It has been difficult trying to own defensive shares for this year (2017) as it is ‘bull’ market with greater than 25 PE ratio for most popular shares on the FTSE. I am not venturing into the US defensive shares because they are too expensive to own at my intended portfolio budget for any dividend reinvestment.
In football or soccer good quality defence line wins you games on 70% of the time. A strong defence with good leadership will help coordinate and dictate the tempo of the game gives you a comfortable 80% chance of winning games in major tournament. The remaining 20% would be down to experience, luck, team work and stamania longevity through the duration.
Every fund managers with good dividend growth return yield always rely on long term household brand majority in their portfolio. Woodford loves tobacco and pharma [IMB and AZN] Buffet loves beverages and food[COKE and KHC].
This month I manage to secure two bargain on FTSE100 which I regard to have reliable business plans with good business moat within its sector.
1. United Utilities [UU] @ 850GBX July 2017.
I was smiling when I saw my alerts and bought without further thoughts. UU supplies the midlands and north west of England utilities and have cash reinvention for expansions at a very slow rate. Keep the good cash flow moving and ensuring slow growth, sustain dividend growth and good strong profit every year. I do not expect any championship jumps or radical changes from UU. All I need is a company that can weather political crisis, scandal sagas, strong and solid on a rainy day. In Scotland, water is essentially free as it is covered in our council local taxes. In Englandshire, folks have to pay for water, sewage removals and utilities. UU are essentially making steady income for existing infrastructure in place. With London getting more expensive and people seeking for other metropolitan areas to settle like Newcastle, Manchester, Liverpool; there are room for population growth and the north east for the next generations. Hence UU reinvesting for future growth.
I am expecting slow growth and generous dividend growth for this one. One to hold for a long long time.
2. Provident Financials [PFG] @ 2350 GBX July 2017.
Student loans are moving beyond 50k as reported today. Inflation have gone up since Brexit and our daily needs have push our expenses higher than last year. Disposable income is low and savings are virtually long gone. PFG provide credit cards for no credit rating people, quick turn around loans and various credit for the daily UK person. PFG are the premier in non traditional bank loans.
The recent 20% drop are due to bad management and poor communication to share holders and investor causing confidents drop. I class this as a bad scandal which do not really affect the business in the long term. End of the day the employees and Managers will still walk into work tomorrow and do what they did yesterday. Nothing has change, perhaps less profit from one of the department but every other department are expecting growth.
This is for the long term and Brexit and world politics seem to have place PFG in a good business position. The recent scandal have put me in a good position to secure and own this part of the business.