Both Barron’s and Knox Ridley have been writing about US Small Caps during the past week. As Findlay Park started as a US Small Cap fund before changing to an unconstrained portfolio I thought that this would be a good area to consider at the present time. I do not like the idea of buying a few small cap stocks as the risk is very high, so I looked at the funds mentioned in Barron’s.
I prefer ETFs over managed funds for additional investment in the U.S. , mainly because mutual funds pay local taxes and spin off tax credits to holders. I am investing tax free funds, so the tax credits have no value.
The ETF which I decided to buy is iShares Core S&P Smaller Companies and 320 of these went into my pension fund yesterday @ 82.50. I will also add another 180 to my ISA account whenever fund is approved by my ISA managers – as long as the price is close to 82.50.
Prior to quarterly results I made a decision to sell Slack (WORK) as the stock had been underperforming and there might be better opportunities to reacquire when valuation looks more reasonable in relation to growth. The sale went through at 22.09 giving a loss on all accounts except the ISA.
Also noticed that Knox Ridley intended to add to Zoom (ZM) following a price drop after their quarterly results, so increased my holding – buying 200 for my ISA @ 63.38
The point has been made that both companies face competition from big tech, notably Microsoft. My feeling is that Zoom could be the better opportunity of the two because it has more of a global reach. Big tech will also be constrained from seeking monopolies by politics – it’s better to have at least one competitor at present to avoid anti trust actions, and try to increase the size of the overall market.
As things turned out November was a surprisingly good month for most of the technology stocks in the portfolios. The three with negligible changes were WORK 22.82, SNAP 15.25, and PINS 19.48.
BABA finally went ahead with their HongKong listing and the ADR price improved from 176.67 to 200 even. My best guess is that Beijing decided that a mega listing would help restore confidence in HK as a financial centre despite the protests and riots. Notable gains were also made by NVDA 216.74, MSFT 151.38, ROKU 160.37, MDB 148.70, WDAY 179.12, and ZM 74.50.
In the real world the general strength in US equities was reflected in Findlay Park American – up from 129.81 to 134.60, SCHD up from 55.52 to 57.09, and VIG up from 119.61 to 122.54.
U.K. funds and investment trusts were generally a bit firmer. However SSON up from 1202 to 1302, and the Buffettology fund up from 322 to 343 stood out as gainers while FEET lost a bit from 1177 to 1138. There is a U.K. General Election on 12th December and Sterling has remained reasonably strong. Once again the result is unpredictable despite opinion polls showing this and that. Theresa May experienced this last year.
People in general are sick and tired of the whole political class.
The two main disrupters of e-commerce dominated by Amazon and E-Bay at the present time are Pinterest and Shopify. On October 31st after hours Pinterest posted quarterly figures which disappointed many analysts, although still showing reasonable growth.
I wrote that the price looked more like 20 than 25 yesterday, before Wall Street opened. In the event the stock started trading either side of 19 and a best order secured a small position @ 19.13. The stock closed at 20.86 but it is very difficult to predict which way the wind will be blowing next week.
From a technical perspective there remains a big gap to fill, but this is going to take time. For the moment I will look to either trade this small position or build on further weakness.
It is useful for me to have a timeline on month end prices that I can look at just like that.So the list starts with US tech, then funds, then U.K. investment trusts and funds.
BABA 176.67, NVDA 201.02, MSFT 143.37, ROKU 147.20, WORK 22.00, SNAP 15.06, MDB 127.77, WDAY 162.16, ZM 69.89
Findlay Park 129.81, SCHD 55.52, VIG 119.61
SSON 1202, FEET 1177, Ab Euro Inc 94, Johcm inc 188, Laz Globalinc 107, Trojan X inc 105, Thread U.K. inc 144,( Buffettology 322p on 1/11)
There is not much on my watchlist. Pinterest just had a disappointing quarter so chances are the price will be more like 20 than 25 with many people stopped out.
Some older small holdings are gradually being disposed of to generate cash.
Zoom continued down to its next support level so I bought another 150 in the real world at 63.90. Mentioned to an ex client with landed estates – he already uses Zoom to videoconference what is happening on his farms and woodlands, while his day job might see him in London, New York, or any other major centre for the arts.
As for Nokia, a huge disappointment as earlier guidance withdrawn, dividend suspended – that’s a 100% cut while new guidance for 2020 looks like 40% down. That sounds like the ADR is headed for USD3 or thereabouts – Travis on Stock Gumshoe sold his at 3.90 and I followed him the next day at 3.79. To me the whole spectacle of a telecoms equipment company losing its way reminds me of GEC in the U.K., a company built over many years by Lord Weinstock only to be trashed by new management during the internet boom around 1999/2000.
Good news that Microsoft has been awarded the Pentagon contract. $10 billion over 10 years will not make a huge amount of difference to earnings, but is a great advertisement for their cloud business, second only to Amazon at the present time. And if we are worried about Green New Deal then Microsoft sits well given Bill Gates’ philanthropic interests.
The target for my recent addition to Roku was the 115 to 120 range. So when the stock price jumped into this range at the close 9th October a sale was imminent . The following opening took the price just North of 120 so I took my profit at 120.56.
This gave me the opportunity to sell in the real world subject to capital gains tax – the purchases of the two lots of 50 shares were in the tax free world of ISA and SIPP.
My rationale was that sooner or later the stock price may be much higher, and I do not wish to have my profits diminished by tax. As things stand this is not the case, as I have a few losses that I can take to bring gains inside the annual tax free allowance in the UK where the tax year ends 5th April.
Thanks for this trade must go to Knox Ridley, a very smart chartist who predicted the rally.
At the end of September Roku dipped below $100 and two lots of 50 shares were purchased at 98.90 and 99.13. The intention was to trade 100 shares out on a rally, so perhaps a sale will follow soon.
My Zoom holding was also doubled buying 150 at 74.97. While Zoom has a long runway and very high valuation, it would be a shame to miss out on the disruption of the video conferencing space worldwide.
You may remember that Snap provided a profitable trade over the last quarterly figures. Now analysts are becoming a bit more bullish, yet the share price is weak again.
So I bought 1000 @ 14.31 early October. Not sure whether this is another trading opportunity or a longish term holding. Can’t make head or tail of their Snapchat app but apparently it has appeal to millennials and might start making money soon.
The US tech sector has been weak of late, so a couple of holdings were increased.
Added to Slack at 25.43 and Mongo DB at 126.56. Both closed lower, but time difference prevents me from dealing in the afternoon NY time. Both of these companies have a long runway, but neither are affected by the present trade war between the US and China. The same applies to many high growth US tech stocks and good numbers should continue whether or not there is a recession in the US.
On the consumer side Roku enabled smart televisions are to be sold by Walmart under their own brand which is usually bargain priced. If there is a recession, I think more people would cut the cord and move to the cheaper internet alternative. And Roku now has its own output (with advertisements) for free, so user numbers should continue to grow even if subscription channels like Netflix experience a period of slow growth given the competition from Disney and others. All the subscription channels are available with a Roku TV or box.
I finally sold out my remaining position in Premier Oil. The holding has moved in and out of profit, so pleased to take a gain of 10p per share.
Roku has continued its upward path, so reduced a bit more at 167.43. This is still my largest holding, but it never hurts to take some profits along the way. The cash went into a new holding of Workday (WDAY) at 175.16, and as there was adverse reaction to Slack’s first earnings statement since it became a public company I was able to double my holding at 26.6.
Alibaba (BABA) has just announced the acquisition of another Chinese e- commerce company for 2 billion dollars. Kaola will strengthen its position in the growing Chinese import e- commerce market which is still in its infancy and offers good long term potential as standards of living continue to rise in China. Initial market reaction on Thursday was good, but the stock ran into profit taking Friday.