Looks like we are back to a normal English summer – rain every other day and cool. But there are a few things to talk about.
Yesterday BHP Group (BHP) published their results to the end of June yesterday. Revenue and earnings were slightly below forecasts and the dividend was reduced by 10% as profits were down. But hey, when so many companies are cutting out their dividends altogether this is surely not going to worry many people. They still managed to achieve a return on capital of 17% and underlying eps was up. The shares fell only slightly as a result.
Today Rio Tinto (RIO) reported that production of refined copper in 2020 is now forecast to be lower by about 30% due to delays in restarting a smelter after planned maintenance. The share price is actually up today slightly at the time of writing, perhaps because copper is a relatively small part of their portfolio.
Both companies are very reliant on consumption of commodities such as iron ore in China, and China is still forecast to have economic growth this year despite the Covid-19 epidemic, unlike many other countries. Both companies are working hard to improve their ESG credentials after some recent mis-steps. Ignoring that, these companies still look good value to me (I hold both).
I used to be a holder of Moneysupermarket (MONY) shares but sold most of them in March when I was cutting my exposure to the stock market and weeding out the underperformers in the epidemic rout. Recently my house insurance came up for renewal and the broker I had used for many years gave a renewal quotation that was up 12% on last year. So I thought I would look for a cheaper quote on Moneysupermarket. They produced three quotations only one of which was cheaper and they insisted we replaced our newly installed alarm system for reasons I could not understand. So I then looked at other alternatives and got a quote from LV (Liverpool Victoria as was) that was less than 50% of all the other quotations. The moral is that it can be cheaper to go to direct providers. Is this why Moneysupermarket has not been growing earnings of late? Perhaps they are not producing competitive quotations?
Another good book for summer holiday reading is “Winning Against the Odds”, the recently published autobiography of Stuart Wheeler. He died in July and had a very interesting career. He was a big gambler and founded IG Index which developed into a major spread-betting company from which he made many millions of pounds eventually.
One section of the book talks about his visits to Las Vegas where he made money by using a card counting technique on Blackjack. But he clearly liked to bet on almost anything.
I visited Las Vegas several times for computer software conferences. But I avoided the gaming tables and slot machines. I did have some interest when a teenager in betting but not after the age of 18. To win at card games, betting on horses or sports results requires a great deal of hard work to be successful. I think there are easier ways to make money such as betting on stock market shares.
One of Stuart Wheeler’s friends was the late Jim Slater, financier and author of books on stock market investment. One of his sons is Mark Slater who runs a fund called the Slater Growth Fund, and others. I don’t hold them because I prefer investment trusts to open-ended funds but he is certainly a good “active” manager. They sent me the latest update on the Growth Fund today and it’s good to see that their fund asset chart over the last few months appears to match my portfolio. At least I am keeping up with the professionals.
The latter part of Wheeler’s book covers his involvement with politics although he seemed to have no great adherence to any political stance, apart from his belief in capitalism and his desire to depart from the EU. He did donate £5 million to the Conservative Party which was the biggest donation at the time to them. But they later expelled him from the party after he started to support UKIP.
Politically the last few years have been some of the most exciting in my lifetime. Politics used to be a very boring subject but now it has captured the imagination of the public with everyone forming opinions on the parties, their leaders and their policies. Rational analysis often gets lost in the fierce debates. Brexit alone was and is a very divisive subject.
The leaders have been a very mixed bunch indeed and Wheeler sticks the knife into both Jeremy Corbyn and Theresa May. But he was careful not to say a lot about Boris Johnson. I think he might have preferred Michael Gove as Conservative Party leader but I do not see him as being very electable.
In summary, it’s an interesting book and an easy read.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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Agreed that Gove is not very electable, but as a parliamentary performer he is second to none. A superb debater. As for Boris, the least said the better. He’s been keeping a very low profile in recent days and letting Williamson take all the “credit”!