High Court Rejects Climate Action Plan

Last week the High Court ruled that the Governments climate action plan is unlawful. On several grounds they argued that the Government will not meet its net zero emission targets in a judicial review brought by environmental groups. This is despite the fact that the net zero target has never been put to a popular vote and many people consider it to be both unnecessary and unachievable.

The Government will need to amend its plans.

As a shareholder in oil/gas companies I object very strongly to the law interfering in the sensible policies of companies who are already making strenuous efforts to control emissions. But in reality we need oil/gas production for many years to come otherwise we will all be impoverished for no good reason.

More info: https://www.ft.com/content/f57e608b-f230-44c9-97f8-44c5c60f3ccb

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Share Buybacks Cutting into Dividends?

An article in last week’s Investors Chronicle suggested that the high number of share buybacks was reducing the dividends paid – particularly by FTSE-100 companies. It suggested that there was a “recent frenzy for buybacks among UK listed companies” and I have certainly noticed this myself in my own portfolio holdings. I get very frequent notifications of buybacks as I monitor all RNS announcements from companies in my portfolio.

This is somewhat annoying as I always vote against share buyback, unless there is a very good reason to do otherwise. I would much prefer they reinvested in the business or paid surplus cash out as dividends. Many buybacks are misconceived – often on the notion that they will improve the share price by reducing the number of shares in issue. But that rarely works in practice.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Assisted Dying Debate, London Elections and Book Review

On Monday there was a debate in Parliament on assisted dying – see https://www.youtube.com/watch?v=q5wPhNupqXc . I have been a long- standing supporter of the Voluntary Euthanasia Society – now called Dignity in Dying. It is long overdue for Parliament to change the law so it’s worth listening to the debate. One speaker argued that not only might some people be persuaded to kill themselves by others but they may persuade themselves. That is a most peculiar argument. There was the usual call for palliative care to be improved but relying on that is problematic. When I want to leave this world I don’t want to be blocked by complex rules or laws.

Today we have the elections in London and other regions.   In London other contenders have been catching up on Sadiq Khan according to the latest opinion polls. But he is still likely to win the vote for Mayor as the opposition is split and so many people don’t vote.

So it is extremely important to get out there and vote today!

Personally I have voted for Susan Hall as the only person with a real chance of ousting the liar Sadiq Khan, the destroyer of London’s transport network with his Transport Strategy. But I voted for Reform Party candidates for the other positions. Some tactical voting is the order of the day.

For lighter entertainment, I have just finished reading the book Brazilian Adventure by Peter Fleming (brother of James Bond author Ian Fleming). This is was first published in 1933 and is ostensibly the story of a search for Colonel Fawcett who disappeared in the Amazon jungle 7 years previously. But in reality it’s the ripping yarn of a few young and inexperienced men seeking adventure.

It’s well written, brings the milieu to life and therefore is recommended. Here’s one sentence from it: “The sun had just risen. It’s light no more than grazed the world, gilding the crests of ridges, from the blue hollows between them picking our little save the tallest trees and the wisps of vapour which hung wherever there was water.”  

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Alliance Trust AGM 2024 Report

I attended the Annual General Meeting of Alliance Trust (ATST) this morning using the Lumi AGM platform. It was physically held in Dundee which is their traditional location and they intend to continue with that in future apparently.

The Lumi platform normally works well although there was a hiccup during the Chairman’s introduction and I had to log in again.

I have held shares in this trust since 2015 and am very happy with recent performance.  The Chairman, Dean Buckley, reported a “very strong investment performance” last year – total return up 21.6% and significantly better than their benchmark plus better than their competitors. Good performance has continued in 2024. The trust has increased dividends for 57 years and the discount to NAV is only 5.4% and heading down.

Craig gave an overview of their investment approach – a global stock picking based on “high conviction” choices but diversified. They were underweight the “magnificent 7” technology stocks last year but that was offset by good performance in other holdings.

I will only report on the question I asked which was “According to page 9 of the Annual Report you seem to be selling the winners and increasing exposure to losers. Please comment as this is contrary to my investment philosophy”. The answer given was that “Individual stock pickers may have different views on this. But it only applies to stock pickers overall performance. It is just a matter of rebalancing the portfolio, avoids a big bias to growth and helps manage risk while lowering volatility.

Comment: It seems to work.

The meeting was well organised and managed by the Chairman. I am happy to continue holding the shares as a foundation holding which I don’t have to continually monitor. As their Annual Report says “Our ready-made portfolio does all the hard work for you….We provide a simple, high-quality way to invest in global equities at a competitive cost”.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Lords Debate on NHS Sustainability

Last week I wrote a blog post on “The NHS is killing us” – see https://roliscon.blog/2024/04/12/the-nhs-is-killing-us/ . Last night I had a dialysis session and after watching a couple of old movies I turned over to the BBC Parliament Channel and was surprised to see my sister (Baroness Murphy) speaking on a debate on NHS sustainability – recording here: https://www.bbc.co.uk/iplayer/episode/m001yg9p/house-of-lords-sustainability-of-the-nhs?seriesId=unsliced&page=1 .

She made a good contribution and there were several others. Often from people very knowledgeable about the NHS (for example by sister worked in it for many years and latterly chaired an NHS trust).

Many people think the House of Lords should be replaced by an elected body or similar but it actually does good work as it’s now full of people who are expert in their fields. Perhaps the hereditary peers should go but otherwise I would leave it unchanged.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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How Sweden’s Stock Market Became the Envy of Europe

“How Sweden’s stock market became the envy of Europe” is the title of an interesting article published by the FT today. Many small and medium-sized businesses are deciding to list in Stockholm. With 501 IPOs in the last ten years “the Nordic country has been highly successful at encouraging smaller domestic businesses to stay at home, encouraged by the depth of its stock market” according to the article and “A key driver has been the country’s investment culture, which Carnegie’s Elofsson says has attracted ‘everyone from the man on the street to very engaged private banking investors, entrepreneurs, but also the small and mid-cap investment community’”.

Compare that with the UK where AIM listings have been falling and the main market has failed to attract new listings – larger companies such as Shell are looking to move to the USA instead which they perceive has a more vibrant equity culture, better share valuations and more liquidity.

Swedish insurance companies have big equity holdings while in the UK insurance companies and pension funds have been reducing their equity holdings, particularly in UK companies.

Another quote from the article: “Compared with the rest of Europe, Swedish households hold among the highest proportion of their investments in listed companies and among the lowest in bank deposit holdings, while financial literacy is greater than in Germany, France or Spain. In 1984, the government introduced Allemansspar, a product enabling ordinary Swedes to invest in stock markets. By 1990 there were already 1.7mn of these accounts, helping drive the launch of domestically focused small and mid-cap funds”.

Education about financial markets in schools seems to be one reason for the vibrancy of equity investment in Sweden, while UK schools seem to be spending a lot of time on education on gender differences, black history and eco issues.

Having worked for a Swedish company for a couple of years I would comment that the business culture is somewhat different. The UK AIM market is full of companies whose management I would not trust, while that is a key attribute of any successful stock market investment. Cleaning up the AIM market is a prerequisite if more IPOs of small and mid-cap companies are to happen. There are still too many dubious IPOs in the UK – companies that list at optimistic prices and quickly run into difficulties – such as Dr Martens. The promoters of such businesses are part of the problem. Too many people looking for a quick return.

Anyone who is interested in improving the UK stock markets should read the FT article.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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The FTSE 100’s Magnificently Unglamorous Seven

Oliver Ralph wrote an interesting article for the FT on Monday. It was entitled “Let’s hear it for the FTSE 100’s magnificently unglamorous seven” and covered the history of Vodafone which has halved its share price in the last two decades while unglamorous Bunzl and Howdens have increased their share prices by 565% and 488% respectively.

Other well-known companies who have done poorly are Barclays and HSBC who did not make it into positive territory while BP, Tesco and GSK did but still underperformed the FTSE-100. Meanwhile lesser-known companies such as Compass, Diploma, Intertek, Experian, Howdens, Bunzl and Relx have done a lot better.

Vodafone should have done well operating in the high growth sector of mobile communications and I looked at them more than once when they were tipped as “cheap” but never purchased the shares. But I have held Diploma, Experian and Relx so it seems I may not be completely daft after all.

The article mentions the acquisition strategies of the successful companies – basically small and low risk ones are preferred.

My prejudice against banks has also worked out well and a preference for smaller well-managed companies with high returns on capital has been successful – Diploma is a classic example.

It’s an article well worth reading. And maybe I should look at Howden and Bunzl to see if they are likely to keep up their performance.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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The NHS Is Killing Us?

That was the title of an article by Allison Pearson in the Daily Telegraph a couple of days ago – see https://www.telegraph.co.uk/columnists/2024/04/09/nhs-enemy-of-british-people-cancer-deaths-waiting-lists/ . This was an article that covered some personal experiences and statistical data on the performance of the NHS and it makes for depressing reading. The BBC seemed to want to counter this with a Panorama item on the problems of private hospitals (no intensive care units if things go wrong which they exaggerated).

As a big user of the NHS I have some view on this (I have suffered from IgA Nephropathy, a serious kidney disease for over 30 years, and have had one transplant and two dialysis periods). I have also used private GPs and consultants including an operation in a private hospital because minor ailments are a particular problem if you want quick treatment.

It is clear to me that the NHS GP service is failing and A&E units are often overstretched. Overall I am not unhappy with NHS care. But they do need more staff and more hospital beds (I did discharge myself from one A&E unit after realising there would be no overnight bed and no diagnosis for symptomless extreme blood test numbers). The ambulance service also seems overstretched in some areas.

The NHS IT systems have improved over the years enormously but communications do not always go smoothly. In essence, some parts good but some parts poor.

In summary I don’t think the NHS needs a lot more money but they do need more effective management, more staff and more facilities. As regards privatisation of some parts, bring it on I say. My current dialysis provider is Diaverum who do a good job. They seem to be owned by a private equity firm.

P.S. Suella Braverman wrote a good follow up article for the Telegraph on this subject here: https://www.telegraph.co.uk/news/2024/04/09/our-ailing-nhs-needs-fundamental-reform/

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Bango Webinar

I attended the Bango (BGO) webinar on their full year results this morning. One of my long-standing and smaller speculative AIM holdings. Total revenue was up by 62% to $46 million but I asked the following question:  “Revenue growth looks OK but capitalised development costs rose to 17.6 million. Please explain why this is so high and what is being obtained from this high investment?”.

The answer given was not totally clear but it was suggested that this arose from further investment in the Digital Vending Machine (DVM) product. I am very sceptical that this is a full explanation. It’s simply too much for improving an existing product. This company does continue to grow revenue well but costs are not under control.

Compare that company with Intercede (IGP) who published a full-year trading update this morning. Revenue was up 65%, i.e. similar to Bango. The full year financials are not yet available but the half-year results show a very different picture to Bango. Minimal capitalisation of software development and positive overall cash flows. Intercede said: “Tight cost control continues to be a focus for the Group in conjunction with considered project expenditure and new hires to support revenue growth”.

I remain to be convinced that Bango is on the right track.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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They Do Things Differently in the USA

The sentence of 25 years in prison by a New York court on Sam Bankman-Fried for the fraud he orchestrated at crypto exchange FTX should be compared to the weak handling of financial fraud cases in the UK. In England it takes years to get them into court, if they ever are, and any penalties are feeble in comparison.

The FTX case was perhaps an obvious case of fraud – using client’s money to prop up the business – but the legal system in England is clearly defective in comparison. The amount that disappeared was about $9 billion and it shows how far a glib talker can go.

The speed of the prosecution is also a lesson. From the collapse of FTX to conviction is only 2 years. The English legal system needs wholesale reform to make it more expeditious and more effective as a deterrent to financial crime. The English legal system is designed more to benefit lawyers, both in civil and criminal cases, rather than ensure justice is obtained swiftly.

Previous comments: https://roliscon.blog/2023/11/03/sam-bankman-fried-found-guilty

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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