A few changes

I said that I was looking to buy Slack, and this is now done. When I held the stock last year there was no pandemic – now the long term implications of working from home or from bubbles are sinking in.

On the medical and pharmaceutical front I sold my holdings in Gilead. This was bought because they had a treatment that helped patients with coronavirus. Several new treatments have emerged from studies, and I have the feeling that there will be more to come before any mass vaccination programmes, and that at least one of these will be preferred to the Gilead product. Another area of interest is telemedicine – where the level of take up this year has been massive. I have a few companies on my watch list here, and so far have bought Veeva Systems and Teladoc

Magnite/F5 Networks

The Rubicon Project changed name to Magnite at the beginning of this quarter.
Also sold F5 Networks after holding for about two months, as possibly too early in this one.

Watching Slack for a purchase if there is some weakness.

Added to Advanced Micro Devices

There was a chance to buy just below 49 (which I missed) but nevertheless happy to have added at 49.45. AMD stock has not performed as well as a Nvidia recently : both companies stand to benefit from the US wanting to bring more production of chips onshore for security reasons.

Bought The Rubicon Project

Advertising has always been a bit of a mystery to me. But I noticed that The Trade Desk, a buyer’s platform, has been doing well. The Rubicon Project is I believe more of a seller’s platform, and was recently enhanced by merging with Telaria. I have also noticed that there are more investigations going on regarding online “walled garden” advertising platforms operated by Google, Facebook, et al – and we all know what happens to walled gardens on the internet once the walls are breached.

2020 is an election year in the United States, and there do not seem to be any limits on advertising spending there, either by the parties and candidates, or by various political groups – sometimes indirectly funded by the Chinese Communist Party or the Russian Secret Service. Perhaps the slack in ad spending could be taken up soon.

Markets still very uncertain in June

I continue to hold most of my portfolios in cash. However a few new holdings have been bought to add to the Alibaba and Bango which were retained.

In the technology sector, the new holdings are Advanced Micro Devices, Atomera, Bandwidth, F5 Networks, and Lam Research. A new position in my old favourite Roku has also been bought.

Among conventional stocks, I now have holdings in Gilead, William Morrison, and 3M. William Morrison are a UK supermarket company who have been hiring staff to deal with expansion in online orders and deliveries – these types of shopping are already well established in the U.K. so there should not be too many problems. I bought 3M after people who followed their financials year after year – concluding great business but too highly valued – decided that the shares were now good value and worth buying.

I also bought two holdings of U.K. investment trusts covering Far East markets – Baillie Gifford Shin Nippon and Schroder Oriental Income.

So my domestic U.K. exposure is limited to one supermarket business – everything else there has revenue coming from elsewhere.

Roku continues to attract bullish and bearish comments. The real deal here is the gradual movement in TV advertising revenues away from conventional TV to online TV. In the meantime there has been international expansion, and Roku smart TVs seem attractive to women in particular, as they remove a dust trap box with wires from the house and there is only one small remote

I was interested to see that Hertz has filed for bankruptcy in the U.S.as the car rental business is dead in the water. In an interesting twist, the company is seeking permission to issue $1 billion in new equity – an IBO (Initial Bankruptcy Offering) !! Perhaps the Venture Capitalists who backed Uber and Lyft should take this on, as car hire seems a lot more straightforward than ride sharing.

Bull trap closed ?

Will hopes of a return to normal evaporate any time soon ? If so, the bull trap will have closed – maybe a couple of days ago. Next on the agenda would then be fear and capitulation, and it is possible that equity markets still have a long way to fall.

Portfolio activity has been subdued. However I did give Gilead a good look through before buying a holding. Their strengths are in anti – virals and I did not see any lifestyle drugs in their portfolio – so a serious drug research company much like Glaxo and Astra in earlier days. Their drug that helps some coronavirus victims to recover quicker was originally developed for ebola.

I also looked at Marks and Spencer – but decided not to buy just now because the food business needs to prop up the clothing lines and gas station shops. Maybe clothing will begin to do better – after the administrators and receivers of other clothing retailers that have gone bust have disposed of stock.

I have also taken out a few small positions on the LCG platform this year. You do usually need to be quick to take profits on shares – ran a very small position in M&S while it rose 9p – now short of the S&P 500 which you can do in 10p (12.5cent) multiples per point – so if you are unsure of potential tops and bottoms and looking at Fibonacci levels you can get your exposure in bits ( e.g. 10 x 10p = £1 ). Helps to alleviate the boredom but care is needed.



More risk – Less reward

The pandemic arrived just as I was changing hosts for this blog. And stock markets were making new highs too. Eventually there was a downturn in markets, but as I write markets have retraced part of their losses and it seems that many investors still believe that they are “buying the dip”. As a reality check I looked at movement by indices since 31st December, to find that the Dow is off 16.6% and the S&P has fallen by 13.3%. The FTSE 100 has had a larger fall of 22.5% reflecting the large oil and mining content.

After much reflection I decided to go liquid, so at the time of writing I just have a few holdings left – including Alibaba and Bango. As things stand my valuations have fallen by 6.3% so far this year.

The rationale for disengagement is that the pandemic is already causing a massive economic downturn and it is best to wait this one out. There will not be much help from analysts – who will be fearful for their jobs – or corporate managers – who will withdraw guidance and be fearful about their stock options and possible class actions.
If my caution proves to be well founded, there will be opportunities to buy most equities at prices ranging from slightly lower to substantially lower. If I am wrong and the world returns to normality – which looks increasingly unlikely day by day – I have cash and only need a 7% return to get back to 31st December levels.

I am reminded that Bernard Baruch sold most of his holdings prior to the 1929 crash and gave credit to a 19th century book – Extraordinary Popular Delusions and the Madness of Crowds !

Noticed as well that Warren Buffet and Charlie Munger appears to be holding a lot of cash and sitting this one out. This is confirmation that some of the best minds around are uncertain in the present situation. Government policies, often relying on dodgy science, will determine whether the landscape improves or withers away.

End December update

As outlined in previous posts the season for taking tax losses ends on 31st December in the United States. The S&P 500 Index was up 28.9% in 2019, so it does not come as a surprise to find weakness in tech stocks that are well down from recent highs, and strength in similar stocks that are up near their highs.

The “weak” stocks were ROKU 133.90, MDB 131.61, WDAY 164.45, ZM 68.04, PINS 18.64, and WIFI 10.95.

The “strong” stocks were BABA 212.10 and MSFT 157.70. There was also a gain on SNAP 16.33. Funds also gained with IJR 83.85, SHCD 57.92, VIG 124.66, and Findlay Park 137.16.

Funds in the UK and Europe were generally a bit stronger and the Buffetology fund was up from 343 to 351.

The adjusted total returns for the year on the portfolios will not match the S&P as cash buffers are in place. The actual numbers need to be worked out on a mainframe, so will wait and see.

Sale of BAT and purchase of Boingo

During the second half of December the remaining holding in BAT was sold at 3179p. Standing a bit higher today, but overall strategy is to exit tobacco shares and not get involved in fossil fuels – although BP or Royal Dutch might be considered from time to time.

I previously noted that I would not be buying US small caps and bought an ETF instead. However this ETF could not get approval for my ISA account, so was left with a smaller overall holding than planned.

Today I bought a smallish holding in Boingo @ $10.84. This company provides WiFi services – notably in airports – that are a lot quicker than free services. The interesting development is the company’s expertise in capturing WiFi signals, bearing in mind that 5G signal capture is a whole new ballgame. As the shares were double the current level earlier in 2019, and the tax loss sale season is coming to a close, I thought a purchase before the year was a good idea. Boingo is a small cap with a chart going back to 2011 , so not a unicorn.

Profits taken on Superdry and Nvidia

Superdry published results a few days ago. The item that stood out was that the turnaround/reorganisation will take about two years. Also noticed a few unfavourable comments about the former CEO (now taking the job at Saga) relating to his management style. The shares popped up on the Election result so took profits @ 510p. The cost back in May was 452.76p.

Nvidia has recently made intra day lows of >200 in late November and again in early December. Clearly the shorts have not got it right yet apart from a few potential scalping trades. As I am uncertain about the future trajectory – 225 seems like resistance – and I would prefer to be holding more cash right now, I decided to sell my entire position and received 223.33. The cost of 80% of the combined holding was 166.49 from November 2018, and the remaining 20% was added at 141.19 end May 2019. Not at all bad for my first chipmaker investment, but may have a few losses to cover if markets peak soon then weaken on something unexpected.