Half a year gone – end June update

Starting with US quoted technology holdings, Alibaba rallied during June from 149.26 to 169.45. A HongKong listing is planned for later in the year, so the stock has been split to appeal to Chinese investors. ADRs now represent eight shares each. Nvidia rose from 135.46 to 164.23. I assume that the resurgence of the Bitcoin price has been helping reduce inventory. Microsoft rallied from 123.68 to 133.96 and is still in the run off for the Pentagon Cloud contract that was supposed to be decided months ago. Seems the peacetime Pentagon is run by a bunch of cunctators and need a new Ike to kick their asses. Roku were unchanged at 90.58 after a run up to 108 – I assume because of the Motley Fool pump. Seems David and Tom finally got the message that this stock could keep doubling and redoubling.

US dividend equities were doing well too, as SCHD improved from 49.47 to 53.07 and VIG were up from 108 to 115.16

Started to follow Slack (WORK) now it is listed, but did not buy any yet. The NYSE tentative valuation was 26 but it started much higher and is now 37.50.

The U.K. market fared worse than the U.S. with many stocks unchanged . Smithson IT was an improver from 1128 to 1234 – so was Prudential from 1577 to 1716 ahead of the M&G spin off. I assume that fund management companies have lost a bit of sparkle after the Woodford debacle, which has left big holders like Hargreaves Lansdown wide open to litigation as systemic risk was present and became obvious – perhaps their fund selectors are cunctators too !

Actually bought an item at Superdry – a St Tropez beach bag – but the stock was unchanged at 461 despite my help with sales.

Among the smaller companies there was not much change in S4 but Bango were a bit disappointing- down from 98 to 88.5 with no news – possibly market makers shaking the tree and building a back book, but this stuff is all done in dark pools so who knows.

Just caught the Trump meeting with Little Kim in the DMZ, and the easing of US sanctions on China.. The question that I guess nobody will ask is the role of Xi in this interaction. It would be good for both the U.S. and China if Korean problems can be solved, and would allow the U.S. to concentrate their effort on their most dangerous enemies both in Iran and wherever else in the World they are hiding.

Growth and Core Funds Asset Allocation

These funds currently account for 24.4% of my investment accounts.

I’m using 18th June 2019 valuations as a starting point.

The largest holding is Smithson Investment Trust 30.03% at 1229p. Second is Findlay Park American 24.22% at USD 124.33 ( straightforward fund – not currency hedged). Third is Vanguard Dividend Appreciation ETF (VIG) 20.52% at USD 114.46. Fourth is Castlefield Buffettology Fund Institutional Income Class 15.92% at 325.73p. Fifth and last is Schwab US Dividend Equity ETF (SCHD) 9.31% at USD 53.06.

I should add that the two US Exchange Traded Funds are held in tax free accounts such as U.K. SIPPs and ISAs to avoid any unfavourable tax consequences which could occur on personal or trust accounts. As I am not prepared to research tax on these it is just easier to park the holdings in the tax free zones rather than argue the toss with HMRC (who will usually win because of technicalities like distributor status, etc.)

My non core fund holdings are gradually being liquidated, so it is most likely that additional core holdings will be added from time to time. Five is fine, and I do not think that I would want to hold more than eight.

Buffettology

I’ll start by telling you my trades. I was a bit overweight in UK Equity Income Funds and selected two for reduction using five year total returns on U.K. funds as a benchmark. The two which I reduced were Threadneedle Equity Income and JO Hambro UK Equity Income – good records when purchased but not in a particularly good place today, with total returns of 24 and 25%. Trojan did better at 32%, Lazard Global 28%, and an Aberdeen Standard (formerly Standard Life) European Equity Income surprised at 52%.

But the Castlefield UK Buffettology fund put on 100%. As this fund has been taking in net new money for the past few months I thought it would be best to catch the wave before any visits from the ghost of Gerald (Gerry) Tsai – who attracted too much money after he left Fidelity to set up his own shop.

Happy to buy another fund with a Buffett like approach, as Findlay Park American has done extremely well over time and the two leading lights – Messrs Findlay and Park – were early Buffettologists going back to 1998 when their fund started as FP American Smaller Companies Fund. Also hearing that value driven Quant funds are not doing so well recently, as humans have been doing better than the algorithms. That makes sense to me, as there are too many value traps around for my liking.

Anyway the price I paid for the Castlefield fund – institutional income class – was 327.54p. The annual charges are an eye watering 1.23%, so they had better prove their value within 18 months or they will face the order of the boot.

Purchase and thoughts going into June

I did in the end add to my Premier Oil, buying back the remaining 40% at around 75. Some interesting statistics about oil and oil product theft in Mexico came to light. It appears that only refined products like petrol/gasoline are stolen on a regular basis from pipelines and trucks, then like abracadabra the same products are sold to filling stations by criminal gangs. Sometimes this is with the collusion of Pemex employees, who are most probably placemen – those are the guys who get a job through political connections, can seldom be found anywhere near their offices, and only answer their private cellphones.

Because products we have bought that were made in Mexico have failed or been well below acceptable standards this got me thinking. Many years ago somebody gave me a Calvin Klein watch bought in Maceys New York for about $100. After a while the battery movement seized up – and I gave it to a specialist watch guy I knew to have a look at. He said the problem was that the manufacturers put in a 50 cent movement, and the watch worked well for a number of years with the $2 movement he replaced it with for me. So I wonder if components are replaced with sub standard copies at Mexican factories, as the criminal gangs could be setting up spares businesses stocked with stolen parts. So far I have had a Samsung Smart TV where the screen failed, a Black and Decker food processor that would not chop anything much, a large Frigidaire upright fridge/freezer that ceased to work, and a Whirlpool washing machine where the tub started to damage the structure of the machine. All Made in Mexico

I assume that Trump knows that the Mexicans will tighten up on immigrants if they are threatened with tariffs. This is because a huge amount of laundered money was used to set up many of the manufacturing facilities in Mexico, now rented to the gringos. As for corporate ownership of property in Mexico, it’s a nightmare – ask anyone who was around at Allied Breweries in the U.K. after they bought Domecq.

I was also a bit surprised to see how quickly Neil Woodford had to suspend redemptions of his fund. I sold out earlier mainly because of concerns that very small U.K. companies could be caught like rabbits in the headlights by Brexit. I need to review funds in greater depth this month, and look at a Buffetology fund – yes there is one and it now has billion in assets.

End May Review

May was notable for an escalation in the trade war between the US and China, and the month ended with the beginning of another spat between the US and Mexico.

So prices of tech stocks were pretty weak, the worst being Nvidia at 135.46 and Alibaba at 149.26, and the best Roku at 90.40 and Microsoft at 123.68. As regards transactions I added to Microsoft, made small averaging purchases of Nvidia and Alibaba, and sold 10% of my Roku holding at 94.10 after a big mark up.

U.K. stocks had a horrible month too, with BAT back to 2760, Prudential at 1577 ( they do have a big Far East life and pensions business amongst other things), Superdry at 462 after >500 (did look to see if they manufactured in China or Mexico, but according to their website they do not – but do sell a bit of merch in Mexico). Premier Oil came back to 78.74 after I bought back 60% of the shares I sold at 97 at about 83. They don’t produce in Mexico yet, so down to the oil price – questions are whether I buy any more, and if so go back to my original position or go to 120%.

There was no news on the smaller holdings, so Bango followed tech down, while S4 was firm for no discernible reasons.

The US dividend indices based ETFs held up reasonably well and there is a case for adding more on further market weakness.

On the political front Theresa May is finally quitting and hopefully there could be a harder line “No deal on Brexit” PM – at least they could gain a bit of respect after May’s appeasement, as the Eurotrash seem to have made it their business to belittle Britain, and it would be good to see Barnier, Junker et al shot down in flames over the Channel.

Donald Trump announced his re-election campaign, AOC did a bit of bartending while campaigning for a minimum wage – a good idea for the US as there should be some attempt to rebalance wealth and income before social problems proliferate.