On my normal FTSE 350 beat it has been a quiet few days...and quite rightly so after a busy last few months. Still - if you were gainfully employed in a large fund management operation - you would not be twiddling your thumbs and wondering what to do, because this is peak brokerage lunch time. Now regulatory constraints and related have cut back such activities, something which has impacted City of London restaurant margins and waistlines alike. However it is probably good for the health of investment portfolios, as the classic brokerage Christmas lunch was also a rabid inducement to push through a final few trades for the year. And more times than not...
The driver of the trades being suggested was essentially to sell the year's winners...and buy the year's losers. Now I love a bit of mean reversion but such a naive strategy ignores the structural shifts which naturally impact financial markets. So to save you a heart attack-inducing three hour session, what nuggets of gold can we find from typical FTSE 100 brokerage Christmas lunch 2019 mutterings? How many FTSE 100 stock in the last year have gone up by more than fifty percent? Congratulations if you said nine. Yes, nine! Suffice to say JD Sports Fashion (JD.) is misnamed (especially the last word of its title) and even the biggest shareholder has taken a few profits. Aveva Group (AVV) is majority owned by Schneider Electric of France (and so the excitable share price is betting on the rest of the shares being bought back too). London Stock Exchange (LSE) aside from presiding over the ‘highly successful’ AIM market is trying to strike its own expensive mega deal. Barratt Developments (BDEV) needs a continuation of the government property sector largesse (when we all know Help to Buy is expensive and hugely distorting). Next (NXT) is a quality player but in today's fast-evolving retail environment even middle of the road has a price... You get the gist. Not a lot of natural value. How about the laggards? After all fourteen current members of the FTSE 100 have share prices which are down more than ten percent in the last year. Who ever said that everything had gone up?!
Well I am sure that you have every confidence in NMC Group (NMC) after the Muddy Waters expose earlier this week. Centrica (CNA) needs a sensible government energy policy centred around the market and not the ludicrous notions of a price cap (although at least Comrade Jezza's nationalisation angle has gone away). Fresnillo (FRES) has to hope that precious metals - especially silver - grab a bit more investor interest in 2020, whilst Pearson (PSON), Carnival (CCL), Imperial Brands (IMB), BT Group (BT.A) and TUI AG (TUI) are all battling an evolving and often reluctant domestic and global consumer.
You get the gist. It is not easy or obvious out there. But it is always this way. Earlier I was watching a hedge fund legend in an interview beat himself up for being too much of a 'coward' a year ago when markets were under pressure and not loading up big time. As always, Hindsight Asset Management is the best performer out there. For what it is worth, I think the, noted above, broad loser grouping is of more interest to me than the broad winner grouping, over the last year. But there will be some stars which continue to burn brightly and some dogs that simply become even bigger dogs. All of this tells me two things. First, the brokerage Christmas lunch was never and is certainly not a value-add nuanced stock selection discussion. It is a social gathering where everything even remotely pertaining to investment discussion should be roundly ignored. Second, for active stock selectors 2020 is going to be a year of opportunity to make absolute money and cane benchmarks. I am looking forward to sharing my two tips of the year 2020 with you over the next week or two.
Filed under: broker Christmas lunch, Bidstack, Dev Clever, Warpaint London, Audioboom, Trafalgar Property
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