A Happy New Year to all readers of this column and we hope you can look forward to a positive and productive 2025.
Our latest ‘eshot’ to clients has provided a brief snapshot of how we have been performing for them during the past year and some of our success stories, so we felt they were worth sharing.
Regular readers will know we like to spread investments across many assets for our clients, to give them a balanced portfolio and generally we do not chase the latest trends or fads – we’re looking for the next trend, not those that have already peaked!
For example, Apple ended the year about to become the first ever $4trillion company and the biggest concentration of the US index ever with the largest 10 companies counting for 40% of the value of the whole of the US market (S&P500) and at just under $21trillion.
It is worth noting that is half again as large as the ‘Dotcom bubble’ and it has been argued those ‘values’ have been pushed up by ‘momentum investing’ (ie everyone jumping on the bandwagon) rather than having value in the traditional sense.
We still feel such ‘investment Jenga’ will eventually wobble and we prefer to invest our clients’ money in holdings with a firmer footing.
There is tremendous value in the markets if you deviate from the ‘momentum’ and a great income yield which happens regardless of daily movements in capital values.
A sound, balanced strategy can still expect in the region of 5% or more of income yield – which is a great return when it recognises that capital growth and increases in income going forwards are also likely, albeit neither guaranteed of course
Admittedly, not by design, but we held seven of the best 10 risers in the FTSE100 over 2024. That’s quite a feat and no, we didn’t hold all 100! In general terms it was because we held deep value assets (in our view) and finally the markets began to appreciate the attractions. However, could we have predicted that list? No.
Stocks such as IAG we’d held for years and also Standard Chartered which we have now sold and Rolls Royce which we cleared ‘too soon’ but what is most important is picking next year’s and not dwelling on the past.
The UK market gained 5.7% but nothing like the US. However, having even a smidgen in these seven (and other good performers in the wider market list) has helped us.
Winning is also about not having too many of the big losers to drag things down overall. Our ’balanced’ strategies still generate more than 5%pa income whilst we wait for value to be unlocked.
An example: Logistics Developments Plc has agreed the sale of NashTech at a 36% internal return rate and has done a tender to return cash to us at 19p. The shares rose 42%. General trading levels have been 10-13p and latterly most have been bought-in by the Company anyway, enhancing the value of such special disposals to those remaining patient.
Digital 9 Infrastructure has just announced the sale of its EMIC subsea system for $42million, albeit at a 15% discount to its last asset value.
That has still pushed shares up 9% – still undervalued based on the new management’s savagely cut remaining asset value. They are now up 34% since December 3. If they sell all remaining assets at a 15% discount to the 47p June 30 value, that’s more than double the present share price – and it could be more.
We have been nibbling-away to acquire them and the more the lower they went. We never bought these when they attracted new investors’ money at the float for this lovely, environmentally-friendly and technologically-attractive investment idea.
In summary: Spread investments widely, don’t chase yesterday’s wins, be prepared to play a longer game and do not make any rash kneejerk decisions!
