Category: Companies

Life on Other Planets and Tate & Lyle

There was a very amusing article in the Financial Times today following the alleged discovery of life on a planet many light years distant. The question posed by Lex is should we reposition our portfolios to anticipate intelligent life that might visit us from planet K2-18b?

The author (John Foley) made some suggestions such as investing in toilet paper makers – is that for demand from visitors or for us? Plus of course defence stocks and biotechnology companies. The author also suggests the planet could present a 56bn market for toothbrushes, cans of deodorant and luxury handbags, depending on the number of mouths, armpits and hands of its residents (the planet is bigger than earth).

All highly amusing but as planet K2-18b is 124 light years distant then discounting the time value of money might result in very small returns. FT Article here: https://www.ft.com/content/4502e62e-4538-42e6-a3a1-d9e5db038698

Another article in a recent Investors Chronicle under the “No Free Lunch” headline covered events at Tate & Lyle (TATE). This is a company that has a great historic brand and sells sweeteners and other specialist food products. I did hold the shares some years ago – last sold at 416p in November 2007 – the current share price is 539p.

I sold because I attended a presentation by the then Chairman and was not impressed – it seems that it was the right decision as progress since then has been very pedestrian. Sometimes impulsive decisions on brief impressions turn out to be sound.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

British Steel Takeover

On Saturday the Government took control of British Steel, although this is not a conventional nationalisation. See https://www.bbc.co.uk/news/articles/c230g09lvv9o for background. If you read the Act of Parliament that was passed you will see it is a quite short and remarkable Bill – see https://bills.parliament.uk/bills/3961 . It gives the Government powers to manage the company but not ownership.

It must surely lead to Government financial control and hence nationalisation in fairly short order. According to the current Chinese owners (Jingye) the company is losing £700,000 per day so the only way this business can be kept afloat is by massive Government subsidies out of your taxes.

With no UK supplies of coking coal required to operate a blast furnace (the Labour Government recently blocked opening of a mine to supply such coal), and no low-cost UK supplies of iron ore, it is difficult to see how a UK based steel business can ever compete on the world stage. It will always be uneconomic particularly when it has to adhere to the Government’s net-zero policy which is making UK electric power the most expensive in the world. Changing the Scunthorpe blast furnaces to electric arc ones will neither be economic nor produce good quality steel.

In reality the takeover of British Steel has been economic suicide with no sensible business plan in place.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Chancellor’s Spring Statement and MP Evans Webinar

I missed watching Rachel Reeves giving her Spring Statement live because it clashed with a presentation from M.P.Evans Group (MPE) I wished to watch – see below. But there were numerous reports I could read later. There were no great surprises. The Chancellor is aiming to save £3.4 billions on welfare payments and £3.6 billions on “other departmental” costs. But there is increased expenditure on the Justice Department to offset that.

A discussion on tv channels afterwards suggested that some benefit recipients, presumably those receiving Universal Credit payments, will lose over £4,000 per year. There is going to be some squealing as a result no doubt. But when you have to cut your budgets to stay solvent, then there is little option.

M.P. Evans Webinar

M.P. Evans Group is a producer of palm oil and associated products in Indonesia (mainly Sumatra). I recently purchased a few shares and the presentation of their final results was most informative – and kept me awake that is more than I can say for some webinars.

There was a useful slide showing the breakdown of the vegetable oil market. That includes rapeseed oil which I recently commented upon and am now avoiding. Palm Oil is now taking up a larger share of a growing market which now includes usage in biodiesel. Production by MP Evans was much the same as in the previous year despite challenges from dry weather but prices of palm oil increased so revenues and profits increased last year. They could therefore afford a17% increase in the dividend.

On a prospective p/e of 8.8 and a dividend yield of 4.8 according to Stockopedia the shares do not look expensive but there may be substantial risks from investing in a country with its main operations in Indonesia even if the company is registered in the UK and has a long track record. It will clearly be sensitive to commodity prices.

It was interesting to note that the war in Ukraine had an impact on the company as their costs are affected by the price of fertilizer.

I will do some more research on the company and track it for the moment.  

The MP Evans webinar was on the Investor Meet Company platform and will no doubt soon be available as a recording there.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

When Your Internet Goes Down

This morning I learned how dependent we are now on the Internet. My hub (router) power plug loosened so it lost power. So I was out of action for about 12 hours. Blood pressure rose in response until I identified the problem.

You might say, was that not easy to identify? No it was not as I have multiple BT boxes on my desk and I thought my gardener might have cut through the cable when planting a new rose yesterday. It’s now taken a few hours to catch up with my emails (I can pick them up on my phone but it’s tedious to do so, particularly if I need to reply).

BT support was quite bad – expecting me to log into a support service on the web. What do people do if they don’t have access by other means if their main internet connection fails? It seems impossible to speak to someone.

I think it might be time for me to fire BT and switch to another internet provider. Please advise any recommendations.

The moral is make sure you have a back-up system for accessing the internet.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Political News and Defence Expenditure

Every few years, one wonders how our stupid political leaders managed to get elected. After Rachel Reeves actions to depress the economy by raising NI and other taxes, we have Keir Starmer saying that the UK was willing to put “boots on the ground and planes in the air” to defend any future Ukraine peace deal.

The PM said the UK and other European countries were willing to defend Ukraine militarily if a peace deal with Russia is agreed – that sounds like a defence agreement like Britain made with Poland before World War II which the UK had neither the resources nor geographic capability to uphold. An enormously expensive war was the result.

The PM might be trying to impress his fellow European leaders and they are probably quite happy to let the UK take the lead on spending money and killing soldiers in a war for Ukraine but it makes no sense to me. This tub-thumping rhetoric is plain daft to my mind. It will be a red rag to a bull so far as Putin is concerned.

The only positive is that shares of defence companies have soared on the prospect of more revenues and profits (for example, I hold QinetiQ – up 8% this morning). Taking the funding out of the AID budget makes sense but I would still prefer peace to war.  

I shall write to my Member of Parliament on this subject and encourage him to change the approach of his leader. I suggest you do the same. See https://www.parliament.uk/get-involved/contact-an-mp-or-lord/contact-your-mp/

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

BP About Face, Nvidia and Tesla, Ukraine Politics

The big news last week was that major UK oil company BP (BP.) is reducing investment in renewable projects and investing more in oil and gas. This is a reversal of previous strategy which I and many major investors such as Elliott welcome although it has angered some of the chattering classes.

As I have said before, I am a holder of BP shares but I have been selling the shares after profit forecasts declined and the share price fell. BP simply said it had been too optimistic in its decision to move to green energy when its rivals took a more conservative strategy.

Well it’s never too late to change your mind if a strategic decision proves to be a mistake. So congratulations to BP for making this decision. One of my stockbrokers now rates BP as a “buy” with a p/e ratio of 9.7x and a prospective dividend yield of 6.0% but I won’t be rushing in to buy back the BP shares I sold. I might even have to sell more to realise some capital gains tax losses before the end of the tax year that is looming. Turning around this giant is going to take some time. There may be better opportunities in US oil companies subject to less political interference. Now if BP was to move domicile and share listing to the USA, the story might be different……

There have been sharp falls in Nvidia and Tesla shares of late. Neither of which I held for reasons given below. There was a good article on Nvidia in Investors Chronicle the week before last. This AI semiconductor specialist is facing new competition from DeepSeek and other challengers while Tesla is seeing falling sales with Chinese competitors such as BYD moving into the electric car space with good products while the older car manufacturers are also catching up.

The big problem with shares in such technology companies is always that the competition can leapfrog with newer products and more advanced technology. It’s very difficult to predict what will happen and when. The only protection is to build an ecosystem of services around the products (as Apple have done to some extent) or have products that customers have come to rely on and are locked in with proprietary technology (as Microsoft has done). But the car market is still wide open to new and cheaper  competition.

On the war in Ukraine, it was fascinating watching the Trump/Zelensky press conference where they seemed to want to negotiate a deal in public. Trump was quite rightly in my view refusing to guarantee a Ukrainian peace settlement which he rightly said was a path to World War III. This was a big missed opportunity though to achieve some progress in halting the war.

Media comments in Europe unfortunately mainly supported Zelensky when the USA see him as the main problem, and so do I.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Unilever Results and Price Drop

Unilever (ULVR) shares dropped 7% this morning after publication of their results. As a holder of the shares they looked OK to me bearing in mind that I thought the previous forecasts were optimistic. Such a large business is unlikely to grow more rapidly than the overall economy. Perhaps there was some negative reaction to the news that the ice-cream business spin-off was progressing but that it would be listed in Holland, not the UK or USA.

Personally I support the spin-off as I think selling ice-cream is a difficult business with no barriers to entry so I would likely sell any shares I might get in the spin-off. But I thought the price drop was too pessimistic so I bought some more of the shares.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Voting on Saba Proposals and Voting Difficulties

US investor Saba Capital is proposing revolutions at several investment trusts – replacement boards and new fund managers. They suggest the performance of the trusts has been poor and vigorous steps have not been taken to improve shareholder value.

There are seven general meetings being requisitioned and the trusts affected are Baillie Gifford’s Edinburgh Worldwide (EWI), Baillie Gifford US Growth (USA), and Keystone Positive Change (KPC), Henderson Opportunities (HOT) and European Smaller Companies (ESCT) trusts plus Herald (HR1) and CQS Natural Resources Growth & Income (CYN).

ShareSoc, the UK’s premier organisation for individual investors, has serious concerns about the governance risks posed by Saba’s proposals, which seek to replace independent boards with its own non-independent representatives in all 7 trusts, award itself the investment management mandates, combine the trusts into a larger vehicle and use that vehicle to acquire further trusts at a discount. See comments here: https://www.sharesoc.org/sharesoc-news/sharesoc-warns-of-serious-governance-issues-in-saba-capitals-proposals/

The AIC which represents investment companies also has concerns and is encouraging shareholders in the trusts to vote – see https://www.theaic.co.uk/aic/news/press-releases/six-unanswered-questions-about-saba-proposals . Information on how to vote is usefully included.

What’s my view? I am generally in favour of such revolutions where past performance is clearly an issue. For example I supported changes at Alliance Trust promoted by another activist investor. But this example is not nearly as clear cut. I don’t personally hold any of these trusts but I think the proposed changes need to be spelled out and justified more clearly.

But shareholders certainly need to vote on the proposals and the boards need to spell out what their defence is or any alternative proposals.

Baronsmead VCT Voting

But voting at General Meetings of companies is not always easy. For example, yesterday I tried to vote at the AGMs of Baronsmead Venture Trust (BVT) and Second Venture Trust (BMD). After twenty minutes of trying to follow the instructions I received in a letter, I gave up. I have sent a complaint to the registrar (The City Partnership (UK) Limited) about the way too complex log-in procedure and even after logging in it was not obvious how to vote.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Fundsmith Equity Fund, Greggs and Book Review

Last week was not a good one for my stock market portfolio. Greggs (GRG) issued a trading update on the Thursday and it read positively to me – total sales for the year up 11.3% to a record level and Q4 sales up 7.7%. More shops opened and new national distribution centre well advanced. But the shares promptly fell over 10%! 

The full year outcome for Greggs should be as anticipated but there were a few negative comments about consumer confidence, street footfall and higher taxes. If that was a profit warning, it was a very mild one. Paul Scott pointed out in his blog that other retail focussed companies have been reporting negative figures so maybe it’s simply contagion. I shall study Greggs in more detail to see if this is a buying opportunity.

The Fundsmith Equity Fund issued its Annual Report last week. It’s always worth reading what Terry Smith has to say. The fund achieved a Total Return of 8.9% last year which is below their equities benchmark of 20.8% (the MSCI World Index). But Terry points out that he has still beaten that index in the longer term. You can read his letter to investors here: https://www.fundsmith.co.uk/media/pirmvyly/fundsmith-annual-letter-to-shareholders-2024.pdf

The 8.9% return is comparable to the FTSE All-Share and my own overall portfolio performance so I see no reason to change my holding. Fundsmith has again been affected by being underweight in the large US tech stocks which is no bad thing as far as I am concerned. Us equities are being driven by momentum effects which may not last.        

And now for something completely different. Here’s a review of a recently published book I read over Christmas. It’s a biography of Alexander Hamilton by Ron Chernow who wrote a very good biography of John D. Rockefeller entitled “Titan” which I can recommend. It explains how to become the richest person in the world by monopolistic practices – rather like Microsoft, Apple, Amazon and Alphabet in the modern era.

Alexander Hamilton was one of the leaders of the American independence revolution. He was a close aide to George Washington in the revolutionary wars and had a big hand in creating the US constitution. From a poor background he achieved a great deal.

He died in a duel with Aaron Burr which he could easily have avoided. Burr was a crack shot and the events surrounding the duel are covered in some detail in this book. The book will interest anyone who wishes to learn more about US history and how their constitution evolved.

But the book is way too long at 1450 pages. It could best have been edited  down to a third of that length. This seems to be a modern failing of authors and publishers. For example the book Titan is only 770 pages. Increased length does not improve the quality.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Paul Scott’s Podcast, SRT Marine Systems, Gelion, Ilika and Politics

The Christmas break gave me time to listen to Paul Scott’s latest podcast. As usual he has good words of wisdom to say about the UK small cap market.

He covers SRT Marine Systems (SRT) which I have held in the past. Forecasts regularly not met and a CEO who is always too optimistic. Good technology but the business model is the problem. Reliant on one-off big projects instead of recurring revenue. Paul is not optimistic about the company, and neither am I.

He also mentions IIika (IKA) and Gelion (GELN) negatively. They are both into battery technology. Ilika has been listed for longer but has yet to turn a profit. Paul argues such pre-profits, or lacking substantial revenue, companies should not be listed on the stock market and I agree. These are the kind of companies to avoid.

Such companies tend to list with optimistic stories about the ability of their technology to conquer the world, but it’s mainly bullshit in reality.

It’s time to reflect on the world of politics and our current leaders. I was sad to see that Bill Clinton has spent some time to hospital, probably with flu. He is aged 78 like me and has had major heart problems in the past. I also happened to watch a past speech by Ronald Reagen. Both Presidents were people who you could both trust and believe in. Convincing in what they said and providing good leadership. Donald Trump is not yet up to the same standard so I can only rate him as being the least worse choice. But the prospect for the US economy are still good.

In the UK our political leaders are second-rate in comparison. Keir Starmer is not someone I can trust and the economic decisions made by the Labour Government to date are poor in my opinion. Raising taxes on false claims about black holes in the budget are disgraceful. The UK is too highly taxed with a horrendously complex tax code. Confidence in the UK economy is rapidly evaporating. So on that depressing thought I will wish all readers a Happy New Year. Thankfully economic forecasts are generally wrong so don’t make any decisions based on my comments.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.