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Ken Baksh – May Investment Report-Lot’s going on!

May 2018 Market Report

 

During the month to April 30th, 2018, most major equity markets enjoyed gains, although trading remained volatile against a background of significant geo-political, economic and corporate events.  The European Central Bank appeared to become more “dovish” following some lower than expected consumer confidence indicators, affecting both equity and currency markets while quarterly corporate results were generally positively received. US market watchers had an especially busy month with tariff discussion (aluminium, steel, China, Russia), Syrian military involvement, some stock specific events such as Facebook, continuing White House “revolving door policy” as well as Donald Trump’s personal issues. In the Far East, North and South Korea made conciliatory advances, and though very early days, the largely symbolic meeting was well reported and received. The UK reported mixed economic data with satisfactory developments on the government borrowing side, inflation slightly lower than expected, but very poor GDP first quarter figures. The probability of a May interest rate hike has been reduced and economic downgrades for for the full year seem inevitable.  Aggregate world hard economic data continues to show steady expansion, excluding the UK, as confirmed by the IMF and the OECD with some forecasts of 2018 economic growth in the 3.5% to 3.9% area. Fluctuating currencies continue to play an important part in asset allocation decisions, the US dollar being the major feature, largely on relative economic developments. Bond watchers saw US 10-year yield hit 3% before backing off towards the end of the period. Greater fluctuations in bond yields are likely to lead to higher equity volatility going forward. It is also worth mentioning the effect of geo-political actions on commodities with disproportionate moves in alumina, aluminium, soya and oil, during April, for example.

 

Equities

Global Equities rose over the month the FTSE ALL World Index gaining 1.18% in dollar terms and now showing a move of -0.43% since the beginning of the year. The UK broad and narrow market indices outperformed other major markets over the month in local and sterling adjusted bases. Emerging markets were the relative underperformers and declined in absolute terms. In sterling adjusted terms, Japan remains the outperformer on year to date performance amongst the major markets although still marginally in negative territory. The VIX index while still up about 55% from the year end levels, fell about 20% in April, somewhat surprisingly in my view. At the time of writing, the absolute VIX level stands at 15.9, far from the 9-10 level that prevailed much of last year and reflecting a level of uncertainty but far from the extreme levels experienced during major market meltdowns of the past.

UK Sectors

Sector volatility remained high during the month, influenced by both global factors e.g. sanctions, tariffs as well as corporate activity. Oil and gas was the stand-out sector in April, helped by the 7.84% rise in the Brent price and good results and statements from both major UK stocks. Corporate activity is increasing and having an increasing bearing on sector indices e.g. Sainsbury’s 13% share price jump yesterday.

 

Fixed Interest

Gilt prices dropped over the month and are down 1.7% year to date in capital terms, the 10-year yield standing at 1.48% currently.  Other ten-year yield closed the quarter at US 2.96% Japan, 0.04% and Germany 0.50% respectively.  UK corporate bonds also dropped in price terms over the month. Amongst the more speculative grades, there continue to be mixed trends, with emerging market bonds, in local currency terms, showing price falls in absolute terms and yet the US lower grade bonds were moving in the opposite direction. Convertible bonds and floating rate issues continue to outperform gilts year to date in both capital and total return terms. Preference shares have recovered from the Aviva U-turn and remain attractive fixed interest alternatives. See my recommendations in preference shares, convertibles, corporate bonds, floating rate bonds etc. A list of my top thirty income ideas (all yielding over 5%) from over 10 different asset classes is available.

 

Foreign Exchange

Amongst the major currencies, a stronger dollar was the major monthly feature rising 1.77% in trade weighted terms, largely on relative economic news The Japanese yen was the major faller on the other hand, while the Euro drifted slightly, and sterling fell quite sharply towards the end of the month on much poorer economic news and the prospect of difficult Brexit discussion over coming days and weeks. As mentioned above, the FX moves are becoming a growing factor in asset allocations discussions. It is no coincidence that last month, the major market gainers of FTSE100 and the Nikkei, both showed their largest local currency moves during periods of currency weakness versus the dollar.

 

 Commodities

A very mixed and volatile month for commodities with significant impact from geo-political events. Oil, for example reacted positively to certain shut downs as well as impending Iranian sanction discussions and increasing US/Venezuela tensions. Alumina and aluminium prices were buffeted firstly by tariff developments and then specific Russian sanctions.  There were mixed trends amongst the other precious/PGM group metals. Most of the major global mining groups have just reported figures and rising commodity prices, capital discipline, balance sheet transformations and higher shareholder pay-outs have been a common theme. Soft commodities have also enjoyed strong price gains since the start of the year, wheat and soya for example showing price gains of around 18.2% and 27.2% respectively.

 

Looking Forward

Over the coming months, geo-political events and Central Bank actions/statements will continue be key market drivers while first quarter results and many ongoing corporate events will likely add a further level of volatility. With rising bond yields, equity valuations and fund flow dynamics will also be increasingly important areas of interest/concern.

US watchers will continue to speculate on the timing and number of interest rate hikes 2018/2019, as well as fleshing out the winners and losers from any tariff developments. Additional discussions pertaining to North Korea, Iran, Venezuela, NAFTA and Trump’s own position could precipitate volatility in equities, commodities and currencies. In Japan market sentiment is likely to be influenced by economic policy, the recent yen weakness being a positive factor for equity investors. European sentiment will be tested by economic figures (temporary slowdown or more sustained?), EU Budget discussions, Italian politics and positioning ahead of Greek rescue package deadlines.  Hard economic data (as opposed to sentiment surveys) will continue to show that UK economic growth will be slower in 2018 compared to 2017, and further down grades may appear as anecdotal second quarter figures trends are closely analysed. Brexit discussion have moved to a new level, discussions on the “custom union” being currently hotly debated. Political tensions stay at elevated levels both within and across the major parties and considerable uncertainties still face individual companies and sectors.

 

On a valuation basis, most, but not all, conventional government fixed interest products continue to appear expensive against current economic forecasts and supply factors, and renewed bond price declines and further relative underperformance versus equities should be expected in the medium term, in my view. On the supply point there are increasing estimates of US bond issuance against a background of diminished QE and overseas buying. Chartists and others are watching closely as the US 10-year flirts with 3%.

Equities appear more reasonably valued, apart from some PE metrics, (especially in the US), but there are wide variations, and opportunities, in both broad asset classes. Equity investors will be looking to see if superior earnings growth can compensate for higher interest rates in several areas.  Corporate results from US, Europe and Japan have, on aggregate, been up to expectations over the first quarter of 2018, although EY noted that the number of UK profits warning were about 10% higher than the previous year at the nine-month stage, mostly in the home improvement, motor, government supply, restaurant and other retail areas.  Outside pure valuation measures, sentiment indicators and the VIX index are showing significant day to day variation, after the complacency of last year.

 

In terms of current recommendations,

Continue to overweight equities relative to core government bonds, especially within Continental Europe and Japan. However, the equity selection should be very focussed. Certain equity valuations are rather high, especially on a PE basis (see quarterly). A combination of sharper than expected interest rate increases with corporate earnings shocks would not be conducive to strong equity returns.

  • UK warrant a neutral allocation now moved from underweight and it is tempting to rebuild some UK equity exposure on certain valuation considerations, the recent bout of sterling weakness maybe providing a catalyst. Within the UK equity space, I suggest moving the balance of small/large cap stocks now back to neutral following both the outperformance of the former and the volatility in the currency (part post-election, part BREXIT). Ongoing Brexit debate, political stalemate and economic uncertainty could cause more sterling wobbles, which in turn could affect sector/size choices. I would expect to see more profits warnings, WPP being a recent example. Extra due diligence in stock/fund selection is strongly advised.
  • Within UK sectors, some of the higher yielding defensive plays e.g. Pharma, telco’s and utilities have attractions relative to certain cyclicals and many financials are showing confidence by dividend hikes and buy-backs etc. Oil and gas majors may be worth holding despite the outperformance to date. Concentrate on the major diversified although there are currently some attractive equity and fixed interest ideas in the mid/small cap area. Mining stocks remain a strong hold, in my view (see my recent note for favoured large cap pooled play). Corporate activity, already apparent in the engineering (GKN), property (Hammerson), pharmaceutical (Glaxo, Shire?), packaging(Smurfit), retail(Sainsbury/Asda) is likely to increase in my view.
  • Continental European equities continue to be preferred to those of USA, for reasons of valuation, and Central bank policy. Improving economic data adds to my enthusiasm for selected European names, although European investors may be advised to focus more on domestic, rather than export related themes. Look at underlying exposure of your funds carefully. Remember that certain European and Japanese companies provide US exposure, without paying US prices. I have recently written on Japan, and I would continue to overweight this market, despite the large 2017,and 2018 to date   Smaller cap/ domestic focussed funds may out perform broader index averages e.g. JP Morgan Japanese Smaller Companies and Legg Mason.
  • Alternative fixed interest vehicles, which continue to perform relatively well against conventional government bonds, have attractions e.g. floating rate funds, preference shares, convertibles, for balanced, cautious accounts and energy/ emerging/speculative grade for higher risk. These remain my favoured plays within the fixed interest space. See recent note
  • UK bank preference shares still look particularly attractive and could be considered as alternatives to the ordinary shares in some cases. If anything, recent sector “news” has highlighted the attractions of the sector.
  • Alternative income, private equity and renewable funds have exhibited their defensive characteristics during recent equity market wobbles and are still recommended as part of a balanced portfolio. Reference could be made to the renewable funds (see my recent solar and wind power recommendations). Results from Greencoat on February 26nd and Bluefield Solar the following day reinforce my optimism for the sector. Selected infrastructure funds are also recommended for purchase after the recent Corbyn/Carillion inspired weakness (see note).
  • Any new commitments to the commercial property sector should be more focussed on direct equities and investment trusts than unit trusts (see my recent note comparing open ended and closed ended funds), thus exploiting the discount and double discount features respectively. However, in general I would not overweight the sector, as along with residential property, I expect further price stagnation especially in London offices and retail developments. The outlook for some specialist sub sectors and property outside London/South-East, however, is currently more favourable. Investors should also consider some continental European property See my recent company note, after management update last week.
  • I suggest a selective approach to emerging equities and would currently avoid bonds. Although the overall valuation for emerging market equities is relatively modest, there are large differences between individual countries. A mixture of high growth/high valuation e.g. India, Vietnam and value e.g. Russia could yield rewards and there are signs of funds moving back to South Africa on political change. As highlighted in the quarterly, Chinese index weightings are expected to increase quite significantly over coming years and Saudi Arabia, is just being allowed into certain indices.

Full second quarter is available clients/subscribers and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring.

 

Good luck with performance!   Ken Baksh 01/05/2018

Independent Investment Research

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691

kenbaksh@btopenworld.com

Good luck with performance!   Ken Baksh 01/03/2018

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

Ken Baksh – April Investment Report – New quarter, new hope!

April 2018 Market Report

During the quarter to March 29th, 2018, all major equity markets suffered marked declines leaving some indices down near 10% year to date, while the VIX rose significantly to 19.94. Globally, a “perfect storm” of rising interest rates, stock specifics e.g. Facebook, and the growing threat of a trade war were the clear market catalysts.  The European Central Bank continued to move, as expected, towards further tapering mode, amidst some lack lustre economic data releases, German political relief but Italian political uncertainty. US market watchers negotiated the well anticipated March interest rate increase and healthy economic data in reasonable shape but were unsettled by growing trade tariff discussions and actions and several Trump’s personal issues.  In the Far East, Chinese premier Xi Jinping consolidated his position, and the country responded to Donald Trump’s tariff imposition in robust fashion, while the “Koreas” edged very tentatively towards discussions.  Aggregate world hard economic data continues to show steady expansion, excluding the UK, as confirmed by the IMF and the OECD with some forecasts of 2018 economic growth in the 3.5% to 4% area. Fluctuating currencies continue to play an important part in asset allocation decisions, the Japanese yen receiving some attention (unwelcome by some) as a haven, while sterling seemed to take heart from ongoing Brexit discussions. Bond watchers watched carefully as the US 10-year yield approached 3% before backing off towards the end of the period. Greater fluctuations in bond yields are likely to lead to higher equity volatility going forward.

Equities

Global Equities fell over the three-month period, the FTSE ALL World Index dropping by around 1.59% in dollar terms and falling 5.09% for a sterling-based investor. The UK broad and narrow market indices have underperformed other major markets over the quarter on a local and sterling adjusted basis. Emerging markets were one of the very few bright spots rising by about 1.5%, building on the 2017 outperformance, while the NASDAQ Index also eked out a small gain despite the well-publicised tech woes late in the quarter. In sterling adjusted terms there was much closer alignment of the year to date moves amongst the major overseas indices, Japan (-3.7%) and America (-5.2%) being the first quarter leaders and both UK broad and narrow indices falling about 8%,bringing up the rear. The VIX index advanced nearly 100% over the period, much in the early February period, and there is no doubt that the oscillations in the VIX and related products themselves, contributed to the nervous market environment at that time. At the time of writing, the absolute VIX level stands at 19.94, far from the 9-10 level that prevailed much of last year and reflecting a level of uncertainty but far from the extreme levels experienced during major market meltdowns of the past. Chartists would note that the quarter just ended was the first negative quarter for major indices since 2015!

UK Sectors

Sector volatility remained high during the month, influenced by both global factors e.g. Mining, down 6.38% and pharmaceuticals, up 6.6%, due largely to corporate action (actual and rumoured). Amongst the financials, banking and insurance shares remain outperformers year to date although still down in absolute terms. It is worth pointing out the growing list of companies involved in some form of takeover/restructuring, Melrose/GKN being a high-profile example. Still relatively early in the year, but so far, UK small company funds are outperforming larger company peers, while active funds are outperforming passive. All the major UK equity sectors are, however showing negative year to date absolute returns, as are all “balanced” portfolios. Source: Trustnet

Fixed Interest

Gilt prices rose over the month but are down 0.66% year to date in capital terms, the 10-year yield standing at 1.39% currently.  Other ten-year yield closed the quarter at US 2.75% Japan ,0.01% and Germany 0.43% respectively.  UK corporate bonds also dropped in price terms over the three-month period. Amongst the more speculative grades, there were mixed trends, with emerging market bonds, in local currency terms, showing price gains in absolute terms and yet the US lower grade bonds were moving in the opposite direction. Convertible bonds continued to outperform gilts and the recommended floating rate bond fund showed a positive total return over the quarter, thus outperforming both equities and gilts. Preference shares had a very bumpy march, largely due to cancellation proposals, subsequently withdrawn, by Aviva plc See my recommendations in preference shares, convertibles, corporate bonds, floating rate bonds etc. A list of my top thirty income ideas (all yielding over 5%) from over 10 different asset classes is available.

Foreign Exchange

Amongst the major currencies, a stronger pound was the major monthly feature rising 1.2% in trade weighted terms. On the other side of the coin, the Dollar fell. The Japanese Yen currently stands as the major currency “winner” over the quarter rising by 4.87% in trade weighted terms and over 5.5% against the US dollar. As mentioned above, the FX moves are becoming a growing factor in asset allocations discussions. For example, about half of the Japanese equity 4% outperformance of the UK market is due to currency gains, so far this year.

 Commodities

A very mixed month for commodities. Oil showed a large bounce, remaining above $60 while gold responded to the weaker dollar by rising about 0.5%. There were mixed trends amongst the other precious/PGM group metals. Most of the major global mining groups have just reported figures and rising commodity prices, capital discipline, balance sheet transformations and higher shareholder pay-outs have been a common theme. Soft commodities have also enjoyed reasonable price gains since the start of the year, wheat and corn for example both showing price gains of around 5%.

Just for completeness I note that bitcoins have lost about 50% of their value since the beginning of the year, not that that would interest many of my regular readers, I am sure!

Looking Forward

Over the coming months, geo-political events and Central Bank actions/statements will likely be key market drivers while the first quarter reporting season and many ongoing corporate events will likely add a further level of volatility. With rising bond yields, equity valuations and fund flow dynamics, will also be increasingly important areas of interest/concern. US watchers will continue to speculate on the timing and number of interest rate hikes 2018/2019, as well as fleshing out the winners and losers from any tariff war. Furthermore, Facebook/tech issues and Donald Trumps’s personal affairs may dominate news for a while. In Japan market sentiment is likely to be influenced by economic policy, especially in the areas of low inflation/strong Yen, and any likely direct or indirect tariff impact. Global geo-politics will also feature Iranian sanctions and Korean discussions. Hard economic data (as opposed to sentiment surveys) will continue that UK economic growth will be slower in 2018 compared to 2017, and further down grades may appear. Brexit discussion have moved to a new level. Political tensions stay at elevated levels both within and across the major parties and considerable uncertainties still face individual companies and sectors.

On a valuation basis, most, but not all, conventional government fixed interest products continue to appear expensive against current economic forecasts and supply factors, and renewed bond price declines and further relative underperformance versus equities should be expected in the medium term, in my view. On the supply point there are increasing estimates of US bond issuance against a background of diminished QE and overseas buying (Chinese retaliation?).  Equities appear more reasonably valued, apart from some PE metrics, (especially in the US), but there are wide variations, and opportunities, in both broad asset classes. Equity investors will be looking to see if superior earnings growth can compensate for higher interest rates in several areas.  Corporate results from US, Europe and Japan were, on aggregate, up to expectations over 2017 although EY noted that the number of UK profits warning were about 10% higher than the previous year at the nine-month stage, mostly in the home improvement, motor, government supply,restaurant and other retail areas.  Outside pure valuation measures, sentiment indicators and the VIX index are showing significant day to day variation, after the complacency of last year.

In terms of current recommendations,

Continue to overweight equities relative to core government bonds, especially within Continental Europe and Japan. However, the equity selection should be very focussed. Certain equity valuations are rather high, especially on a PE basis (see quarterly). A combination of sharper than expected interest rate increases with corporate earnings shocks would not be conducive to strong equity returns.

  • UK equities still only warrant a neutral allocation now, in my view, despite the underperformance of last year and the first period of 2018, and some relatively modest ratings. It is tempting to rebuild some UK equity exposure on certain valuation considerations, though difficult to see a short-term catalyst. Within the UK equity space, I suggest moving the balance of small/large cap stocks now back to neutral following both the outperformance of the former and the volatility in the currency (part post-election, part BREXIT). Ongoing Brexit debate, political stalemate could cause more sterling wobbles, which in turn could affect sector/size choices. I would expect to see more profits warnings.
  • Within UK sectors, some of the higher yielding defensive plays e.g. Pharma, telco’s and utilities have attractions relative to certain cyclicals and many financials are showing confidence by dividend hikes and buy-backs etc. Oil and gas majors may be worth topping up after recent weakness and balance sheet improvements and have lagged the recovery in the spot price. Concentrate on the major diversified although there are currently some very attractive equity and fixed interest ideas in the mid/small cap area. Mining stocks remain a strong hold, in my view (see my recent note for favoured large cap pooled play). Corporate activity, already apparent in the engineering (GKN), property (Hammerson), pharmaceutical (Glaxo, Shire?),packaging(Smurfit) is likely to increase in my view.
  • Continental European equities continue to be preferred to those of USA, for reasons of valuation, and Central bank policy. Improving economic data adds to my enthusiasm for selected European names, although European investors may be advised to focus more on domestic, rather than export related themes. Look at underlying exposure of your funds carefully. Remember that certain European and Japanese companies provide US exposure, without paying US prices. I have recently written on Japan, and I would continue to overweight this market, especially in hedged form, despite the large 2017 outperformance. Smaller cap/ domestic focussed funds may out perform broader index averages e.g. JP Morgan Japanese Smaller Companies and Legg Mason.
  • Alternative fixed interest vehicles, which continue to perform relatively well against conventional government bonds, have attractions e.g. floating rate funds, preference shares, convertibles, for balanced, cautious accounts and energy/ emerging/speculative grade for higher risk. These remain my favoured plays within the fixed interest space. See recent note
  • UK bank preference shares still look particularly attractive and could be considered as alternatives to the ordinary shares in some cases. If anything, recent sector “news” has highlighted the attractions of the sector.
  • Alternative income, private equity and renewable funds have exhibited their defensive characteristics during recent equity market wobbles and are still recommended as part of a balanced portfolio. Reference could be made to the renewable funds (see my recent solar and wind power recommendations). Results from Greencoat on February 26nd and Bluefield Solar the following day reinforce my optimism for the sector. Selected infrastructure funds are also recommended for purchase after the recent Corbyn/Carillion inspired weakness (see note).
  • Any new commitments to the commercial property sector should be more focussed on direct equities and investment trusts than unit trusts (see my recent note comparing open ended and closed ended funds), thus exploiting the discount and double discount features respectively. However, in general I would not overweight the sector, as along with residential property, I expect further price stagnation especially in London offices and retail developments. The outlook for some specialist sub sectors and property outside London/South-East, however, is currently more favourable. Investors should also consider some continental European property plays. See my recent note on this sector. Corporate activity may unlock long term value.
  • I suggest a selective approach to emerging equities and would currently avoid bonds. Although the overall valuation for emerging market equities is relatively modest, there are large differences between individual countries. A mixture of high growth/high valuation e.g. India, Vietnam and value e.g. Russia could yield rewards and there are signs of funds moving back to South Africa on political change. As highlighted in the quarterly, Chinese index weightings are expected to increase quite significantly over coming years and Saudi Arabia,is just being allowed into certain indices.

Full second quarter will be available in mid-April for clients/subscribers and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring. I expect more clients, who may have been considering cashing in , to switch some final salary pots to SIPP, to act sooner rather than later, as the combination of rising gilt yields in the medium term and lower projected investment returns over the  coming period will further erode CETV’s.

 

Good luck with performance!   Ken Baksh 01/04/2018

Independent Investment Research

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691

kenbaksh@btopenworld.com

Good luck with performance!   Ken Baksh 01/03/2018

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

 

Ken Baksh – March 2018 Market Report. Volatility, unlike the snow,is here to stay!

 

March 2018 Market Report

During the period to February 28th, 2018, major equity markets registered little overall move on balance, but there was a large increase in volatility and day to day movement, leaving some markets, briefly, in “correction” territory earlier this month before recovering some of the fall. The European Central Bank continued to move, as expected, towards further tapering mode, amidst some very strong economic data releases while new additional political “noise” from Germany and Italy, affected shorter term market sentiment. US market watchers negotiated the Federal Reserve (both rate increase and change in Chairperson) as well as the last-minute passage of the Tax Reform Bill. However, at the time of writing, the expectation of greater than expected, monetary tightening in the short term, protectionism and growing longer term debt implications are unsettling factors. In the Far East, Chinese authorities stepped up regulatory action (specifically the financial sector) while still showing very satisfactory GDP growth, and Japan recorded yet another quarter of relatively strong GDP growth. The re-appointment of Japanese Central Bank Governor Haruhiko Kuroda signalled continued adoption of the easier monetary and fiscal stance for the time being. Aggregate world hard economic data still showed steady expansion, excluding the UK, as confirmed by the IMF and the OECD with some forecasts of 2018 economic growth in the 3.5% to 4% area. Fluctuating currencies continue to play an important part in asset allocation decisions. Bond watchers are watching carefully the US 10 year as the yield hovers near 3.0%, (2.93% at close 28/02). Greater fluctuations in bond yields are likely to lead to higher equity volatility going forward.

Equities

Global Equities rose over the period, the FTSE ALL World Index climbing by around 2.02% in dollar terms. The UK broad and narrow market indices underperformed other major markets, both falling by   near 6%. Emerging markets, Asia and the tech-heavy NASDAQ index had a relatively strong start to 2018, building on the 2017 outperformance. In sterling adjusted terms there was much closer alignment of the year to date moves amongst the major overseas indices, Japan and America a little ahead, both outperforming UK by about 6%. The VIX index advanced nearly 90% over the period, much in the early February period, and there is no doubt that the oscillations in the VIX and related products themselves, contributed to the nervous market environment at that time. At the time of writing, the absolute VIX level stands at 19.26, far from the 9-10 level that prevailed much of last year.

UK Sectors

Sector volatility during the period was high, mining outperforming telecoms by about 11% for example. Amongst the financials, banking and insurance shares have been stronger than average and the former sector has recently announced a series of buy-backs, dividend increases/reinstatements after the troubles of recent years. Still relatively early in the year, but so far, UK small company funds are outperforming larger company peers, and, along with mixed asset funds, are showing a negative year to date returns. The only IMA sectors still in positive territory are Tech,Asia and Emerging markets. Source: Trustnet

 

Fixed Interest

Gilt prices have fallen over the recent period, the ten-year yield currently 1.59%.  Other ten-year yield movements were generally upwards, American, Japanese and German ten-year yields closing recently at 2.93%,0.04% and 0.62% respectively.  UK corporate bonds also dropped in price terms over the period although slightly less than gilts. Amongst the more speculative grades, there were mixed trends, with emerging market bonds, in local currency terms, showing price gains in absolute terms and yet the US lower grade bonds were moving in the opposite direction. Convertible bonds continued to outperform gilts. See my recommendations in preference shares, convertibles, corporate bonds, floating rate bonds etc. A list of my top thirty income ideas (all yielding over 5%) from over 10 different asset classes is available.

Foreign Exchange

Amongst the major currencies, the Japanese Yen was the major feature rising by nearly 4% in trade weighted terms, partly on globalised dollar weakness and a certain amount of perceived “safe haven” buying during the volatile equity period. On the other side of the coin, the Dollar fell. The Euro did not show much net movement while sterling, a little stronger, seemed to be driven by slightly more hawkish MPC statements and difficult Brexit discussion. As mentioned above, the FX moves are becoming a growing factor in asset allocations discussions.The dollar yen,for instance has already moved over 5% in just two months.

 Commodities

A generally firm period for commodities. Oil(WTI) showed a small bounce, remaining above $60 while gold responded to the weaker dollar by rising about 2%. There were mixed trends amongst the other precious/PGM group metals, platinum and palladium rising while silver fell rose. Most of the major global mining groups have just reported figures and rising commodity prices, capital discipline, balance sheet transformations and higher shareholder pay-outs have been a common theme. Soft commodities have also enjoyed reasonable price gains since the start of the year.

Looking Forward

Over the coming months, geo-political events and Central Bank actions/statements will likely be key market drivers. With rising bond yields, equity valuations and fund flow dynamics, will also be increasingly important areas of interest/concern. US watchers will continue to speculate on the timing and number of interest rate hikes, as well as fleshing out the winners, losers and debt implications from the recent Infrastructure/ Tax Reform Bill initiatives and watching Donald Trumps’s personal issues. Protectionism also seems to be on the increase. In Japan, Shinzo Abe is likely to push for changes in the Constitution and reinforce the easier monetary and fiscal economic policy stance following his resounding election victory and re-appointment of Kuroda. Hard economic data (as opposed to sentiment surveys) will shows that the UK economic growth will be slower in 2018 compared to 2017, just released, and downgrades to have recently been made by many organizations. BREXIT discussions enter a new phase with discussions on the timing and nature of the new “Trade Deal”, as well as transitional arrangements being a major focus. Political tensions will arise both within and across the major parties.

On a valuation basis, most, but not all, conventional government fixed interest products continue to appear expensive against current economic forecasts and supply factors, and renewed bond price declines and further relative underperformance versus equities should be expected, in my view. On the supply point there are increasing estimates of US bond issuance against a background of diminished QE and overseas buying.  Equities appear more reasonably valued, apart from some PE metrics, (especially in the US), but there are wide variations, and opportunities, in both broad asset classes. Equity investors will be looking to see if superior earnings growth can compensate for higher interest rates in several areas.  Corporate results from US, Europe and Japan were, on aggregate, up to expectations over 2017 although EY noted that the number of UK profits warning (well flagged Maplins,ToysRus,Prexxo’s,this morning) were about 10% higher than the previous year at the nine-month stage, mostly in the home improvement, motor, government supply and other retail areas.  Outside pure valuation measures, sentiment indicators and the VIX index are showing more day to day variation, after the complacency of the last quarter.

In terms of current recommendations,

Continue to overweight equities relative to core government bonds, especially within Continental Europe and Japan. However, the equity selection should be very focussed. Certain equity valuations are rather high, especially on a PE basis (see quarterly). A combination of sharper than expected interest rate increases with corporate earnings shocks would not be conducive to strong equity returns.

  • UK equities still only warrant a neutral allocation now, in my view, despite the underperformance of last year and the first period of 2018, and some relatively modest ratings. Within the UK equity space, I suggest moving the balance of small/large cap stocks now back to neutral following both the outperformance of the former and the volatility in the currency (part post-election, part BREXIT). Ongoing Brexit debate, political stalemate could cause more sterling wobbles, which in turn could affect sector/size choices. I would expect to see more profits warnings.
  • Within UK sectors, some of the higher yielding defensive plays e.g. Pharma, telco’s and utilities have attractions relative to certain cyclicals and many financials are showing confidence by dividend hikes and buy-backs etc. Oil and gas majors may be worth topping up after recent weakness and balance sheet improvements and have lagged the recovery in the spot price. Concentrate on the major diversified although there are currently some very attractive equity and fixed interest ideas in the mid/small cap area. Mining stocks remain a strong hold, in my view(see my recent note for favoured large cap pooled play).
  • Continental European equities continue to be preferred to those of USA, for reasons of valuation, and Central bank policy. This strategy, in sterling adjusted terms worked very well through 2017 and I expect to continue. Improving economic data adds to my enthusiasm for selected European names, although European investors may be advised to focus more on domestic, rather than export related themes. Look at underlying exposure of your funds carefully. Remember that certain European and Japanese companies provide US exposure, without paying US prices. I have recently written on Japan, and I would continue to overweight this market, especially in hedged form, despite the large 2017 outperformance. Smaller cap/ domestic focussed funds may out perform broader index averages e.g. JP Morgan Japanese Smaller Companies and Legg Mason.
  • Alternative fixed interest vehicles, which continue to perform relatively well against conventional government bonds, have attractions e.g. floating rate funds, preference shares, convertibles, for balanced, cautious accounts and energy/ emerging/speculative grade for higher risk. These remain my favoured plays within the fixed interest space. See recent note
  • UK bank preference shares still look particularly attractive and could be considered as alternatives to the ordinary shares in some cases. Prices have shown good capital growth since as well as offering annual yields more than 5%, but are still recommended for more cautious investors with a desire for regular annual income. Recent results and the November “stress test” results show that generally UK balance sheets are generally in good shape, and I see negligible risk of default on preference share dividends for the recommended stocks.
  • Alternative income, private equity and renewable funds have exhibited their defensive characteristics during recent equity market wobbles and are still recommended as part of a balanced portfolio. Reference could be made to the renewable funds (see my recent solar and wind power recommendations). Results from Greencoat on February 26nd and Bluefield Solar the following day reinforce my optimism for the sector. Selected infrastructure funds are also recommended for purchase after the recent weakness (see note).
  • Any new commitments to the commercial property sector should be more focussed on direct equities and investment trusts than unit trusts (see my recent note comparing open ended and closed ended funds), thus exploiting the discount and double discount features respectively. However, in general I would not overweight the sector, as along with residential property, I expect further price stagnation especially in London offices and retail developments. The outlook for some specialist sub sectors and property outside London/South-East, however, is currently more favourable. Investors should also consider some continental European property plays. See my recent note on this sector.
  • I suggest a selective approach to emerging equities and would currently avoid bonds. Although the overall valuation for emerging market equities is relatively modest, there are large differences between individual countries. A mixture of high growth/high valuation e.g. India, Vietnam and value e.g. Russia could yield rewards, especially after a rating upgrade earlier this week. As highlighted in the quarterly, Chinese index weightings are expected to increase quite significantly over coming years.

Full second quarter will be available in mid-April for clients/subscribers and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring. I expect more clients, who may have been considering cashing in, to switch some final salary pots to SIPP, to act sooner rather than later, as the combination of rising gilt yields and lower projected investment returns over the  coming period will further erode CETV’s.

Independent Investment Research

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691

kenbaksh@btopenworld.com

Good luck with performance!   Ken Baksh 01/03/2018

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

 

 

Ken Baksh – When is a trust not a trust?

When is a trust not a trust?

Many of my regular readers will know of my preference for investment trusts (closed end funds) over OEIC’s (unit trusts, to those of a certain era!). I come clean on the fact that my formative City years in the late 70’s and most of the 80’s were spent with one predominantly investment trust institution!

However, that bias aside, and, even though the abolition of trail commission has levelled the playing field somewhat between open and closed end funds, there are still many other current reasons why I think investors should always include analysis of investment trusts, certain ETF’s and unit trusts before making their final choice of pooled investment vehicle. There can be nothing worse than correctly identifying the asset class, but then picking the “inappropriate” vehicle within that class!

Numis have recently conducted their annual analysis showing that equity focussed investment trusts have outperformed open ended funds, whether in NAV total return terms (thus eliminating the effect of fluctuating discounts), or price total return terms (i.e. in the investor pocket) in at least 75% of the cases over the last five and ten years. In fact, over the last ten years, in price total return terms, investment trusts have outperformed unit trusts in 15 out of 16 sectors…. The one exception being Japanese small companies. I reproduce their statistics below (Appendix 1) …thanks to Morningstar and Numis Securities Research!

Performance is clearly a major positive issue. There are however seven or eight other reasons why investors should consider investment trusts as part of their due diligence process when considering pooled investment vehicles.

  • Investment trusts allow managers to take a longer-term view; they do not have to sell assets when investors sell their units, unlike unit trusts. Investment trusts are well suited for assets that are hard to sell quickly, like property and infrastructure. As a recent example, property investment trusts very substantially outperformed property unit trusts after the Brexit vote. In fact, some of the unit trusts placed time restrictions or financial penalties on selling investors, and still hold excessive amounts of cash, which dilute any recovery in the underlying asset.
  • Unit trusts distribute their income on an annual basis, while investment trust managers can accrue revenue reserves for a rainy day! Despite the widespread dividend cuts around 2008-2009, many investment trusts were still able to maintain their records of paying out and growing dividends. There are two or three investment trusts that have actually racked up about 50 years of consecutive dividend increases, spanning at least the four major market “crashes” since my time in the City!
  • Investment trusts are also subject to market discipline. If performance dips, the board of the investment trust can hold the manager to account and, in extreme cases, replace him. This has happened, and there have been more cases of investor activism e.g. Alliance Trust which have prompted personnel moves….and usually, improved investor return.
  • A related issue is the possibility of outside corporate action. A one stop approach in acquiring a chunk of assets, sometimes at a large discount either to merge into another financial group or for other reasons may make sound commercial sense. For example, the British Coal Board Pension fund took over one of my old stable TR Industrial and General in 1988, and more recently, one of my recommendations in the specialist area of Japanese real estate,Japanese Residential Investment Company was taken over at a substantial premium (approx30%) late 2015 by one of the Blackstone Funds.
  • Many, but not all, investment trusts use gearing, which can provide a boost to returns when markets rise and with current borrowing rates so relatively low compared with income returns from many stock market sectors. However, the opposite can be true….so an advantage or disadvantage! Extra homework and diligence required!
  • Unit trusts tend to be priced just once a day so that investors do not have perfect visibility over the price they pay. This can be especially true when unstable market conditions are prevailing. Investment trusts tend to be traded live so investors have a better feel for what they are paying and can finesse their entry/exit points.
  • The subject of a fluctuating DISCOUNT is of course, a two-way argument and can produce an element of complexity and unpredictability into investment trusts, especially for inexperienced investors. As with gearing, price performance and final cash return to the investor can be enhanced/weakened by inappropriate gearing relative to the overall market background. As a sweeping generality, out of favour markets, tend to be accompanied by wider discounts, and it is often in these periods, that longer term value investors can benefit. As an example, over the last five years, Europe and Japan have received new investor attention and this can be seen by the superior price performance over NAV performance in the table below (i.e. discount narrowing), while in the case of the defensive UK Equity Income sector, discounts have widened over the same period.
  • Finally, the subject of relative pricing is as long as a piece of proverbial string with AMC’s, performance fees, initial charges, platform fees and dealing fees being thrown into the comparison pot, but in general, especially if the one off initial charge can be heavily discounted or eliminated, the differences have narrowed over recent years and unit trust are no longer significantly more expensive than investment trusts from a dealing perspective.

In summary, do not ignore investment trusts!

I can provide a service of stock selection or even construction of an entire investment trust portfolio if desired. Feel free to contact with your requirement.

Appendix 1

 

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

 

 

Ken Baksh – Lower volatility monthly income idea suitable for more cautious investor. Is that you?

TwentyFour Select Monthly Income (SMIF) -ISIN-GGOOBJVDZ946

This investment trust, live traded on the LSE, holds a diversified portfolio of fixed income credit products. Opportunities arise from situations such as small issuance size or legacy issues. Most of the portfolio is invested in B/BB credits (approx. 70%) and the holdings are typically held to maturity. As at the end of December 2017, European and US High Yield Bonds, Bank Fixed Interest Issues and Asset backed securities represented about 89% of the total portfolio. The portfolio is well diversified with 94 positions, and the largest holding is less than 3.04% of the total. The duration of the portfolio is relatively low, and the three-year volatility is below 5%. This volatility is reflected in a share price that has remained within the 84p-105p range since launch, while continuing to pay high annual income, monthly.

  • Twenty-Four Asset Management, the parent group is a London based fixed income specialist, established in 2008, with £7.3 billion assets under management and an investment team of 21 professionals.
  • Rather uniquely, SMIF pays a MONTHLY Income of 0.5p. In addition, it pays a larger dividend each October to distribute all the financial year’s income. At the current price the annual yield is 6.62% based on the last twelve monthly dividends.
  • Another unusual feature of this fund is that there is a quarterly tender process for up to 20% of the share capital at a 2% discount to NAV.This tender process is a robust discount control mechanism because it gives investors comfort that they can exit at close to NAV in a reasonable time frame.
  • The trust has tended to trade at a premium to asset value of between 1% and 5% over most of the period since launch in March 2014.
  • As at 15th January the trust traded on a 1.95% premium and 6.62% historic 12-month yield.

The fund is recommended as an income play with additional features such as the discount control as well as the potential for capital growth from spread tightening and the pull-to- par elements of the portfolio. Suitable for a more cautious investor looking for a regular income flow.

 

https://content.prnewswire.com/documents/PRNUK-1201181001-E6F3_SMIF_Factsheet_(December_2017)_CC.pdf

Independent Investment Research

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

 

 

 

Ken Baksh – January 2018 market Report……New challenges and opportunities!

Independent Investment Research

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691

kenbaksh@btopenworld.com

 

January 2018 Market Report

 

During December, major equity markets displayed an upward trend, assisted by well flagged Central Bank actions and statements, a quieter political mood, and the tail end of a generally upbeat third quarterly corporate reporting season. The European Central Bank continued to move, as expected, to a gradual tapering mode, amidst some very strong economic data releases while there was additional political “noise” from Germany, Austria, Italy and Spain. US market watchers negotiated the Federal Reserve (both rate increase and change in Chairman) as well as the last-minute passage of the Tax Reform Bill. In the Far East, Chinese authorities stepped up regulatory action (specifically the financial sector) while Japan recorded and another quarter of relatively strong GDP growth. Aggregate world hard economic data still showed steady expansion, excluding the UK, as confirmed by the IMF and the OECD with some forecasts of 2018 economic growth in the 3.5% to 4% area. Fluctuating currencies are playing an increasing role in asset allocation decisions, the near 14% move in the USD/Euro over the year being a good example. An American investor into Germany has seen a currency adjusted annual return of approximately 25%, some 20% higher than the other way around!

 

Equities

Global Equities rose over December, the FTSE ALL World Index climbing by 1.94% in dollar terms. The UK broad and narrow indices outperformed over the month while underperforming the World, in sterling terms, over the full year. Emerging markets had a relatively strong December thus completing a full year return of nearly 35% in dollar terms. In sterling adjusted terms Germany and Japan led   the year-to date returns, amongst the major markets, followed by the USA, although the tech-heavy NASDAQ, Asia ex-Japan, and Emerging Markets all showed yearly gains of between 25% and 35% in local currencies. The VIX index ended the year at 10.26, a fall of around 25% over the full year.

 

UK Sectors

Sector volatility during the month was high, mining outperforming utilities by about 15%. Over the full year, mining shares (the best performing major sector) have outperformed utilities (the worst) by approximately 40%. Within the overall UK fund universe over 2017, smaller caps outperformed larger stocks, and the difference between active and passive performance was much smaller than that experienced in 2016.Within the broad UK All company sector, investment trusts outperformed unit trusts by about 3.5% over the full year. The average IA mixed investment pooled fund (40%-85% shares) delivered a total return of about 10% in 2017.

Source: Trustnet

 

Fixed Interest

Gilt prices showed marginal gains over the month, the ten-year yield finishing the month at 1.23%. Over the full year gilts showed a price decline of about 1%, thus delivering a total return of about zero. Other ten-year yield movements were mixed, American, Japanese and German ten-year yields ended December at 2.43%,0.05% and 0.43% respectively.  UK corporate bonds rose slightly in price terms over the month and outperformed gilts over the full year. Amongst the more speculative grades, there were mixed trends, with emerging market bonds, in local currency terms, having a better month and US high yield hardly moving. Convertible bonds dropped slightly during the month but rose about 6% since the beginning of the year and I expect this outperformance over gilts to continue. See my recommendations in preference shares, convertibles, corporate bonds, floating rate bonds etc. A list of my top thirty income ideas (all yielding over 5%) from over 10 different asset classes is available.

 

Foreign Exchange

Amongst the major currencies, the Japanese Yen was the major December feature falling 1.2% in trade weighted terms. On the other side of the coin, the Euro rose 0.57%. The Euro strength at least partially reflected growing economic optimism and a gradual resolution to the German political stalemate. These volatile FX moves have played an increasing role in asset class allocations and this look set to continue. In sterling terms, Japanese and Continental European equities markedly outperformed USA and the UK.

 

Commodities

Another mixed month for commodities. Oil showed a further bounce, the most recent OPEC agreement being broadly in line with expectations and some supply issues e.g North Sea and Libya. There were mixed trends amongst the precious metals, while the copper price rose by 7.8% during the month and over 31% over the full year. Over the twelve-month period, palladium rose by over 57% in price terms, while iron ore dropped about 7%. Recent mining conferences have focussed on both the China effect in reducing supply, and the growing requirements of the emerging EV (electric vehicle) markets. See my recent note on how to play the mining and oil sectors into 2018 while also enjoying an above average dividend yield (paid quarterly).

 

Looking Forward

Over the coming months, I expect Central Bank statements and political events e.g.  German coalition formation, Catalonian election follow-up, Italian election campaigning, Brexit,Korea, Iran, USA, and the major corporate reporting season (both figures and forward looking statements) to be the main forces driving major asset classes . US watchers will start preparing for the next interest rate hike, under the new Fed Chairman Powell as well as fleshing out the winners and losers from the recent Tax Reform Bill, and watching the machinations ahead of the latest funding deadline (19th January).  In Japan, Shinzo Abe is likely to push for changes in the Constitution and reinforce the easier monetary and fiscal economic policy stance following his resounding election victory. Hard economic data (as opposed to sentiment surveys) will shows that the UK economic growth will be slower in 2017 compared to 2016 and downgrades to 2018 have recently been made by many organizations. Anecdotal evidence from retailors usually released early January will give some clues as to consumer trends. BREXIT discussions enter a new phase with discussions on the timing and nature of the new “Trade Deal”, as well as transitional arrangements being a major focus.

 

On a valuation basis, most, but not all, conventional government fixed interest products continue to appear expensive against current economic forecasts and supply factors, and renewed bond price declines and further relative underperformance versus equities should be expected, in my view. Equities appear more valued, apart from some PE metrics, (especially in the US), although not in bubble territory, but there are wide variations, and opportunities, in both broad asset classes. Equity investors will be looking to see if superior earnings growth can compensate for higher interest rates in several areas.  Corporate results from US, Europe and Japan were, on aggregate, up to expectations at the third quarter 2017 stage, although EY noted that the number of UK profits warning were about 10% higher than the previous year at the nine-month stage, mostly in the home improvement, motor and other retail areas.  Outside pure valuation measures, sentiment indicators and the VIX index are still relatively low though showing more day to day variation. Growing cyber-currency attention also demonstrates investor skittishness, search for new assets.

 

In terms of current recommendations,

Continue to overweight equities relative to core government bonds, especially within Continental Europe and Japan. However, the equity selection should be very focussed. Certain equity valuations are rather high, especially on a PE basis (see quarterly). A combination of sharper than expected interest rate increases with corporate earnings shocks would not be conducive to strong equity returns.

  • I have moved UK equities from underweight to a more neutral position following the market 2017 underperformance and valuations of certain of the major global stocks. Within the UK equity space, I suggest moving the balance of small/large cap stocks now back to neutral following both the outperformance of the former and the volatility in the currency (part post-election, part BREXIT). Ongoing Brexit debate, political stalemate could cause more sterling wobbles, which in turn could affect sector/size choices. I would expect to see more profits warnings e.g WPP #WPP, Provident Financial #PFG, Dixons Carphone #DX, Carillion #CLLN, Paragon #PAG, Next #NXT, Centrica #CNA etc and cautious statements as we move through into the results season.
  • Within UK sectors, some of the higher yielding defensive plays e.g. Pharma, telco’s and utilities have attractions relative to certain cyclicals. Oil and gas majors may be worth topping up after recent weakness and balance sheet improvements and have lagged the recovery in the spot price. Concentrate on the major diversified although there are currently some very attractive equity and fixed interest ideas in the mid/small cap area.
  • Continental European equities preferred to those of USA, for reasons of valuation, and Central bank policy. This strategy, in sterling adjusted terms worked very well through 2017 (DAX outperforming the S&P by about 8%) and I expect to continue. Improving economic data adds to my enthusiasm for selected European names, although European investors may be advised to focus more on domestic, rather than export related themes. Look at underlying exposure of your funds carefully. Remember that certain European and Japanese companies provide US exposure, without paying US prices. I have recently written on Japan, and I would continue to overweight this market, especially in hedged form, despite the large 2017 outperformance. recently.
  • Alternative fixed interest vehicles, which continue to perform relatively well against conventional government bonds, have attractions e.g. floating rate funds, preference shares, convertibles, for balanced, cautious accounts and energy/ emerging/speculative grade for higher risk. These remain my favoured plays within the fixed interest space.
  • UK bank preference shares still look particularly attractive, and could be considered as alternatives to the ordinary shares in some cases. Prices have shown good capital growth since the beginning of the year as well as offering annual yields more than 5%, but are still recommended for more cautious investors with a desire for regular annual income. Recent results and the November “stress test” results show that generally UK balance sheets are generally in good shape, and I see negligible risk of default on preference share dividends for the recommended stocks.
  • Alternative income, private equity and renewable funds have exhibited their defensive characteristics during recent equity market wobbles and are still recommended as part of a balanced portfolio. Reference could be made to the renewable funds (see my recent solar and wind power recommendations). Selected infrastructure funds are also recommended for purchase after the recent weakness (see note).
  • Any new commitments to the commercial property sector should be more focussed on direct equities and investment trusts than unit trusts (see my recent note comparing open ended and closed ended funds), thus exploiting the discount and double discount features respectively. However, in general I would not overweight the sector, as along with residential property, I expect further price stagnation especially in London offices. The outlook for some specialist sub sectors and property outside London/South-East, however, is currently more favourable. Investors should also consider some continental European property plays. See my recent note on this sector.
  • I suggest a selective approach to emerging equities and bonds, especially where significant dollar loan exposure and or potential geo-political uncertainties are present e.g. Brazil, Venezuela, South Africa. Although the overall valuation for emerging market equities is relatively modest, there are large differences between individual countries.

Full fourth quarterly report will be available in January and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring. I expect more clients to consider switching some final salary pots to SIPP over coming quarters, as transfer values start to slip (partially in line with rising gilt yields) and can work with you providing bespoke portfolios according to client needs.

 

Good luck with performance!   Ken Baksh 01/01/2018

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

 

 

Ken Baksh – Lots starting to happen in European Property Sector….

Independent Investment Research

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691

kenbaksh@btopenworld.com

 

Schroder European Real Estate Investment Trust-Isin Gb00By7R8K77 (SERE)

Launched in December 2015, the Schroder European Real Estate Investment Trust targets growth regions in Continental Europe and aims to provide a regular and attractive level of income together with the potential for long term income and capital growth.

With a certain degree of uncertainty surrounding the UK commercial property market (slowing economic growth,

BREXIT) increasing number of investors are looking to continental Europe for their real estate exposure, and the SERE would seem to tick many boxes.

It should also be noted that corporate activity in the sector has picked up massively in recent weeks, with Hammerson/Intu,Unibail/Westfield  ,and just this morning Vonovia/Buwog.

Results released on December 06,2017, show Net Asset Value increasing 13% over the last full year (September Year End) to Euro 1.33, and dividend pay-out moving towards the company target of 5.5% on issue price. Total dividends payable in respect of the financial year just ended 5.2 Euro cents per share.At current price of Euros 1.095,the stock trades on a discount to NAV of approximately 18% with a prospective annual yield of 6.8% payable in Euros.

  • Eurozone economic data is positive, growing about twice as fast as the UK over the first half of 2017and this differential is expected to grow into 2018.Private business surveys point to further growth and property and investment activity remains robust. A recent sample of German companies, for instance, showed rents rising between 4% and 6% over the last twelve months.
  • SERE invests in cities/regions characterised by large liquid real estate markets such as Amsterdam, Berlin, Hamburg, Munich and Paris where local GDP is outperforming the national averages.
  • The Trust is managed by Tony Smedley, an experienced real estate investment manager, who is supported by nearly 100 property specialists located in key European hubs. The team see over Euro 2 billion of introductions each month, with the near-term pipeline comprising over Euros 115 million yielding between 5.8% and 7.5%.
  • The process/risk control involves holding the bulk of the portfolio in stable income producing developments (approx. 70%) while adding a greater capital return component to the other 30% via refurbishments, change of use, lease extensions etc.
  • As at end June 2017 the geographical weighting were France 56%, Germany 30% and Spain 14%, split 46% retail and 54% office.
  • The top five properties were in Paris, Seville, Berlin and Biarritz. As at September 30th,2017, the portfolio contained nine properties, valued at Euros 211.7 million.
  • Portfolio is almost 100% occupied with a 6.8 years average lease time and net property income yield of 6%

SERE targets a fully covered Euro yield of 5.5%(7.5 Eurocents on a Euro equivalent issue price of Euro1.37). Dividends are declared in Euros, and paid quarterly, with UK shareholders being given the option of sterling or Euro pay-outs. Lease structures vary across Europe, but most typically have some form of inflation linkage, providing support for the target dividend.

Current discount to NAV (Euros 1.33-September 30th) represents a good level to be obtaining exposure to mainstream European property.

  • The portfolio seeks to enhance property returns with a relatively modest level of gearing currently 25% LTV, (35% target LTV). The blended all in debt cost is 1.3% with an average maturity of just over 7 years.
  • Closed end fund structure with daily liquidity via a listing on the main market of the London Stock Exchange.

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00BY7R8K77GBGBXSSMM.html

Full fourth quarterly report will be available in January and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, new model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring. I expect more clients to consider switching some final salary pots to SIPP over coming quarters, as transfer values start to slip (partially in line with rising gilt yields) and can work with you providing bespoke portfolios according to client needs.

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

Ken Baksh – UK and US financials a hot sector for 2018?

Independent Investment Research

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691

kenbaksh@btopenworld.com

Polar Capital Global Financials Trust PLC (PCFT)

One of the sectors which may outperform next year, and which has received a barrage of better than expected news over the last few weeks could well be financials, especially UK and US names, which have lagged many other sectors over 2017 and offer good value on several investment ratios.

Over the last week investors poured $1.5 billion into funds that buy US financial stocks, extending a rotation into the area, on optimism about the prospects of lighter regulation and lower tax. The regulatory backdrop has become more favourable which increases the likelihood of buy backs and dividend increases, while the progression of tax cuts through Congress has further increased the positive sentiment. If that was not enough, the Federal Reserve is about to raise interest rates with the prospects of more hikes in 2018, further aiding the sector.

Meanwhile, across the pond, rules agreed following the Basel III agreement proved less onerous for European Banks than feared causing the start of a rally, led by Lloyds, which is strongly tipped to increase its dividend, and whose ordinary and preference shares are strongly on my buy list of direct stocks

A good way to gain this exposure is through the Polar Capital Global Financials Trust (PCFT-138p)

  • This investment trusts seeks to generate a growing dividend and capital appreciation by investing primarily in a global portfolio of securities issued by companies within the financial sector operating in the banking, insurance, property and other sub sectors.
  • The trust was launched in July 2013 since when the asset value and benchmark have outperformed the financial benchmark.
  • As at end November 2017, the fund was split geographically as 41% USA,34% Europe (incl UK) and 13% Asia (excl Japan). By sector banks represented over 63% with names such as JP Morgan, Bank of America, ING Group, Chubb, BNP Paribas, KBC, Sampo, Citigroup amongst the top holdings.
  • The trust currently trades at a discount to assets of around 4%.
  • The fixed life of May 2020 should limit significant discount widening and it should be remembered that the trust has traded at a premium for significant periods.
  • A dividend is paid twice yearly, and the current yield is 2.65%

Sources:London Stock Exchange,Numis,Winterflood,Trustnet.

www2.trustnet.com/Factsheets/Factsheet.aspx?fundCode=JFFOC&univ=T&pageType=overview&skipre=1

www.londonstockexchange.com/exchange/news/market-news/market-news-detail/PCFT/13456340.html

Full fourth quarterly report will be available in January and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, new model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring. I expect more clients to consider switching some final salary pots to SIPP over coming quarters, as transfer values start to slip (partially in line with rising gilt yields) and can work with you providing bespoke portfolios according to client needs.

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

 The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

Ken Baksh – January 2018 Investment Review

Independent Investment Research

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691

kenbaksh@btopenworld.com

 

January 2018 Market Report

 

During December, major equity markets displayed an upward trend, assisted by well flagged Central Bank actions and statements, a quieter political mood, and the tail end of a generally upbeat third quarterly corporate reporting season. The European Central Bank continued to move, as expected, to a gradual tapering mode, amidst some very strong economic data releases while there was additional political “noise” from Germany, Austria, Italy and Spain. US market watchers negotiated the Federal Reserve (both rate increase and change in Chairman) as well as the last-minute passage of the Tax Reform Bill. In the Far East, Chinese authorities stepped up regulatory action (specifically the financial sector) while Japan recorded and another quarter of relatively strong GDP growth. Aggregate world hard economic data still showed steady expansion, excluding the UK, as confirmed by the IMF and the OECD with some forecasts of 2018 economic growth in the 3.5% to 4% area. Fluctuating currencies are playing an increasing role in asset allocation decisions, the near 14% move in the USD/Euro over the year being a good example. An American investor into Germany has seen a currency adjusted annual return of approximately 25%, some 20% higher than the other way around!

 

Equities

Global Equities rose over December, the FTSE ALL World Index climbing by 1.94% in dollar terms. The UK broad and narrow indices outperformed over the month while underperforming the World, in sterling terms, over the full year. Emerging markets had a relatively strong December thus completing a full year return of nearly 35% in dollar terms. In sterling adjusted terms Germany and Japan led   the year-to date returns, amongst the major markets, followed by the USA, although the tech-heavy NASDAQ, Asia ex-Japan, and Emerging Markets all showed yearly gains of between 25% and 35% in local currencies. The VIX index ended the year at 10.26, a fall of around 25% over the full year.

 

UK Sectors

Sector volatility during the month was high, mining outperforming utilities by about 15%. Over the full year, mining shares (the best performing major sector) have outperformed utilities (the worst) by approximately 40%. Within the overall UK fund universe over 2017, smaller caps outperformed larger stocks, and the difference between active and passive performance was much smaller than that experienced in 2016.Within the broad UK All company sector, investment trusts outperformed unit trusts by about 3.5% over the full year. The average IA mixed investment pooled fund (40%-85% shares) delivered a total return of about 10% in 2017.

Source: Trustnet

 

Fixed Interest

Gilt prices showed marginal gains over the month, the ten-year yield finishing the month at 1.23%. Over the full year gilts showed a price decline of about 1%, thus delivering a total return of about zero. Other ten-year yield movements were mixed, American, Japanese and German ten-year yields ended December at 2.43%,0.05% and 0.43% respectively.  UK corporate bonds rose slightly in price terms over the month and outperformed gilts over the full year. Amongst the more speculative grades, there were mixed trends, with emerging market bonds, in local currency terms, having a better month and US high yield hardly moving. Convertible bonds dropped slightly during the month but rose about 6% since the beginning of the year and I expect this outperformance over gilts to continue. See my recommendations in preference shares, convertibles, corporate bonds, floating rate bonds etc. A list of my top thirty income ideas (all yielding over 5%) from over 10 different asset classes is available.

 

Foreign Exchange

Amongst the major currencies, the Japanese Yen was the major December feature falling 1.2% in trade weighted terms. On the other side of the coin, the Euro rose 0.57%. The Euro strength at least partially reflected growing economic optimism and a gradual resolution to the German political stalemate. These volatile FX moves have played an increasing role in asset class allocations and this look set to continue. In sterling terms, Japanese and Continental European equities markedly outperformed USA and the UK.

 

Commodities

Another mixed month for commodities. Oil showed a further bounce, the most recent OPEC agreement being broadly in line with expectations and some supply issues e.g North Sea and Libya. There were mixed trends amongst the precious metals, while the copper price rose by 7.8% during the month and over 31% over the full year. Over the twelve-month period, palladium rose by over 57% in price terms, while iron ore dropped about 7%. Recent mining conferences have focussed on both the China effect in reducing supply, and the growing requirements of the emerging EV (electric vehicle) markets. See my recent note on how to play the mining and oil sectors into 2018 while also enjoying an above average dividend yield (paid quarterly).

 

Looking Forward

Over the coming months, I expect Central Bank statements and political events e.g.  German coalition formation, Catalonian election follow-up, Italian election campaigning, Brexit,Korea, Iran, USA, and the major corporate reporting season (both figures and forward looking statements) to be the main forces driving major asset classes . US watchers will start preparing for the next interest rate hike, under the new Fed Chairman Powell as well as fleshing out the winners and losers from the recent Tax Reform Bill, and watching the machinations ahead of the latest funding deadline (19th January).  In Japan, Shinzo Abe is likely to push for changes in the Constitution and reinforce the easier monetary and fiscal economic policy stance following his resounding election victory. Hard economic data (as opposed to sentiment surveys) will shows that the UK economic growth will be slower in 2017 compared to 2016 and downgrades to 2018 have recently been made by many organizations. Anecdotal evidence from retailors usually released early January will give some clues as to consumer trends. BREXIT discussions enter a new phase with discussions on the timing and nature of the new “Trade Deal”, as well as transitional arrangements being a major focus.

 

On a valuation basis, most, but not all, conventional government fixed interest products continue to appear expensive against current economic forecasts and supply factors, and renewed bond price declines and further relative underperformance versus equities should be expected, in my view. Equities appear more valued, apart from some PE metrics, (especially in the US), although not in bubble territory, but there are wide variations, and opportunities, in both broad asset classes. Equity investors will be looking to see if superior earnings growth can compensate for higher interest rates in several areas.  Corporate results from US, Europe and Japan were, on aggregate, up to expectations at the third quarter 2017 stage, although EY noted that the number of UK profits warning were about 10% higher than the previous year at the nine-month stage, mostly in the home improvement, motor and other retail areas.  Outside pure valuation measures, sentiment indicators and the VIX index are still relatively low though showing more day to day variation. Growing cyber-currency attention also demonstrates investor skittishness, search for new assets.

 

In terms of current recommendations,

Continue to overweight equities relative to core government bonds, especially within Continental Europe and Japan. However, the equity selection should be very focussed. Certain equity valuations are rather high, especially on a PE basis (see quarterly). A combination of sharper than expected interest rate increases with corporate earnings shocks would not be conducive to strong equity returns.

  • I have moved UK equities from underweight to a more neutral position following the market 2017 underperformance and valuations of certain of the major global stocks. Within the UK equity space, I suggest moving the balance of small/large cap stocks now back to neutral following both the outperformance of the former and the volatility in the currency (part post-election, part BREXIT). Ongoing Brexit debate, political stalemate could cause more sterling wobbles, which in turn could affect sector/size choices. I would expect to see more profits warnings e.g WPP,Provident Financial,Carphone,Carillion,Paragon,Next,Centrica etc and cautious statements as we move through into the results season.
  • Within UK sectors, some of the higher yielding defensive plays e.g. Pharma, telco’s and utilities have attractions relative to certain cyclicals. Oil and gas majors may be worth topping up after recent weakness and balance sheet improvements and have lagged the recovery in the spot price. Concentrate on the major diversified although there are currently some very attractive equity and fixed interest ideas in the mid/small cap area.
  • Continental European equities preferred to those of USA, for reasons of valuation, and Central bank policy. This strategy, in sterling adjusted terms worked very well through 2017 (DAX outperforming the S&P by about 8%) and I expect to continue. Improving economic data adds to my enthusiasm for selected European names, although European investors may be advised to focus more on domestic, rather than export related themes. Look at underlying exposure of your funds carefully. Remember that certain European and Japanese companies provide US exposure, without paying US prices. I have recently written on Japan, and I would continue to overweight this market, especially in hedged form, despite the large 2017 outperformance. recently.
  • Alternative fixed interest vehicles, which continue to perform relatively well against conventional government bonds, have attractions e.g. floating rate funds, preference shares, convertibles, for balanced, cautious accounts and energy/ emerging/speculative grade for higher risk. These remain my favoured plays within the fixed interest space.
  • UK bank preference shares still look particularly attractive, and could be considered as alternatives to the ordinary shares in some cases. Prices have shown good capital growth since the beginning of the year as well as offering annual yields more than 5%, but are still recommended for more cautious investors with a desire for regular annual income. Recent results and the November “stress test” results show that generally UK balance sheets are generally in good shape, and I see negligible risk of default on preference share dividends for the recommended stocks.
  • Alternative income, private equity and renewable funds have exhibited their defensive characteristics during recent equity market wobbles and are still recommended as part of a balanced portfolio. Reference could be made to the renewable funds (see my recent solar and wind power recommendations). Selected infrastructure funds are also recommended for purchase after the recent weakness (see note).
  • Any new commitments to the commercial property sector should be more focussed on direct equities and investment trusts than unit trusts (see my recent note comparing open ended and closed ended funds), thus exploiting the discount and double discount features respectively. However, in general I would not overweight the sector, as along with residential property, I expect further price stagnation especially in London offices. The outlook for some specialist sub sectors and property outside London/South-East, however, is currently more favourable. Investors should also consider some continental European property plays. See my recent note on this sector.
  • I suggest a selective approach to emerging equities and bonds, especially where significant dollar loan exposure and or potential geo-political uncertainties are present e.g. Brazil, Venezuela, South Africa. Although the overall valuation for emerging market equities is relatively modest, there are large differences between individual countries.

Full fourth quarterly report will be available in January and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring. I expect more clients to consider switching some final salary pots to SIPP over coming quarters, as transfer values start to slip (partially in line with rising gilt yields) and can work with you providing bespoke portfolios according to client needs.

 

Good luck with performance!   Ken Baksh 01/01/2018

Disclaimer

All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

 

 

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