January 2020 Investment Review

Now we have safely got our feet under the table of the new decade, it’s time to look back to see how we fared in the last decade.  We are in the “twenties” now.  We have a name for this decade.  I think the last real named decade was the “nineties”, the “noughties” and the “tens” just didn’t cut it.  Let’s hope we are entering the “Roaring Twenties” once again.  Thankfully the “tens” weren’t terrible, in fact for investors I would go as far as saying they were the “Terrific Tens”.  There that sounds better already.

our central investment philosophy remains intact

I have believed for 6 years now that the Global economy is within a secular growth trend. Secular simply means long-term in investment speak. The more usual trend is cyclical, the one all financial commentators comment about. Cycles are much shorter term, typically expressed over a “seven year business cycle”. Cyclical trends exist, but they are never become boom and bust during a secular growth trend. Here’s what I wrote in my January 2014 Investment Review. It’s well worth a re-read for my older clients and a first read for anyone who became a client since 2014. In short I believe the markets are set to expand gradually over a 20 or 25 year period. I believe it began in 2013.

so how have clients fared over the last decade?
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Five Year Plan

The winds of change

Just occasionally, things suddenly look better than they did before. And it shows. If you have logged into Nucleus recently, (and once again I urge all of those who don’t log in to start right now) you will have seen that valuations are suddenly climbing. This isn’t pushing them to over-valued territory, it’s simply a catch up.

In a short week the Yanks have agreed to talk turkey (festive pun) with the Chinese and the UK General Election delivered a resounding blow to those who threatened to replace Capitalism with something akin to Marxism. Now I’m not going to get political, but it became clear that anyone who had built up any life savings at all would have been on John & Jeremy’s hit list.

These events, along with resolved bank liquidity issues in the US have given global stock markets a welcome upward tailwind. In the US, recession has been averted it seems, so its full steam ahead once again. And boy do UK shares look cheap in the eyes of US investors.

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BooHoo.com

I have regularly spoken to individual clients in review meetings about how we decide what shares we buy, at what price we buy and at what price we sell. However I have never explained it to everyone in a blog. Having sold out of BooHoo.com last week, we have just committed to buying back more of their shares. Describing our recent actions will show how we work.

Christmas bonus

If you work on something everyday, occasionally you get lucky. Fyffes, Worldpay, The London Stock Exchange and Dart to name just a few lucky results in recent years. Now we can add Boohoo.com either to that lucky list, or we can take credit for an investment process that highlights value and helps us to make more good decisions than bad ones.

Collectively we have just safeguarded a swift £370,000 in extra shares. Normally that takes patience and time. The BooHoo.com story has unfolded in just 1 week.

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October 2019 Investment Review

I have been writing my quarterly investment reviews since January 2011. Then the new MiFID II regulations came along at the beginning of 2019. I couldn’t be sure that my reviews wouldn’t fall foul of the new European regulations, so I had to stop producing them. The quarterly valuations sent direct from the platform provider became a statutory requirement. The situation wasn’t helped when the GDPR regulations came along. For a while I was even unsure as to whether I could still contact my own clients. Were my blogs marketing? Did I require permission to continue to email you?

Back by popular demand

It seems my quarterly valuations have been missed by my clients. So having picked through the copious regulations, it seems that I can still email my own clients and I can add to the statutory MiFID II quarterly valuations without fear of breaching regulations. So a little belatedly, here is my latest quarterly valuation.

back to the start of the year

The year started on a low point with the markets fearing that Donald Trump’s global trade war combined with a Federal Reserve Bank intent on raising interest rates, was going to kill the US economy and send the US into a recession. That matters to us a great deal as our UK Stockmarket is basically in lockstep with the US Stockmarket. That fear caused many global markets to crash ahead of the year end. Currently the US looks likely to avoid recession, as do we in the UK (touch wood). The slow down has effected much of the world already, notably in China and Germany.

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October

We do tend to make greater returns on our investments over the winter months than we do over the summer months. However last year that didn’t happen.  October to December was an appalling period to be an investor, but it did pick up early in the new year.  Crucially, we are investors, not speculators.  We are never all in the market or all out of the market, trying to time the ups and downs.  We maintain a long term strategic asset allocation, tactically adjusting that balance up and down in line with market conditions and sentiment. We have learned to remain patient and understand that when the results have been coming along in spades, those times just don’t last.  But also when things look bad, those times don’t last either.  

So here we are in October already, by halloween we could be “crashing out”, “on the cliff edge”, “surrendered” or “defeated”.  Whatever evocative language the press and the politicians choose to use, that’s where we will be within the month.   The “October effect.”is starting to look like a bit of investment legend which could be proved true once again.  October tends to be a bad month for the markets. 

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