Government turnaround and market opportunities

There are plenty of opportunities to harvest in the curent markets
Well, economics and turnarounds where the Government would be lambasted whatever it did. However, the reversal of the 5% tax cut is purely political as the suggested £0.6-£2billion it raises is a tiny sum of the total tax take HMRC collected last year of £716billion.

As an economist and not a politician speaking, I still hold that as part of a business attractive overall package of measures, it would have rewarded the Country far more in the end but there we are. It has settled the markets, the Bank of England has only spent loose change stabilising the Gilt Market (nowhere near the £65billion pledged) and the Pound is up 10% on last Monday week’s nadir.
We are just issuing our latest newsletter to clients in view of current volatility and if you would like some refreshing and more encouraging reading and don’t receive it already, please contact me.

The markets remain very disorientated however. The FTSE250 (the UK index of companies sized from 101-350) and predominately UK-centric businesses) is all the way back to levels just before the vaccine roll-out. That’s a savage 28% drop and sorely overdone. It’s now only 27% above the Pandemic low on 20 March 2020. The FTSE100 is faring much better, with main sectors like oils and banks holding-up well. Even then, the index is lower than the level it touched on 31 December 1999 – 23 years ago. These companies’ bigger size can better withstand economic shocks too but there is some really choice value in both now and even the FTSE250 ‘index’ alone is a ‘buy’. Smaller companies and AIM stocks have been similarly hard hit.

Pessimism is rife and overdone. Lots of companies hold lots of cash and are doing very well, all things and head winds considering – the jobs market is testament to that, even if we are likely to see some implosions as a result of inflation, energy costs, residential property slump and economic slowdown. Indeed, more will do share buy-backs – if the market doesn’t value your stock, buy-in shares and cancel them so the remaining shareholders do even better, sharing the profits across fewer participants. Last Tuesday week, one of our bigger energy funds announced it will buy-in and cancel 10% of its shares (about £100million’s worth) as they are trading way below the see-through asset value – well done them and the shares rose. All their income is US Dollars too so this buys really cheap Pounds. We already receive over 10% dividends so those will rise too as a result…

Takeovers will also happen, exacerbated by the weak Pound/strong Dollar. I wish we had Biffa – up 28% on an agreed takeover but we have plenty of other choice targets. Those quoted Property Trusts are also looking so over-sold too even after value reassessments on higher yield factors. Even a large social homes’ Trust has fallen to its lowest level – worth sniffing-around now I sense and regardless of some qualms but the 7% dividend from rents is very attractive. Just think too – investors flocked into that at float – some 64% higher than today’s price (which is what we didn’t do and why we may be interested now). However, we are spoilt for choice… more funds to invest please – send this way!

Philip J Milton & Co Plc Charitable Foundation  

The Charity’s latest accounts to 31 March have been published HERE and these show £35,603 was given to many deserving causes over the year. The causes include poverty relief locally and nationally, international disasters including Ukraine, the Coronavirus appeal and also support of projects in Asia and Africa including the digging of Bore Holes, self-help groups in Ethiopia and many Christian charities with their own outreach and poverty relief. A full list is within the accounts.

We have also helped many small local entities and wish to continue doing this where we can bring them publicity at the same time. More recently this has included the Bumblebee Conservation Trust, the Littlest Wildlife Hotel in South Molton and a project to help with financial guidance to the poor, one of our key initial objectives.

The Charity is pleased to receive donations and these can be made under GiftAid. It will continue to support a wide range of deserving causes, though it continues to await a property planning outcome for an anticipated capital injection, to build its endowment fund.

A J Bell  

I have been unimpressed by the FCA’s judgements over the engagement of Andy Bell in the firm he founded. The guidance was that his involvement on the board (but not as Chief Executive) any more might be a conflict (and he remains a large shareholder). Another Director, Helena Morrissey, has also resigned as a result. There are already rules about conflicts of interest and A J Bell would benefit from Andy’s engagement not his expulsion from any role within it – what crass interference. Still, he has contracted his consultancy business back to it instead.

Meantime, the FCA still hasn’t acted in the gross breaches of conflicts of interest and shenanigans regarding the awful investment management, protocol breaches and behaviour by Blue Planet Investment Trust’s Board and management company, let alone its Barnstaple lawyers’ defamatory actions as they desperately tout for business (when the Financial Ombudsman Service would cover investors’ claims absolutely for free and no commission share of any compensation awarded too – funny that)… hmmm.

It is odd, isn’t it? We are regulated in claims management, which means helping victims raising claims against the mis-sale of financial products, bad financial advice and also negligence including ‘wrong’ investment management. We charge fees for that service (and don’t share victims’ compensation which may be offered). However, unlike certain lawyers in this field, do you know what, our integrity notes that before anything else we encourage the investor to claim free of charge through the free services available via the Financial Ombudsman Service. We even help the aggrieved write a complaint letter, for free. What we don’t do is progress ‘no win no fee’ scams where actually the client could end-up paying significant costs and damages after all, especially if they lose with a misguided case – and guess what, the lawyers still take their Judas’ silver.

It’s interesting too in that we do ‘pro bono’ work for very disadvantaged people and will always review a case without cost anyway. We have just taken-on a very unfortunate case into which Samuels in Barnstaple had gotten its teeth. North Devon is a very small place…

The ‘no win, no fee’ arrangement offered entailed them having to pay an almost £1,000 fee ‘as there will be expenses… and costs are running away so I will reset the costs threshold to £7,000 plus uplift and VAT’ (and these people could ill afford anything) to continue proceedings and then, who knows where that may have led as the victims would have been trapped in a process with significant costs to extricate themselves even had they wanted to do that (that’s the law for you). Yes, I have the correspondence. We are helping these poor people without any fee so far (or none at all depending on progress), as the appropriate channels are now being pursued, by experienced experts in financial services who know what they are doing.


Pension Protection Fund  

Proving that you must understand what you are sold. Scottish Widows’ ‘Pension Protection Fund’ Series for the most safety conscious investors has fallen by 40% since January. It sits in the ‘Guaranteed Funds’ sector and that is no joke. It holds over £1billion of investors’ money. This is likely to be full of investors who are just about to draw from their pensions. I wonder what risk warnings were given. People just do not understand what ‘risk’ is all about. We have been flagging the concerns about what could happen to these really safe ‘investment grade bonds’ for years. We haven’t had any… for years.

There will be many investors and employees in some form of company arrangement which shuffles them across into ‘safe’ investment funds like this (lifestyle?) as they near retirement and they will be in for a great shock as they will find they have similar ‘stuff’ to this. If you don’t know what to do and are affected, best contact us asap.


Secure loan funds – closing down  

Readers will remember we like these. One of ours has just reported the latest position. The share price in Dec 2020 was 16.5p. So far, we have received 19.5p and the latest net asset value is still 17.44p. That’s a good return from ‘secure’ loans! The shares are 6.5p now. We own 5% of what’s left and shall keep buying but clearly as the pot becomes more concentrated, the risk increases but likewise, what is left has been heavily written-down in value and I suspect the final pay-outs will be above the nav. Regardless, it’s still only 0.75% of our total assets now.  

We like these types of special opportunity and the price is up 20% since June 17. One of our other perennial ‘general’ funds closing down reported its last net asset value too – the shares are still on a 24% discount (meaning if it closed-down tomorrow we’d see an uplift of 30% excluding costs). We’ll keep buying…  

Silly share prices  

It is not alone and we don’t have any, but to see J D Wetherspoon’s share price go from its post-Covid £14 high to £3.90 shows how ridiculous the market’s perception of value can change. They weren’t excessively over-priced at £14 but at present levels they are stupidly cheap, even with all the negative sentiment abounding. I am not making a play for this one, however, but just saying how stupid the current sentiment has become in driving-down solid businesses’ values but of course the flip side is that these types of situations are amongst the greatest opportunities for the buyer and not a reason for people to sell-up and retreat to cash under the mattress.

Did you know for example that the projected income yield from all the FTSEAll Share components now exceeds 4%pa? In January 2020 it was little above 2%. The FTSE250 is not far behind. These signals are compelling reasons to recognise the value in the whole, general UK market presently. Remember, what this represents is the ‘rent money’ the ‘tenant’ enjoying the use of your money (companies) pays you regularly, regardless of what happens from one day to the next in the value of their ‘home’ (about which, short-term, they care not one iota as it doesn’t affect their liability to pay you the rent does it?). Traditionally the ‘yield’ should be lower than cash deposit rates, as an investment in this gives you an increasing income over time (also inflation-linked but not lateral nor exactly correlated) unrelated to interest rates but also some capital appreciation too.

Note I have not said ‘could’ – it will but it just needs time in periods of uncertainty (like now) and the usual caveats of egg-spreading and so on. So, all else being equal, the British Stock Market should be around 50-100% higher than it is presently, or put the other way, it is two-thirds, or half as cheap (or even more) than it should be. Is that a time to sell or a time to buy and put the valuation reports in the bottom drawer for another day?

My best wishes

Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers