquid assets like gold remains strong.

Peter Temple is an active private investor writing about his own investments. He may have a financial interest in any of the companies and trading strategies mentioned.