Investor Views: ‘I Bought Miners And it Wasn't in Vein'

But private investor Rodrigo Cabral has had mixed fortunes with his share portfolio in the post-Covid economy  

Emma Simon 26 April, 2022 | 6:30AM
Facebook Twitter LinkedIn

Woman with piggybank

Rodrigo Cabral has been investing for around 15 years because he’d “like to stop working as soon as possible and enjoy life.”

To achieve this Rodrigo invests in a range of different assets. He has a “retirement pot” including a work pension, a Lifetime ISA and a portfolio of buy-to-let properties. Alongside this he has a stocks and shares ISA and also invests directly in a range of funds and shares through his general investment account. He also has cash savings too, which he has increased more recently amid wider market uncertainty.

Rodrigo is in his early 40s and works as a finance principal at a mining company. When buying shares, he favours larger companies or ones he is familiar with. “Dividend payments are attractive and can influence my decision to buy. I don’t really want to gamble on companies I don’t know, unless it is with very small amounts of money.”

Mining and Travel

His current investments include a stake in the mining companies Anglo American (AAL), Anglo Pacific (APF) and Thungela Resources (TGA). He also invests in a couple of airline and travel-related companies, including International Consolidated Airlines (IAG) and TUI (TUI).

For Rodrigo, who is married and lives in Surrey, these mining companies have performed well recent, given the strong demand and rising prices for many natural resources. However, the share prices of the travel companies have failed to recover to 2019 levels, despite tourism opening up as many countries move out of Covid restrictions. He bought these travel-related shares at the peak of the 2020 crisis after share prices had plummeted as they looked like being a good long-term recovery play.

IAG is the parent company of European flag carriers like British Airways, Aer Lingus, and Iberia. Its share price fell sharply in the wake of the pandemic, and despite a sharp rally in 2020, is not back at pre-pandemic levels. More recently profitability has been hit by huge increases in fuel costs, and the cost-of-living squeeze may limit discretionary spending on travel and holidays.

Morningstar analysts say IAG is the highest quality of European legacy airlines, achieving “industry-leading margins and returns on invested capital, due to its focus on fleet efficiencies and cost containment.”  But this has not translated into returns for shareholders in recent years. Morningstar data shows that investors are sitting on total annualised losses of 28.53% over three years and 31.09% over the past year. The stock has a 4-star rating as it’s trading below its fair value estimate. It is a similar picture at TUI, the travel company only operates airlines and runs cruises, hotels, resorts and tours globally. Again investors are sitting on significant losses over five, three and one year periods – with total annualised losses of almost 40% over the past year alone.

In contrast Anglo American, which also saw its share price dip significantly in the wake of the Covid pandemic, has enjoyed a strong recovery since, with the global economy moving out of enforced lockdowns. Inflation has caused the price of many raw materials and commodities to rise significantly, boosting revenues and margins.

At Anglo American, investors have seen a 43% return on their money in the past 12 months according to Morningstar data, and a 29.66% annualised return over three years — which covers the Covid period.

The company’s global mining portfolio spans industrial commodities like coal, iron ore and copper but it also has greater exposure to platinum and diamonds, which Morningstar analysts expect to have better growth prospects in future. Anglo also has a long history dating back more than 100 years.

In contrast, Thungela Resources only floated in London 2021. It’s also a more focused mining company, producing and exporting thermal coal from South Africa. Shares have risen by nearly 10 times since IPO, helped by booming demand for fossil fuels since the start of the Ukraine war.

Patience Pays

Although some of his shareholdings are in negative territory Rodrigo is not planning to sell at present. He says: “I try not to realise these losses, just leave it there until it hopefully recovers.” Sometimes, this may not be possible if he needs to access to the money. But he adds: “One thing I’ve learned over the years is that it pays to be patient, and to have some cash savings as well.”

Rodrigo he uses AJ Bell for his share and fund investments and also has ISAs with Nutmeg. “It’s certainly a lot easier now that all these companies offer online platforms. You can just log on, do your own research and invest when you want. Even opening an account is a lot easier than it was 10 years ago.”

He has recently sold some of his fund holdings to fund his latest buy-to-let property. “I haven’t re-invested all the money I got from selling these holdings and it is currently sitting as cash. With the war in Ukraine, and the increase in day-to-day living costs, I think it is prudent to have a bit more uninvested cash available than I would otherwise have. I am waiting to see if the world stabilised a bit before committing this to shares and funds.”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk