Value at last???

​”In the middle of every difficulty lies opportunity” (Albert Einstein”)

So another month has been and gone and as we enter December, historically the month with the best performing markets, we reflect on November and saw some of those unjustified losses being clawed back.

The US still leads the way, with Brexit affecting both UK and European markets. One thing markets do not like is uncertainty and the debacle which has been the UK’s exit from the European Union has been that for sure. China and Emerging Markets remain down though great value to be had there now

So raw data being:

                                   Nov          YTD

Dow Jones                 +1.7%       +3.3%
Nasdaq                       +0.3%       +6.2%
FTSE                          -2.1%       -9.2%
Nikkei                         +3.0%      -1.8%
SSE                             -1.0%     -21.7%
Dax                             -1.7%      -12.9%

And on the currencies, a fairly flat month with the exception of the Australian Dollar which continues to claw its way back against the greenback…..USD results being

                                     Nov                   YTD

GBP                           +0.8%              +4.1%
EUR                           +0.2%              +5.8%
JPY                            +0.6%               +0.8%
AUD                            -2.7%              +6.9%
CNY                            -0.3%             +6.9%

So does this market offer value now? Emerging Markets / China absolutely. China’s economy has been affected by the trade war and although still un-resolved, the 21% fall in its market is an over reaction. November 11 in China is Singles Day. This year sales on Singles Day surpassed US$30 billion, taking in more in the first 10 minutes than Amazon PrimeDay in the US took all day…an economy in crisis..I don’t think so


On the subject of Amazon, its 3rd quarter revenue was up US$13 billion when compared to Q3 in 2017, to put that into context a year later the retail giant is making an extra US$6 million an hour….another crisis at company level – you decide… The recent drop in the share price was purely profit taking and emotion and despite the recent falls, year to date the stock is still up 42% . Why? Because its a good company.

You don’t need to be too clever or cunning to make good returns on investment. Buying good companies is the way to achieve sustainable long term growth. There is a place in every portfolio for alternatives, property, other assets uncorrelated to the stock market…..yes you must diversify for sure but buying good companies with good products or services that people continue to consume is the key. Have your bit of fun with bitcoin and the like (notice how many of these guys have gone quiet recently) but recognise it for what it is. Niche. Occasionally I have these niche opportunities that can make you the 100% ++ returns but of course are correlated to a higher risk and no more than 5% of your hard earned cash should be there.

A more passive play on the Nasdaq still made you over 6% this year but anyone with their money being managed properly should have made at least double that. Yet the consensus is that the market is in a bad place, why? CITI recently published an article titled “Reasons to be Thankful in a Dreadful Market” Whilst I disagree with the market being dreadful, for the half empty brigade out there these were the reasons cited
  • Sector leadership is shifting to value from growth
  • Amid all the market volatility, health care has become a “good place to hide”
  • Investor sentiment has moderated, which has historically been bullish for stocks
  • Credit backdrop isn’t the same as during the global financial crisis
So a well managed portfolio makes 12% per annum in a “dreadful” market. Based on this, a US$100k investment today, topped up monthly with US$1k for 20 years gives you a retirement pot just over US$1.9m, without having to shoot the lights out.

Long term growth and successful investments, as quoted by Warren Buffett is about “Time in , not Timing”…that said taking advantage of good timing is only going to benefit your portfolio and these markets are offering this now, especially in the Emerging Market space. So some profit taking in October because of some stretched valuations has caused some fear and talk of “dreadful market”…..so to paraphrase Mr Buffett again on his philosophy which has made him the greatest investor ever, “Be fearful when others are greedy and greedy when other are fearful”

Get in touch to work out how we take the opportunity….

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