Q2 2020 +24% (+33% ytd), but still nervous

Quick overview of performance – and holdings which I know is something you all enjoy.

At the end quarter I am c+24% ytd.  This is vs a FTSE AS of -17%. and AIM AS of -8%. I have had a very good July and am currently up c33%.

This is good but I often think of a (mis) quote when I am doing well:

“Those whom the gods wish to destroy they first make invincible”

To invest in current times I  think you need something of a thesis of how the new world will work – my view is more towards inflationary melt-up but some severe dips.  There is always the possibility that no matter how much is printed it will not be spent…

Its very easy to forget with markets just a touch off flat /  slightly down for the year.

Dont forget happy charts such as this on US unemployent:

or this on US money supply:

Difficult to position in this environment but I do my best.

Portfolio is as below (as at 12/7/2020)

And Grouped.

So Gold/ Silver Cash is 13% with gold equities a further 12%.  So I am 25% gold exposed – at my limit – I will be selling gold periodically if it goes above that.

34 holdings over 1% weight, top 10 is 54% the of portfolio.  It feels too many holdings.  I prefer fewer, particularly as I am very short of time.  The issue is that I am in areas which concentration is a risky business – gold / Russia so have sacrificed depth and concentration for opportunity. I believe natural resources are likely to outperform but they are naturally risky and not really my area, hence the use of funds.

Buys

One gold holding I will touch on is GPM – Golden Prospect Precious Metals.  This has a NAV of 66.15 but a share price of c61.7p per share (as of 19/7/2020).  I dont believe in a bullish precious metals market this will continue.  Even if the discount continues, if gold miner’s share prices rise and the discount is maintained it will do OK. Holdings are mostly largish cap gold miners – this is rallying strongly so take care and double check figures as they are already out of date.

I have also spiced this up by buying the subscription shares – in essence, options on the share price.  These currently trade at 18p to buy – I paid far less, c10p but have a 46.14p exercise price at the end of November.  If we stay at current price (66p) I recon they should be worth about 20p – if we go to NAV then 26p – so I double my money.  Of course this can go in reverse, or further if gold continues to rise – hence the small position size. (since I wrote this it has happened and I have more than doubled on a small stake).

Purchased a touch more DCI – people keep telling me its a scam and it is down a lot – I am not so sure and I think the upside is good from here…

I bought more CMCX before recent rises – I have sold now and moved weight to CAML last few days as I think its due a run.  Am doing more of this sort of trading around positions right now. I will try and post these on twitter more as I have done quite well…

Another holding, DNA2 is interesting – I think I tweeted it.  Its Doric Nimrod Air two – they have 7 A380s on lease to Emirates.  If Emirates continues to pay leases the market cap is covered by the dividend over the next two years, debt is paid down and you own the planes.  These are not the most popular planes in the world – the A380 having widely been regarded as a flop but they are free and the engines alone are worth money and in a worst case scenario these can be stripped for parts.  VIC has a good write up. https://valueinvestorsclub.com/idea/DORIC_NIMROD_AIR_TWO/1496294994

There (to me) is some risk of leases being renegotiated by the government but transport assets are covered by international treaties so I think it should be OK….

I bought more 4d pharma in the placement at 35p – clinical results are due in the next six months.  It is currently trading at 50p (not in figures above).

Sales

I sold some EOS Russia – as I wanted to cut exposure a touch.

I have also sold all my PHN – cheap polisth property at 1/4 book.  The issue is that it isnt the best run company, the property isnt the best and in a post COVID / work from home world I am not sure its where I want to be.  Plus, I want to lower exposure more generally….

In the quarter I bought more then sold CMCx. Its a good company and my thesis was right but it is cyclical and has risen a lot.  I put more into CAML – as its really cheap, particularly vs peers which have rerated more – only now is it starting to move.

Sold Kazatomprom.  I believe URNM, which I bought after quarter end, is a better bet.

Sold my small ORPH position on the capital raise – I thought they were taking advantage of the high share price rather than needing the money. My expectation is COVID will be beaten – more or less in the rich world in the next 6 months.

Increased weight / adds

I would like to add more to SNN (Romania’s Nuclearelectrica) – as I think its very cheap – I just havent had time to analyse it properly.  I think it fell back as they decided not to go ahead with another reactor – something I actually prefer… Why invest more if your existing plant is valued at less than book ?

BXP is also one I would like to add to – with increased medical spending and a highly erratic discount vs the Bangladeshi listing – think I may have missed the boat on this.

One to me you guys should consider add to is FEES – the Russian Electricity grid – it’s fallen from a high of 0.24 to .20 rub (on MOEX, its on LSE too, but I dont follow it there).  Russian rates are lower than when the price is higher, the yield is 11% and its trading at a quarter book.  Lots to like here. Actually writing this – I should add here…. Particularly with the growth in the portfolio I need to keep weights where I want them to be.  Globetrans might also not be a bad bet…

General

Even though I expect the virus to pass / be cured in the next 6 months I am not sure whether the economic consequences will be longer lasting.  I will monitor it and may well try to lock in gains with options.  The other risk is more inflation but gold / silver trading at highs maybe isnt attractive, though I am a holder and think it will go higher.  There are other potential options – for example property, that I can explore. I am increasingly nervour of holding cash.  I have borrowings worth

Now that those in control realise they can print money I don’t anticipate them stopping any time soon. Still I could be wrong, VIX is down though and put options are looking cheap.

I think the next place to look for value is, (I think) oil – ahead of things starting up again.  Its also an inflation hedge – to a degree, I have exposure via Russia, so need to be careful I dont get over exposed.  These cross exposures of natural resources / Russia are hard to manage. A potential short opportunity is UK insurers who I believe may well be wiped out by business interruption COVID claims. I dont think this is really in the price, I feel an option trade coming on if I get time to look into it properly…

In life more generally, I am still (ridiculously) working in a job, albeit 4 days a week.  At present I have made 4 and a half year’s (meagre) net salary , in the last 7 months.  Its nuts I am still working but the safety net of a job has become very much a hammock. Preparations to move abroad and go full time on the investing are continuing but I’m not ready yet – goal is to do this before the end of the year, regardless of COVID. Its years past time to make a change.  As regular readers can probably tell I havent been posting much and my research is not quite what it could be as I am desperately short of time.  I am looking forward to making the switch.

I intend to try to at least tweet more – as I haven’t really been putting enough out there. As ever, I don’t, and won’t post every trade I do, for lots of reasons, but I can post more, particularly those relevant to a wider audience.

As ever, comments / suggestions, positive and negative appreciated.

 

Advertisement