Bertram McDonald's teaching career has influenced his investment decisions. He first became interested in investing after the global financial crisis in 2008, which made him want to understand how finance works and what issues were facing the economy. He also wanted to understand whether public sector pensions, like his own teacher's pension, were sustainble over the long-term.
While his research reassured him that his pension was fairly secure, it also got him interested in fund and share dealing. "It allowed me to make my more informed choices about my own financial future," says Bertram.
Bertram primarily invests in a range of high-yielding shares, which he hopes have the potential to grow over the long term. “I am aiming to build a portfolio that yields a decent pension with access to may capital, should I desperately need it in a hurry,” he explains.
As Morningstar's monthy dividend stock round-up highlights, it is important to consider more than just the headline yield when picking income-paying stocks. Bertram looks at a number of factors, such as the PE ratio and profitability of the company to date. He also looks at the potential viability of the business. “It’s good to try to understand what the narrative is,” he says.
When it comes to individual holdings he says he as favoured high-yielding shares, like Royal Dutch Shell (RDSA), Diageo (DGE) and Unilever (ULVR).
Drinks manufacturer Diageo has a two-star rating from Morningstar. The company was created in 1997 following the merger of Grand Metropolitan and Guinness. Morningstar director Phillip Gorham points out that “acquisitions remain part of the firm's DNA” and have helped establish the company as a global industry leader.
This has translated into decent returns for investors. Over the past five years its shares have produced total annualised returns of 14.8% for investors - comfortably outperforming the 5.4% annualised returns from the FTSE 100.
Morningstar is optimistic about Diageo’s future prospects, too. Gorham says industry consolidators, like Diageo are well placed to strengthen their position in emerging market.
Unilever is another stock with a two-star rating from Morningstar. The company manufactures a whole range of branded consumer goods, including Marmite, Dove beauty products and Ben and Jerry’s ice cream. It is deemed as having a wide-economic moat by Morningstar, meaning it has a dominant positions in its markets and remains well protected from competitors
This, too, has helped it produce healthy returns for its investors over both the medium and long-term. According to Morningstar data it has delivered total annualised returns of 15.4% over five years, and 13.8% over 10 years.
Bertram says: “These various holdings have all proved to be good investments for me, and consistent with my overall aims. Owning stocks also means you cut down on fund manager fees. Given the recent debacle over the Woodford Equity fund, it strikes me that owning shares directly might be a strategy that more investors will find attractive.”
Alongside this large blue chip holdings, Bertram also owns a number of small-cap and tech growth stocks. One of his more successful holdings to date has been Advanced Micro Devices (AMD) — a Nasdaq-listed stock involved in the crypto-currency sector.
But not all his tech-focused investments have done so well. Bertram says: “I would not classify it as a disaster yet, but my holding in Tesla (TSLA) seems to be in the doldrums with shares now trading around 40 to 50% below its previous peak. I view this as an upstart company tackling some very powerful entrenched energy interests with, to my mind, some very sophisticated and credible solutions.” The electric car manufacturer has a three-star rating from Morningstar.
Bertram says his own experienced feeds into his investment ideas. He has spent a considerable amount of time in China, for example, where he noticed that between 10 and 20% of the cars in richer areas were all Tesla models. He notes that Tesla has recently opened a factory in Shanghai and thinks, given efforts to drive down pollution in cities like Beijing and a growing middle-class in the country, it still has potential to prosper long-term, despite the recent poor stock market performance.
Elswhere, Bertram says his own pupils have proved to have some interesting insights, when it comes to his investments. He has previously invested in Activisation Blizzard (ATVI) — a gaming company, again listed on Nasdaq — but its shares price has fallen more recently.
When Bertram was discussing investments with his class one pointed out that the company has a charging model within the games, which means people don’t want to play them any more.
Bertram says: “When I invested I read that this so-called ‘subscription model’ made it an attractive option for investors, bBut it turns out that this might be the reason for their recent decline.
“But one of the advantages of being a self-directed investor is that you can capitalise on the niche interests and knowledge you might have access to.” As he points out, he talks to lots of kids who play computer games and this may influence his decision to sell or hold this particular investment.
Bertram tries to ensure he invests no more than 10% of his portfolio in any one holding. He doesn’t invest a fixed amount on a monthly or annual basis: “I invest when I have the money, or when a see a good opportunity that arises.” For example, as a customer with AJ Bell (AJB) he recently had the opportunity to buy shares in the platform when it floated on the stock exchange.
He says: “I hope to own this for the longer term. Their customer service is great and it should be well placed to profit from the UK’s move to more pensions freedoms.”
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