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David Kempton: the art of the deal is not ideal

Our experienced private investor expects 'soggy' markets as the Trump rally fades but is reassured by the performance of his AIM stocks.

 

by David Kempton on Jan 24, 2017 at 14:35

David Kempton: the art of the deal is not ideal

I thought I should update Citywire Money readers on my portfolio and thoughts on the market before I depart on my annual visit to seek investment opportunities in Africa’s mining sector!

I seem to be rather isolated in viewing Trump primarily as a business man, where everything is negotiable. That’s what business men do; take an outrageous demand or stance then negotiate down from there. He has no political, military service or other establishment experience – just a six times bankrupt billionaire trader. As such he’s made a poor start taking on the media and markets are losing their respect for him.

That’s not ideal for the most powerful man in the world, who was almost certainly elected following cyber interference and false news, but perhaps American voters had a point.

Obama left the legacy of soaring stocks, cheaper oil, higher corporate profits and record low borrowing costs, but in that regime the rich just got richer at the expense of the American worker.

Change has arrived – the future will be very different and will reverberate around the world – viz, ‘Nato is obsolete’, which is an uncomfortable comment if you live in Estonia.

A strong dollar doesn’t help, making it very hard to export, easy to import, which won’t work for long and can only be mitigated by import tariffs (very bad) or maintaining low interest rates to moderate dollar strength (better).

The UK is the opposite: with sterling 19% down against the dollar and 13% lower versus the euro, the referendum will readjust the economy away from consumer spending and towards exporting, irrespective of the Brexit deliberations.

Here’s a summary of my 2016 Citywire stocks. Price movements are from the date I first mentioned them up to 23 January; a mean rise of 20%, which is not bad given that six months was the average holding period. 

My AIM portfolio has more winners than losers

Date Stocks (tickers)
23/02/2016 Bovis BVS (-6%) Vodafone VOD (-4%)
23/03/2016 BlackRock World Mining BRWM (70% Phoenix Spree Deutschland PSDL (43%) HgCapital Trust HGT (33%)
04/05/2016 Eco Animal Health EAH (34%) Lok'n Store LOK (35% NMC Health NMC (61%
24/05/2016 Burford Capital BURF (109%) Paysafe PAYS (-4% Scancell SCLP (-12%) SCS Group SCS (5%)
16/06/2016 Arrow Global ARW (22%) EKF Diagnostics EKF (33%
27/06/2016 Rolls-Royce RR (5%) Royal Dutch Shell RDSb (19%)
12/07/2016 Shire SHP (-10%) Swallowfield SWL (53%)
02/08/2016 IQE (62%) Tarsus TRS(5%) Watkin Jones WJG (+16%)
19/09/2016 Arria NLG (-20% BCA Marketplace BCA (3%) Bioventix BVXP (23%) Cerillion CER (14%) Conviviality CVR (14%) Journey Group JNY #
26/10/2016 Carillion CER (-6%) Costain COST (-1%) Interserve IRV (-2%) Morgan Sindall MGNS (20%) Renew RNWH (9%) Severfield SFR (52%) T Clarke CTO (0%)
10/11/2016 Cadiz CDZI.O (59%) ~ CRH CRH (-1%)
21/12/2016 Purplebricks PURP(14% RedT Energy RED(25%)

Note: # was taken over; ~ US Nasdaq-listed stock

All these shares are still held except where stopped out and sold at -20%.

My stocks for the year remain the disruptive RedT Energy (RED) and Purplebricks with Avingtrans (AVG) to be revalued to match the cash and growth prospects. Also I have just added to my Swallowfield (SWL) holding.

There’s only one resource share in the list but that will change in 2017. I agree with David Stevenson of the Financial Times that emerging markets look good value again. The world’s seven billion people live in America, Europe, Africa with one billion each and Asia four billion, but the growth potential is massively in Asia and Africa.

I will make more comment on my core holdings there after I return in March. Stay cool, batten down and stick to your last, the next weeks look a bit soggy now after the run of record index levels, notwithstanding the longer upward trend. I will watch from afar and sell if a 20% stop loss is breached. 

David Kempton is non-executive chairman of Hawksmoor Investment Management. He is an experienced investor, proprietor of Kempton Holdings and a non-executive director of a number of quoted and private companies. He may have an interest in any of the investments which he writes about.

3 comments so far. Why not have your say?

Hotrod

Jan 25, 2017 at 12:22

Thanks for your update David, I always value your comments.

Your 20% stop loss is a sensible precaution. Whilst I believe stockmarkets in general should thrive in 2017 the performance of their constituents looks increasingly risky.

What bothers me the most is trading statements emerging from the board rooms of dodgy deals being done, accountancy discrepancies being discovered and directors being replaced. e.g. Rolls Royce, Tesco, BT. etc.

The only way you can safeguard yourself is to have a well diversified portfolio and initiate stop losses.

The Trump phenomenon is radical and difficult to fathom, but I believe his head on, confrontational approach, is to be preferred to the slimy double dealing, we have come to expect from politicians.

Trump has already stated that he intends to cut corporate taxes massively. Maybe by as much as 20% (from 35% to 15%) This would undoubtedly increase the balance of payments deficits but what is in his mind is the possibility of repatriating the billions of dollars which are festering in offshore tax havens.

I don't believe he can change America's reliance on cheap imports, but he can make everyone aware that there is a price to be paid and hopefully stop the rot.

His views are by no means unique, but are shared by opposition groups throughout Europe, who are tired of carrying the yoke of unbridled capitalism, to support the privileged 1%. If Donald Trump's ideas start to work it could cause a tidal change in the forthcoming European elections.

report this

Mark Yu

Jan 29, 2017 at 18:59

has he included the ones that he bought and then either took profit or a loss by selling out, as I vaguely remember that at the same time he recommended Scs and Pays he also recommended Sxx and Atma, which are not on this table?

report this

Mark Yu

Jan 29, 2017 at 19:30

Yes, He did say buying five shares including Sxx and Atma, both having done not so well since. So isn't the list here misleading to say the least? The link is here. http://citywire.co.uk/money/david-kempton-5-stocks-im-buying-as-eu-vote-looms/a913485

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