So far this week the FTSE 100 has fallen slightly too around 7500; Sentiment has been affected by both the weak pound and the General Election result. There has been an oscillation in equity prices with the multi nationals rising and the domestic companies being discounted. I believe this to represent an opportunity to buy the UK centric stocks. I have listed ones to watch in the recommendations section.
I suspect that last night’s event will lead to a general loosening of policy, so we can expect more gilts being issued and even longer before the deficit is tackled (if indeed it ever is). I would also expect the Bank of England to be accommodative and push a rate rise further down the road, even if inflation does pick up.
Attention is now focused on what the election result will mean for the Brexit negotiations which are due to start in ten days’ time.
With the global economy generally improving, a well-balanced portfolio of investments should not be unduly affected by any potential local difficulties. With that in mind I have taken the time to detail a broad selection of investments that may help diversify your exposure.
Seneca Global Income and Growth
Seneca which has a good spread of investments, with roughly a third in UK equities, a third in overseas and a little more than 20% in specialist assets which include things such as unlisted holdings, private equity and hedge fund investments. It also has an element of fixed income and property investments. It gives a yield of 3.7% with a prospect of rising income and capital over the years. It’s performance over the last 5 years, since a change to its investment mandate and objectives, has seen the share price rise by more than 60%, whilst dividends over that period has provided a further 28%. A total return of share price of 88% equivalent to 17.6% per annum.
TR European Growth
The company’s objective is to achieve capital growth by investing predominantly in small and medium size European companies (excluding the UK). The trust yields around 1%.
Henderson Far East Income Fund
Henderson Far Eastern Fund invests across the Far East, and looks at investments which in addition to growth prospects and have attractive levels of income. The fund invests in the Pacific, Australasian, Japanese and Indian stock markets. Currently yielding 5.6%
Blackrock Latin American Investment Trust
The Company seeks to secure long-term capital growth and an attractive total return primarily through investing in quoted securities in Latin America and currently pays a 2.9% dividend.
Blackrock Frontiers Investment Trust
The Company aims to achieve long-term capital growth from investment in companies operating in Frontier Markets or whose stocks are listed on the stock markets of such countries. Frontier markets include Argentina, Pakistan and Nigeria amongst others.
JP Morgan Global Growth & Income
A further suggestion would be JP Morgan Global Growth & Income, which aims primarily for growth despite its name, with a yield of 1%. However, its long term track record is excellent, having given a return over the last 10 years of 140%, over seven years 80% and five years 97%. By far the largest geographical exposure currently is the USA, but it also gives exposure to Japan, China, Finland, The Netherlands and Belgium.
EPE Global Opportunities
EPE is a relatively small trust, that concentrates on growth, buy out and special situations in the UK. It is the best performing fund in its sector, generating a return of more than 500% over the last 5 years and more than 100% in the past 12 months. I believe this will add diversification to most portfolios and although past performance isn’t an indication of future performance I feel the management have a high level of expertise to achieve such high/uncorrelated returns.
Scottish Mortgage Trust
Scottish Mortgage is an actively managed, low cost investment trust, investing in a high conviction, global portfolio of companies with the aim of maximising its total return to its shareholders over the long term. The managers aim to achieve a greater return than the FTSE All World Index (in sterling terms) over a five year rolling period. The trust is a great way to gain exposure to the likes of Amazon, Tesla, Facebook and Alibaba.
Premier Energy & Water Trust
The Company’s investment objectives are to achieve a high income from its portfolio and to realise long term growth in the capital value of the portfolio. The Company will seek to achieve these objectives by investing principally in equity and equity related securities of companies operating in the utilities and infrastructure sectors. The Company may invest up to 15% in other investment companies provided that they themselves invest in utilities and infrastructure. Up to 15% of the portfolio can be invested in unquoted investments.
Utilico Emerging Markets
The trust’s investments include firms operating in the fields of water, sewerage, waste, electricity, gas, telecommunications, ports, airports, service companies, rail and roads; any businesses with essential services or monopolistic characteristics; and new infrastructure or utility firms. It may also invest in businesses that supply services to, or otherwise support, the infrastructure, utility and related sectors.
Blackrock Commodity Income
The funds objective is to achieve an annual dividend target and, over the long term, capital growth by investing primarily in securities of companies operating in the mining and energy sector. Currently yielding 6.4%.
BB healthcare trust invests in a concentrated portfolio of listed equities in the global healthcare industry (maximum of 35 holdings) managed by Bellevue asset management AG, who manage bb biotech ag, Europe’s leading biotech investment trust. The investable universe for bb healthcare is the global healthcare industry. The fund currently yields 3.5%.
Regional is a diversified, office and light-industrial led portfolio across the UK’s regions, outside of the M25 motorway. The portfolio amounts to 128 properties 974 units. The large number of units brings income diversification, with an income yield of 7%.
RM Secured Direct Lending
A European Asset Management firm focused on secured lending. RM aims to generate long-term, stable and predictable returns, whilst providing a degree of inflation protection through Fixed, Floating, CPI and RPI linked investments.
Basic share analysis
Last week I talked about PE ratios (fundamental analysis). This week I will take a very basic first step into technical analysis. I expect a lot of people already have a grasp of these principles however it never does any harm to recap. I will continue to go more in depth each week. Once people are up to speed if I notice anything in the charts during the week I will add them to the newsletter.
Technical analysis assumes that a security’s price already reflects all publicly-available information and instead focuses on the statistical analysis of price movements.
Trends aren’t always easy to spot because prices almost never move in straight lines. Rather, prices tend to move in a series of highs and lows over time. In technical analysis, it is the overall direction of these highs and lows that constitute a trend. An uptrend is classified as a series of higher highs and higher lows, while a downtrend consists of lower lows and lower highs.
A trend line is a simple charting technique whereby a line is added to a chart to represent the trend in a market or stock. Drawing a trend line is as simple as drawing a straight line that connects lower lows or higher highs to show the general trend direction. These lines are used to cut through the noise and show where the price is headed, as well as identify areas of support and resistance. Support levels are where the price rebounds higher multiple times, whereas resistance levels are where prices rebound lower multiple times. The strength of support and resistance levels are determined by the number of rebounds from the trend line.
My recommendations this week take on a slightly different format. Normally I would name a couple of companies and explain why they appear good value however today there are too many for that. I view the recent volatility caused by the political uncertainties as a good opportunity to buy domestic stocks at a lower valuation.
Here are my top 10 domestic buys;
Lloyds Banking Group
Enjoy your weekend, thanks for taking the time to read my newsletter!
Karl Townsend ACSI
For and on behalf of
Arnold Stansby & Co. Limited
Telephone: 0161 832 8554 Fax: 0161 834 7710
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A word about some risks: Investing in the bond market is subject to certain risks that fixed income securities will decline in value because of changes in interest rates, and the risk that the manager’s investment decisions might not produce the desired results. Bonds with longer durations tend to be more sensitive and more volatile than securities with shorter durations; bond prices generally fall as interest rates rise. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Derivatives may involve certain costs and risks such as liquidity, interest rates, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Diversification does not ensure against loss.
There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors, and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
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