February 2018 – Trades, Tips and Funds

February 2018

Today’s post is another in the series of monthly roundups of the interesting investing tips I’ve come across, plus a summary of any trades that I make. Welcome to February 2018.

Trades

February has been a much quieter month than January.

  • This is mostly down to the January correction throwing me out of most of my momentum trades.

The 10% drop was about the worst possible size for me, as it hit many of my stops before starting to recover.

  • I went from 40 open positions to five over around eight trading days.
  • Even worse, my (small) spread-betting account went from +60% to -40% over the same time frame.

In the big picture, this didn’t mean much – this is an experimental account designed to provide learning opportunities.

My entire active account (not a massive portion of my net worth) is down 1.9% for 2018.

  • That’s annoying when it was up 4% in mid-January, but it’s not a serious problem.

I haven’t replaced the momentum trades that were stopped out, but I have started to trade a more market neutral system based on UK pairs.

  • There’s a separate post coming on this, but the key point is that I’m trading with the momentum, rather than looking for mean reversion as most pairs traders do.

I may come back to the UK momentum stocks and UK tech stocks in due course.


Since it turned out to be a correction rather than a crash, my strategy for 2018 remains unchanged:

  1. Explore various strategies for protecting my portfolio against a market crash / Brexit / Corbyn government in the UK.
  2. Look to exploit a possible blow-off (euphoria) in the stock market before any crash.
    • This means building up my spread bet account.
  3. I am also liquidating holdings in legacy accounts so that I can consolidate and reduce the number of SIPPs and ISAs I and my partner hold.
    • I can only do this at the pace that the account providers will allow (transfers are slow).

Four portfolios are now being managed according to their rules:

  1. SmallCap AIM
  2. Piggyback (Main)
  3. Stocko NAPS / Sector plays
  4. IHT AIM

There are regular updates on these portfolios (approximately once every two months) elsewhere on the website.


The Defensives portfolio is being constructed as strategies are examined and cash becomes free.

  • At the time of writing it has six positions filled out of a planned 25, and is not being reported on.

I’m also looking to trade a global multi-asset portfolio on a trend basis.

  • Eventually this will be via ETFs in a low-cost ISA, but during the account consolidation process, I will be using spread bets as well.
  • There’s still a bit of analysis to do on this one, so I will only be dipping my toe in the water for now.

Finally, I’ve just completed an analysis of the VCT market to get ready for any new issues in the next tax year. (( Note that I don’t really expect a lot of new shares to be launched in April, but I’ve now bought two years of VCTs and EISs “blind”, and I don’t want to do it for a third year ))

Tips

Mike Tubbs

Mike Tubbs had an article on science firms whose R&D spend should drive super growth.

See also:  January 2020 – Trades, Tips and Funds

Three UK firms were mentioned:

  1. Renishaw (RSW)
  2. Halma (HLMA)
  3. Craneware (CRW)

Another three US firms were mentioned:

  1. Gilead (NASDAQ:GILD)
  2. Vertex (NASDAQ:VRTX)
  3. Alphabet (NASDAQ:GOOGL)

Gilead and Vertex were added to my Tech list.

Mike also mentioned the Biotech Growth Trust (BIOG).

Rupert Foster

Rupert Foster looked at Chinese tech giants Alibaba, Tencent, Baidu and JD.com.

  • JD.com (NASDAQ.JD) was new to us, and was added to the Tech list.
Funds

David Stevenson

We have a record number of articles from David Stevenson this month – six in total.

The first was about something fairly unusual – a ship rental fund.

  • I invested in a couple of tanker EISs back in the 80s / 90s, but I haven’t seen anything similar in recent times.

The new fund is called Tufton Oceanic Assets (LSE:SHIP).

  • Unlike cyclical shipping trading firms like Maersk and Hapag-Lloyd, Tufton is a $1.5bn manager of second hand ships and will be focused on producing a steady dividend stream.

Of course, the ship rental market is itself very cyclical (take a look at a chart of the Baltic Dry index for more evidence).

  • But the Baltic Dry is up 60% over the past five years and the global economy is now doing well.

Tufton is targeting a 7% yield (5% in the first year), and an IRR of 12% (including capital gains).

  • Tufton’s institutional fund has made 12.5% pa over the past three years.
  • David says that even this fund is aimed at sophisticated investors.

I haven’t tried to buy it yet, but I’ve added it to the Exposure Stocks list.


David’s second article was about an easy way to jump on three bandwagons:

  1. ETFS Battery Value Chain ETF (BATG)
  2. ETFS Ecommerce Logistics (ECOG)
  3. ETFS Pharma breakthrough ETF (BIGT)

David also mentioned a rival to BIGT – Source Nasdaq Niotech ETF (SBIO).

All four have have been added to the Exposure Stocks list.


The third article was about Empiric Student Property (ESP).

  • It has fallen from favour and is trading at 84p, despite a NAV of 103p.
  • The yield is now 6% pa.

David had worried about government opposition to lots of foreign students, and competition from new market entrants.

  • But in fact the problem was simply poor execution.

David thinks that ESP has turned a corner and is worth buying again.


The fourth article was about bonds issued by oil explorers, but that’s not a sector I plan to get into.


David’s fifth and sixth articles were about infrastructure funds.

It has suffered from the collapse of Carillion and threats from Labour to nationalise PFI projects.

  • But David thinks these threats are overstated and has added HICL to an income portfolio he runs for MoneyWeek.

Two weeks later, he was much more cagey about the funds exposed to PFI nationalisation:

  • HICL
  • INPP
  • BBGI
  • JLIF
  • 3IN

Max King

In the same issue, Max King wrote that 3IN was the safest of the bunch.

Max had another three articles, the first of which was about the Independent  Investment Trust (IIT).

  • We’ve covered this before, but I hadn’t realised that it only cost 0.2% pa.

His third article was about smaller companies trusts:

  1. BRSC
  2. THRG
  3. HSL
  4. SLS
  5. JMI
  6. JMF
  7. ASL
See also:  September 2019 – Trades Tips and Funds

Of these, only JMI (JP Morgan Smaller Companies) was new to us.

Max’s fourth article was about European Small Cap trusts – JESC and TRG.

  • JESC was new to us and has been added.

Merryn Somerset Webb

Merryn is still a fan of the Japanese market, and she recommended some Japanese trusts:

  • BGFD
  • BGS
  • AJG
  • CCJI

AJG (Atlantis Japan Growth) was new to us and has been added.

That’s all I have time for today.

Until next time.

Mike is the owner of 7 Circles, and a private investor living in London. He has been managing his own money for 40 years, with some success.

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February 2018 – Trades, Tips and Funds

by Mike Rawson time to read: 4 min