Category: Stock market

FTSE Strong Run?

The editorial in Investors Chronicle this week by Rosie Carr noted that the FTSE 100 has delivered a storming performance year to date. It’s risen by 12% beating both inflation and the S&P 500.

It appears investors are looking to avoid a possible crash in US tech stocks particularly those focussed on AI solutions. Also earnings expectations for large UK companies have been rising and buy-backs have also been prominent. Does that mean that we can all relax and buy UK large cap stocks without much thought?

I think that would be very dangerous. Such stock market trends are simply a symptom of how the markets move in emotional and irrational ways.

Small and mid-cap stocks seem to be more rationally priced of late but are still not exactly cheap. I continue to look for well managed companies with a good return on equity and with some barriers to entry. So in essence, and as usual, I won’t be following the herd.

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 Rants on Digital Currencies and Meme Stocks

I follow Paul Scott’s blog which generally covers small cap stocks but he also covers other stock market matters. Today he gave his views on Bitcoin, other digital currencies and “meme” stocks which are being ramped up again in the USA. He concludes that they are all simple speculations.

Today as it’s Friday his blog is free – see: https://paulypilot.substack.com/p/pauls-daily-podcast-free-friday-25

I agree totally with what he says.

His blog is usually both accurate and amusing and is highly recommended.

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.

New Market for Private Shares – or an Opportunity for Exploiting the Gullible?

The Financial Conduct Authority (FCA) have announced that PISCES, a new market for private (i.e. unlisted) shares will launch later this year. To quote from the announcement: “PISCES is a new type of platform where shares in private companies can be traded. It will open the door to more opportunities for investors, facilitating their access to growth companies. Private companies can tap into a broader range of investors and asset managers and PISCES offers exits for shareholders to sell up. As companies choose to stay private for longer, there is demand for investors to trade private company shares easily and efficiently in an organised marketplace. PISCES meets this demand by allowing secondary trading of these shares. Companies can set the floor and ceiling of share prices, and have a say over who can buy their shares”.

But will there be liquidity in the shares traded on this platform? And will investors get all the information required to make sound judgements about the merits of private companies?

There may just be big new opportunities to promote dubious companies by the wide boys who frequent financial markets.

See https://www.fca.org.uk/news/press-releases/fca-rings-bell-new-type-private-stock-market-growth-boost for more information.

The Investors Chronicle published an article last week entitled “The next 30 years of AIM”. In my view AIM has not been a success, particularly of late. Companies have been leaving AIM because of high listing costs and general reputational concerns (too many AIM companies have turned out to be run by dubious characters, with fraudulent accounts).

Although I personally have had some good successes investing in AIM companies, I have also had some failures which have offset the good ones. I now take great care about investing in AIM companies and never touch new IPOs.

How to fix AIM? Tougher listing rules are required such as longer track records.

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.

Stock Market Bouncing Around and Gut Problems

The sun is out and Spring is definitely upon us so surely it’s time to be more positive about the future. But the US stock market is bouncing around, mainly downwards, while the UK market is somewhat more positive. Are US investors dumping US stocks and buying UK stocks instead I wonder?  I have been buying stocks lately as when companies I hold issue positive trading statements or improved forecasts and the share price rises I tend to buy more.

There has been a lot of media coverage on gut problems of late, which I suffer from. See this article in the Telegraph for example: https://www.telegraph.co.uk/health-fitness/diet/gut-health/antibiotics-ruined-my-gut-health-heres-how-im-back-on-track/ .

It blames the cause on taking too many antibiotics which could be right. Treatments suggested are changes to diet to improve the microbiome, to include more fibre, and take probiotics. I have been trying several approaches. But it must be a common problem as TV advertisements at considerable expense now promote expensive products. I’ll let you know if anything works.

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.

Should I Sell US Stocks?

Easter gives one time to review your share portfolios. In last week’s Investors Chronicle John Rosier reviewed his portfolio and the impact of Trump tariffs. He has been “purging” US exposure from his funds portfolio. He has sold Polar Capital Technology (PCT) and JPMorgan Global Growth and Income (JGGI), both of which I hold, and several others. The exposure of Fundsmith Equity to US Stocks also proved unhelpful to his overall performance and mine.   

With the S&P 500 down 10% in the last six months, is it time to refocus on other markets and dump US holdings? I am not so sure.

It has certainly been the case that buying the US markets has been a simplistic trading strategy in the last couple of years. You couldn’t go far wrong by investing in US companies or US index trackers. Tariffs will certainly have a negative impact on the US economy and several other countries. China should be particularly badly hit.

But has the world really changed?  Famous investor Warren Buffett has said in the past “never bet against America” and he has proved right so far. The size and vibrancy of the US economy is not easy to beat and trade tariffs may only have a temporary impact. The US economy is so attractive to the best and brightest immigrants that it is like a lamp to a moth. That accounts for much of the success of the US technology sector in recent years.

It’s exceedingly difficult to predict what will happen to the world economy and changing portfolios based on short-term economic forecasts is surely a mistake.

There may be some opportunities to pick up as panicking investors dump holdings of US stocks or funds because they are scared of what Trump might do next, but this is surely a time for holding one’s nerve, not for responding to emotions. The dominance of index tracking funds is making the waves of emotions that sweep stock markets more pronounced than ever but now is not the time to ride those waves.  

With signs that progress on peace in Ukraine and Gaza is looking more likely, it is time to be optimistic rather than pessimistic about the state of the world and the major economies.

The UK economy is a different story though. Higher taxes are going to have a negative impact while Trump is aiming to reduce US taxes by cutting Government expenditure. He surely has the better strategy.

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.

Market Gyrations and Other News

It’s been a truly horrific last couple of weeks on the stock market. It’s taken a big dive then reversed direction just as quickly. It’s impossible to keep up with the tariff policy changes announced by Donald Trump.

Folks are still trying to figure out which companies are going to be affected when the target of the tough regulations appears to be mainly China. A good example of a company that is likely to be affected is 4imprint Group (FOUR). This is a UK FTSE company in which I have a holding. It sells promotional goods mainly in the USA but a major proportion of their products are made in China. Since the start of the year the share price has fallen about 35%. EPS forecasts have not fallen much but there is clearly uncertainty about the future business.

Will the company be able to replace Chinese imports by production in other countries such as the USA, the UK or other low tariff countries? There are plenty that could produce the products at low cost so I think the answer to that question is Yes.

It seems way too soon to me to jump to conclusions about what will happen even if there is some short-term disruption to supply chains.

FCA Consultation. The Financial Conduct Authority (FCA) have published a consultation of changes to the regulation of alternative fund managers (that includes those who manage VCTs for example). I have not had time to  read it yet but you may care to do so – see: https://www.fca.org.uk/publication/call-for-input/call-for-input-future-regulation-alternative-fund-managers.pdf

Nationalising British Steel. It looks like the Government may nationalise British Steel, or otherwise financially bail it out. This is very annoying and even the Reform Party is in favour of this stupidity. Unviable and declining industries should be allowed to go bust as they can never be rescued except at enormous cost – to be paid out of our taxes. A short-term bail-out never cures the problems in the long-term. The Labour Government seems not to have learned from their past experience of backing losing horses.

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.

Portfolio Review and What To Do Next

It’s the start of a new tax year today and the stock markets fell sharply on Friday – the FTSE 100 was down 5% while both the S&P 500 and NASDAQ were down 6%. Markets worldwide are crashing in response to the Trump tariff changes. As usual my portfolio is not immune to the falls even if I now have a somewhat defensive portfolio which is paying high dividends. When selling gathers momentum there is nowhere to hide. Panic is gripping the market regardless of the fact that the impact of the tariff changes has yet to become clear. Uncertainty is the name of the game and it will be some months before we see the impact on company financial results. I anticipate that it will be less than the doom mongers are forecasting. It is always remarkable how companies can adapt to negative events.

What should one do in such circumstances? Well I have been through such panics before. My tactic is simply to wait for an opportune moment to pick up some cheap shares. I always have some cash in my portfolio (about 10-15% normally) and that will be deployed when the market appears to have bottomed out – but that might be some weeks or months away. I will resist the temptation to buy more shares in response to minor bounces, and I never gear up my portfolio by borrowing cash in response to anticipated bounces.

I will move cash into our ISAs to maximise my ISA holdings now we are in the new tax year with another £20,000 allowance but there is no great hurry to do that.

The moral is keep calm and carry on.

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.

Year End Review of 2024

For the last 25 years I have been reporting on how my stock market investment portfolios have performed in the last year. This is my report for the calendar year 2024.

I am not very consistent as regards performance measured in total return. The year 2021 was a very good year but all the profits were wiped out in 2022. The year 2023 didn’t manage to beat the FTSE All-Share which is my benchmark objective. But 2024 showed a good recovery with a total return (capital and dividends) of 11.2% versus the FTSE All-Share of 5.5% (capital only – the dividend yield is about 4%).

It’s worth bearing in mind that my portfolio is very diversified across FTSE-100, FTSE-250 and smaller company (e.g. AIM) shares listed in the UK. I also hold a number of UK investment trusts which gives me exposure to overseas markets, and some Venture Capital Trusts (VCTs). Although I have some emphasis on AIM shares, they are not the very speculative ones. With 74 holdings altogether I am never going to significantly outperform benchmarks but at age 78 I feel no need to take an aggressive stance on investments.

The reason for my annual analysis is to pick out my investment mistakes of which there are always a few, which I will highlight in this note. Learning from one’s mistakes is an essential investment discipline.

I lost money last year on my holdings in BP, Rio Tinto, Safestore, Bango, Bioventix, DotDigital, Judges and Tracsis. The last 5 are all AIM shares and I sold Tracsis at the year-end but I see no reason to sell the others. I also sold some BP but held on to Shell. I consider oil/gas companies to be irrationally undervalued, mainly by institutions who have been bitten by the ESG bug. AIM company shares still seem to be out of fashion and it was difficult to make money on small cap shares last year. I bought several but they proceeded to go nowhere.

Big wins last year were Diploma, Paypoint, Polar Capital Technology Trust, Unilever, GB Group, Polar Capital Holdings and Intercede (the last one issued a positive trading statement today but it’s already highly rated).

In the property sector the Schroder REIT turned a profit but losses on TR Property Trust offset the gains. The property sector is still in the doldrums it seems with no recovery in capital values.

Our VCT shares continued to lose capital value but the tax-free dividends have held up so I will continue to hold. They continue to be negatively affected by the malaise in small cap shares.

Our large holdings in the Fundsmith Equity fund and Scottish Mortgage Trust did well again last year so I will continue to hold.

I have decided to sell one of our NS&I Index-Linked Savings Certificates – held since 2007 – I invested £15,000 then and it’s now worth £29,720, mostly as a result of inflation. But likely return on these is now much less so I do not consider them worth renewing. Savings rates for instant access deposits are now much better than in 2007 and more comparable to inflation. Returns on the stock market are likely better.

What are the investment prospects for 2025? I have no idea. I just like to buy shares in well managed companies with good prospects. That has worked well in the past and ensured decent long-term returns. My compounded total return over the last 25 years is about 10 times which has meant my wife has been kept busy on her expensive hobbies. It also means that unlike most people I have got richer in retirement, not poorer. But our offspring are looking for some financial assistance so they will soak up some of the profits. I will also be reviewing my usual charity donations near the end of the tax year and look at what we can gift out of surplus income which I track carefully.

It’s important to use all the potential IHT reliefs now that avoidance has become more difficult.

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.

How to Retire Early and Live Comfortably on Your Retirement Funds

The Investors Chronicle ran an article headed “How to retire early” in this week’s edition. It contains some useful tips. As someone who retired from full-time employment at the age of 50 on medical grounds I can make some comments on the subject. I am now 78 so have been lucky in some regards to survive so long and it’s worth bearing in mind that life, or death, can be very uncertain so making provision for an early retirement is always sensible even if you in practice can carry on working to a late age.

The IC article suggests that investing in equities from an early age is helpful and I would certainly agree with that. You can of course get tax relief from investing in pension funds and the best option is to set up a SIPP (Self Invested Personal Pension) with a low-cost provider so that you minimise charges and make your own investment decisions without the charges imposed by fund managers. There is no evidence that most fund managers are any better than randomly picking investments with a pin so it’s not difficult to do as well as them.

To be more specific you need to invest directly in listed companies although if you don’t wish to spend time looking at individual companies then investment trust companies are a second-best alternative.

As the IC article points out, it is possible to “retire early without being on a six-figure salary”. But you do need to live well within your means and live somewhat frugally.

Elsewhere in the IC it is pointed out that the level of savings for most people in defined contribution company pension schemes in the UK is “woefully low” and averages about 8% of salary. This is much less than in many other countries and is insufficient to build a reasonably large pension pot.

A related problem is that many UK pension schemes are too small with high costs. Effectively they provide poor value for money. The FCA are aiming to tackle this problem with a new “traffic-light” system which would rate pension funds. The FCA is consulting on their proposals now to which you can respond – see https://www.fca.org.uk/publications/consultation-papers/cp24-16-value-for-money-framework

You might be wondering how my own pension fund is doing since I have lived much longer than expected. Well it has increased in value over the last 28 years by sensible investment decisions and frugal living so I have been donating more to charities and other good causes. I have also made adequate provision for my wife and offspring. As one gets past a certain age the desire for expensive holidays, meals out, new suits, flash cars and other luxuries does reduce somewhat so that helps.  The “triple-lock” on state pensions also helps of course but medical expenses have also risen although most of those are covered by the NHS.

But the key message is to take control of your own pension provision so as to minimise costs and ensure good long-term investment performance.

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

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Taxes, General Election Promises and the UK Stock Market

The Labour party will need to raise taxes if they want to meet their manifesto promises. That particularly applies to Capital Gains Tax which is always a good socialist target for those who think it is “unearned” income that people have not had to work hard to obtain which is blatantly untrue if your wealth comes from developing a business before you sold it. According to Rachel Reeves they have not even ruled out taxing the profit on the sale of your own home which has traditionally been excluded.

This is not such a daft idea as it might seem at first sight. People in the UK rely way too much on housing wealth to provide for their retirement instead of investing in a business. That is one reason why housing is so expensive – people buy houses as investments rather than simply as somewhere to live. So capital gains tax on houses would help to change the excessive devotion to housing wealth in the UK. It might also free up some underused space in big houses. But it would create enormous problems if the gain was not index-linked. With capital gains tax at 40% it would make it impossible to move house in pursuit of a new job if you had owned a house for a few years. Reducing labour mobility is never good for the economy.

There is a very good article by Michael Fahy on why London-listed small caps have dropped by a third over the past 20 years in the Investors Chronicle. This is indeed a major problem. Pension funds and institutional investors have been selling equities, particularly in recent years. There is a quote at the end which reads: “You can’t have deep and effective capital markets unless you have deep effective pools of long-term capital. We have big pools of long-term capital in the UK – the second largest in the world. They’re just invested in the wrong place”.

This is indeed the major issue which needs tackling and it arises from the regulatory structure of pension funds which has made the managers so risk averse that they shun equities.

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

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