My portfolio gets a pounding
Part of the reason I have done so well in the last couple of months is the relentless fall in the pound. Since the beginning of the year it has slid from almost 1.64 dollars to the pound to 1.48 on Tuesday 12th March. And because more or less the whole of my portfolio is now in dollars I have benefited.
To give you an example, one of my best performing picks was BBY. I bought some of these for $11.9 per share, so each 100 shares cost $1190. In sterling that was £725.50 at an exchange rate of 1.64. The price had rocketed to $20.3 on Tuesday, increasing my dollar investment by 71% to $2030 per 100 shares. The exchange rate was 1.48 so in pounds my shares were worth £2743, an increase of 89%.
As you can see on the chart, the Pound's value enjoyed an abrupt reversal of fortune. This followed a comment yesterday by Mervyn King, Governor of the Bank of England, that the Bank was not trying to push down the currency's value. Those of you who like chart patterns will notice that the market anticipated the announcement by creating a doji formation two days before.
For me the change in direction has cost me money. BBY continued its rise since Tuesday and is now at $21.50 a 6% rise. Sterling has risen to 1.516 so my 100 shares worth $2150 in dollars are worth only £1418 in pounds, a rise of just 3%.