Good afternoon. It is a pleasure to welcome a number of new clients bringing funds to our fold – thank you very much indeed for the confidence expressed and looking forward to having you in our Elite Club! We don’t take ‘just anybody’, either! We guarantee one thing – that we shall try our best always for you. Upon that you have our firm and absolute assurance.
We endeavour also to fulfil simple things, like responding to enquiries promptly, not forcing you to navigate colossal push-button telephone systems but with real people to answer the telephone and deal with your enquiries in a caring and compassionate way. Importantly though, it is not only the high quality of the financial planning guidance we provide but the care and attention we impart in the construction of and management of clients’ financial and investment strategies, whether that is in their pensions, ISAs, Portfolios or bonds or whatever.
Currently, that is very much with a wary eye on downside protection and aversion to the excessive risks to which we fear the majority of investors out there is exposed, especially through the US. If you are not with us, ask your manager how much of your money, in whatever pot, is exposed to the main US stocks.
So, the US has agreed terms to reopen its government services again. This seems an annual event and so it goes on. Initially the markets rallied but underneath, some of the tech giants have been seeing some heavy swings downward, despite Nvidia’s latest buoyant results. As you will know, we remain very concerned at the excessive levels of these self-same stocks but as there is such tremendous value elsewhere, there is no point in taking excessive risks chasing these dragons more when you can buy and hold value stocks at deep discounts to their underlying tangible assets and ‘worth’.
Investors are interesting and daft beasts at the best of times – selling things which have fallen in value or which have not ‘performed’, some to chase pennies in front of steam rollers and of course lauding their day-trading success till one day, just like Preston in Wallace and Gromit’s ‘A Close Shave’, their coat-tails will be caught and well, that’s the end. Why sell something on those criteria? You have to look to the future and expectations and just because up till yesterday it seemed uninspiring does not mean that tomorrow it will not make-up lost ground and some?
To give you an idea, a commercial property fund we have held for a few years now has been exactly that – uninspiring. Indeed, we are losing money on what we paid initially and on most of the shares we have bought but whilst we have been sitting there, we have still been reaping a handsome dividend – effectively paid to wait. Today, we can expect an income of approaching 10%pa, for a portfolio of property worth just over £700million (so no tiddler).
The company has some debt but deducting this, if it could sell all its assets for the presently already depressed values logged, for every £1 we pay to buy a new share today, we’d see a nigh 100% uplift before costs, etc. In other words, we’d double our money. Meantime, income comes from all those tenants who have to keep paying the rent. As well as nearly 80% of its properties being occupied, the Trust is refurbishing some assets and engaging in development projects to increase the values of some others, all designed to add to the worth and profits. It represents a mere 1% of our total assets however but we’ll increase that.
Alternatively, you can invest in Nvidia, a company theoretically worth one-and-a-half times the value of all UK stocks and shares and the same as the whole of the German economic output for a year, expecting the Company to be worth perhaps $10trillion (and the income for waiting is non-existent in effect, too). That is the same ‘value’ as all the homes in the UK according to Zoopla. Which one is safer?
Of course, this property Trust’s shares can still fall, its assets can be marked-down in value (as can happen to any single investment) and so it goes on but conversely, an overseas’ investor may well make a bid to buy the whole, ready-made property portfolio and to do so at a discount to the book value of say 15%. We’d be upset but we’d still clear a profit well above today’s value – of 70%. And incidentally, boringly to satisfy necessary prudence for risk mitigation as well, presently the largest exposure to any of our most diversified strategies counts for just over 2% of total client funds – there are just so many of ‘these’ opportunities out there now, primarily as investors dump them to chase US dragons, reminiscent the Dot.com crash.
And generally for all the concern being show universally at present? Global dividends to investors hit a record $519billion for the second quarter, fuelled by banks. Remember. These are real returns paid to investors regardless of the daily gyrations in share prices.
By the way, the average Investment Trust discount remains at c14% presently too so plenty of value in such funds, this discount bonus is not present in OEICs or ETFs (including pension funds and insurance bonds investing similarly), passives or not, as they don’t ever give such bonus opportunities, bonuses from which we have benefited so handsomely for clients over the years (including several property Trusts)! If not us, ask your adviser how many Investment Trusts at discount they hold for you and if none, why not!
And dare I ask… who are the journalists who spliced together the Trump speech parts and also who overlaid them on the earlier video of the marchers approaching Capitol Hill to infer that they acted after President Trump had said ‘that’? Have they been disciplined yet?
Hot chocolate
And whilst not in time for Christmas but the cocoa price has been on the slide. London Cocoa prices have now slipped by over half their peak in December 2024. Along with sugar prices which are down almost the same since November 2023, those with a sweet tooth should be looking forward to cheaper confectionary prices down the road!
Accolades again
Thank you, Citywire New Model Adviser as the Firm has again made it into the ‘top 100’ which celebrates the best of the professional financial planning community. Top 100 2025: The third batch of leading advice firms
We really do try hard and it is always a pleasure to say ‘thank you’ for the recognition and indeed, to all of our Team and indeed our patient, loyal and lovely clients too!
Already the funds we manage for our many clients have now broached £290million at the end of October but I fear it would be a rather impossible outcome to broach £300million by the year end. Most of this has been by long-term performance too as daily oversight and management have continued to be our core activity, as we have not been concentrating on adding big new clients’ funds over the last few years.
Achieving this from ‘Value’ rather than ‘Momentum’ and a keen eye on risk mitigation by avoiding overpriced assets is great testimony as well. That was £248million the same time last year and remember, within we have lots of cash and defensive assets which frankly won’t have moved much at all either, because they are a necessary protection part of the overall balance.
‘Ai?’
Yes, a colloquial form of exclamation, pronounced ‘hay?’ (‘what horses eat’, said my Gran if ever we used the expression for something we didn’t hear). Today, though, a very different thing and proving very profitable for British Overseas Territory, Anguilla (ok, admit it, the majority of recipients of this eshot would not have known this is in the West Indies but that’s not a problem for this philatelist…!)
Anguilla is doing nicely and wisely storing up cash to create a fund which could be called-upon to help support it in the face of a hurricane (which will happen from time to time as that’s the case in that area). Yes, the .ai domain is attracting buyers and .ai sales last month were almost half of its national income this year, which is pretty impressive for the 16,000 inhabitants. The perceived prudence being shown by its Government has even resulted in a bolstered economic rating – now that’s refreshing behaviour instead of what we face, isn’t it! ‘Oi’ would be more apt perhaps and which is apparently from the early Norman/French, meaning ‘you, listen to me’.
The economy
The Budget is approaching and the trepidation increasing. The economy grew by a mere 0.1% (better than a fall), unemployment has ticked-up yet again, inflation is sticking (and food prices are still high) and the cost of government borrowing rose on increasing fears about the UK’s economic and political future. We are told that the State spends £45,000 per household, which is £5,000 more than it collects in taxes. This sort of situation cannot continue indefinitely and unless the excesses in public spending and benefits generally are not tackled, then the problems down the line will be even greater and the medicine even harder to swallow.
The Junior Doctors on strike again suggest an absence of sympathy for what the Country is facing and consultants are also considering supporting them apparently. The public, generally, is also not sympathetic to the claims this time round. Already the NHS spends over £200billion a year, or £7,000 per household. Throwing more money at these vast entities does not seem to be helping either, with weaker productivity across the public sector.
I am not going to speculate much on what the Budget may contain – what is the point? However, if you own a company which pays dividends, declare one now as the tax rate may go up, if you have profit on an asset, maybe sell it now as CGT may rise and gifting for IHT… maybe Lifetime Transfer tax may rear its head again for bigger gifts… however, as with anything, only do it ‘early’ if you were going to do it anyway as you could well regret acting out of panic. That is certainly unwise – regardless at what all your friends at the Golf Club may have done – it doesn’t make them right (indeed they probably need our wise counsel – send their details along!).
Meantime, house prices seem to be falling with several headwinds already affecting sentiment and more possibly, due to the Budget. In tourist areas where prices were so inflated because of the second-home tax incentives, nothing seems to be moving as vendors ‘think’ their prices are right as they ‘were there before’ but there could be a major retrenchment and if people want to sell, significant write-downs first, or ongoing stagnation and then, if it is a second home, the constant costs of maintaining them too.
I know that may not sound very good for some but sadly I can’t change the facts. I think history will suggest that successive governments should never have allowed houses, a box within which we live, to become so detached from reality, pricewise. Of course, high prices for fortunate owners also inflated consumers’ sense of well-being and optimism, as reflected in their spending which, as we know, powers the UK economy…
Clients beware!
According to the FCA, advisers shed 350,000 clients last year as a consequence of the Consumer Duty rules. This is primarily lower value ones and the first time the number’s dropped since 2020 – a sad ramification of what generally is a ‘good idea’. From the ‘regulatory burden’, it is mainly the cost of servicing small investors and indeed the resource to look after them.
Sadly it is one of the unintended consequences especially when the availability of advice needs increasing and especially for those with less. It could be said it is even more important for them to have advice than the larger. This might bode badly for clients of the consolidators (especially those owned by private equity companies with shorter-term business/investment models) which will no doubt make more ruthless decisions about what constitutes a ‘profitable client’.
Our clients can rest easy. We have not done any culling so I hope our smaller clients appreciate that – we shall always do our best to look after ‘everybody’, without discrimination but we do need their cooperation with information and communication to do the best job we can
Complaints
The FCA has published data on the numbers of complaints logged. I shan’t go into full depth but it is pleasing to note that 98% of all complaints are to firms which file over 500 complaints in six months or 1,000 in a year.
There are two interesting takes here. The first is that smaller advisory firms have very few complaints indeed. The second is that the bigger firms with the bigger compliance departments, resources, skillsets and expertise are the ones generating most complaints – isn’t that a curious conclusion?!
The final conclusion is that smaller, more personal firms, like our own, are more likely to not be filing significant numbers of complaints – perhaps because they deal with issues (and quickly) which could give reason for dissatisfaction whereas the bigger firms (particularly banks and insurance companies) tend to brush-off complaints with trite responses and still, to great extent, riding roughshod over the rules, hoping the complainant simply goes away? On top of that, the number of advice firms has shrunk by 1,478 since 2020. Many of these are long-experienced advisers leaving the industry for good, too and there are fewer entering at the bottom.
Good news/bad news
Well, we have now sold all our Barclays and Nat West shares. We had started buying the banks too early and sold probably too soon too and plenty of pundits are pushing them now as well. For some purchases we have simply been regaining earlier losses but in the main we have reaped considerable profits. Yes, we had Standard Chartered and HSBC as well and also gone – only Lloyds held of the major banks.
Why weren’t these pundits pushing them and buying them when they were cheap? Even in October 2023, Barclays were £1.29 and have touched £4.13 recently. Don’t forget the hefty dividends too. We kept buying the cheaper they were too. NatWest? They hit £1.82 that October and recently over £6. I should not be surprised if a bank windfall tax isn’t applied next week.
It’s not easy being a contrarian – independently minded – and that is the same at the bottom as it can be at the top. And really sobering but we were there in those troughs… Nat West was under £1 in September 2020. I shan’t comment on the fact this and the last government ‘gave’ our nationalised shares away… Of course, with the banks should I say also that I have lost faith with their basic business models and practices but that is another story.
There is a number of reason to sell something too – it is not necessarily because you think the share price is at the top but it can be to release funds to buy tomorrow’s performer. In other words, what’s the best deployment of my money today? That’s just as hard a decision but as a ‘value’ investor, at least in the main you know you are buying tangibles which are far too cheap – and you just have to wait – and sometimes wait lots more too. It doesn’t always ‘come good’ but there aren’t many investors like us who have been ‘overweight the banks’ since 2020… and despite what many present buyers may infer!
Hydrogen Capital Growth will need to rename again as ‘Hydrogen Capital Attrition’. The shares have relisted, the assets have been revalued and the Fund is now into asset sell-down mode to return cash to shareholders. The shares reopened down over half from the suspension price – very frustrating. However, if the revised asset value is as conservative as the new valuers have suggested, then the current share price reflects a seriously large discount.
Trouble is – who wants to buy hydrogen development assets where yet more research capital may be required before the true value of the concept can be proven? I feel for the original investors – many were very ‘green’ – paying £1 or indeed more on the open market afterwards. 13p at the lowest point is a long way down for unproven technology, however well-intentioned and wishful. Let us still be hopeful it works – the principles do for the likes of Ceres Power – different but reflective perhaps.
CMC Markets rises 28% as it increases its interim dividend by 77% and reports better figures than expected. With fickle markets, even a relatively small change in the results can have a very disproportionate impact on share prices. Usually, it is preferable when they are positive ones in stock we own! This is one of our larger direct stocks as is McBride which also announces results in line with views and the announcement of a £20million buy back so the shares rise 20% – a daft previous under-valuation.
Maxims – being a better investor – from the ‘Basil of Barnstaple’
11. Ignore the superstitious adages when it comes to the stockmarket (and indeed any markets). Bear in mind myriad factors but very often, follow your sentiments and commit to buying, selling or holding regardless of what ‘everyone else’ says.
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
