Its Not Harry

Comment and opinion for retail investors in the UK

Mark Potter

Blue Whale surfaces…

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In April last year I commented on a new fund management group, Blue Whale, backed by Peter Hargreaves of Hargreaves Lansdown fame. I was cautious in my comments but as I promised, I have been watching the fund and it has done very well. Here is a link to my original post.

The fund managers’ own reporting says the fund is now up to GBP80 million, so still small. It has stuck with its US and tech biases but the trading record looks intelligent (stocks that were no longer looking right were quickly sold) and the performance relative to a sensible benchmark (the Investment Association Global sector) is stated as being in the 4th percentile.

Although the best of the performance was achieved in the run up until mid Summer, the overall return since launch is a very decent 11.7%. However, all new funds have the advantage of holding no “baggage” of poor stocks at outset, so should show relatively better performance data. It will take a few more discrete periods of performance to prove that the managers are long term stars, but I am impressed. I have read most of the monthly commentaries and they are credible.

The fund would make an interesting pairing with the Guinness Global Innovations fund that I have personally supported for some years. A sort of ‘young bucks’ vs ‘old hands’ challenge. I think I might try it out with a modest test purchase, if it is available on my trading platforms (always an issue with new funds)!

Worse and worse, or opportunity knocks?

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I have to close the year with a blog post noting, after looking at my own portfolios, that the serious risks I have emphasised since the early Summer have wrought even more havoc than I expected. I am known as an optimistic, so when my comments had started to turn pessimistic I had been told that things must be really bad. Indeed they are.

Of course, I am pleased that some of the ‘insurance’ built into the portfolios is working well, notably the highest ever weighting to cash. The ‘works when you need it most’ holding in the Jupiter Absolute Return fund is also doing what it should. No one who reads my words of acclaimed wisdom should be needing to sell assets at the moment.

When will it get better? Not soon in my opinion because none of the major political risks have reached a hiatus. But if things get much worse, there will shortly be a great opportunity to start in to the next 10 years of making money – as long as you have cash and courage!

So, the optimist in me still lives on! There is always opportunity around the corner when there is a sell off and this time I hope we are all ready for it.

Happy New Year!

Spot the trend!

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If I told you I am using wood pellets from Russia to heat my house you might instantly think I am eco minded or getting a government subsidy or both.  The former is true but not the latter but neither are the actual reason:  the house I bought had a granular pellet boiler installed already because that is the most practical fuel option.  Russian wood pellets are the best quality and the price is sensible.

The reason why you might have guessed at the reasons I suggested is because you may be aware of a trend towards using bio-mass as a fuel on the basis of the (contested) argument that it is carbon neutral.  Trends reflect a general direction of change that has impacted enough people or processes or just data to suggest a long term impact.  The word trendy implies keeping up with changes in fashion that have become set in.

Knowing about trends in a mathematical or statistical sense is useful when looking to assess the likely direction of stock market asset prices.  In fact there is a whole industry built around the concept, called generally ‘charting’.  The number one blunt instrument of the chartist is something called the ‘moving average’ which seeks to strip out short term ups and downs in valuation and show how the direction of data is progressing in a nice smooth way.

There are different ways of adding such ‘trend’ lines to charts and the various methods of interpreting them.  The interpretation can sometimes  seem as improbable as astrology but as one might assume human behaviour across a very wide base of participants does not change much, patterns might exist, I concede.  I would however suggest that most charting methods are in fact naïve and useless because they do not account for the exact features prevailing in the financial climate of the time.

Graphs and charts are only any use if you know how they were constructed and how to interpret them

Where the trend is useful is in looking at turning points, which can never easily be detected at the time they happen.  Looking backwards and spotting quite soon the start of a new trend (an inflection point) can help one see what risk and opportunities are current. Investment fund managers often claim they are good at seeing inflection points in share prices.

An easy way to make some personal use of this concept without being a statistician is to get up a graph from a news service like the BBC of a major stock market like say the FTSE 250 (this is broader based than the 100) over a long period like 5 years.  Such charts are drawn with not too many data points so short term oscillations disappear. That can be very informative.  If you do it now, you will see we are well into a ‘bear’ market but could have some way yet to go down the slope!