What could be more timely than a collection of investment tips for 2021? No need to answer.
Reviving an old feature favourite, I have asked a variety of stock market professionals, writers and bloggers for their top investment ideas for the year ahead (and beyond).
It is also a competition of sorts, pitting this bunch against each other to see whose will do best over the coming 12 months.
Be warned, when I ran this feature at the sadly departed Bullbearings website my tips generally came last (all prices as off Midday 24 December 2020).
Neil Wilson, chief market analyst for Markets.com, points his index finger at the FTSE 100: “There’s a big recovery coming.
“Assuming vaccines mean a return to almost normal and with global macroeconomic numbers looking very strong through 2021, combined with the Fed anchoring rates and the general liquidity sloshing about, I think the UK is very cheap and liable for a strong bounce.
“The FTSE 100 also has an expected 2021 dividend yield of 4%, making it the most attractive among developed market stock indices for income.
“On top of that, while UK domestic stocks have re-rated, they still trade at about a 10-15% p/e discount to the broad European market and against the US,
“British equities trade at a 35% discount based on a two-year earnings outlook, further boosted for the Footsie by its strong bias to cyclical and value stocks.”
(FTSE 100: 6,502)
Peter Sleep, Senior Investment Manager, Seven Investment Management, settles his binoculars across the pond at Berkshire Hathaway Inc (NYSE:BRK.B).
“This is a large US conglomerate, run by the legendary investor Warren Buffett, made up a mixed group of companies such as the railways, pipeline, insurance, banking and a major shareholding in Apple.
“It has underperformed in recent years as investors have sought out higher growth stocks like Tesla or Amazon. Berkshire Hathaway is not a simple business, but it seems to be trading at a discount of about 30% to the sum of its parts – an abnormally large discount.”
Andrew Hore, editor of the AIM Journal, plucks a smallcap life sciences company focused on skin health, SkinBioTherapeutics PLC (LON:SBTX).
“This microbiome-based skin treatments developer has developed a self-managed human study with its partner Winclove Probiotics for psoriasis treatment AxisBiotix.
“This will commence in the first quarter of 2021.
“If this is successful, AxisBiotix could become a commercial food supplement by early-2022.
“There is potential in other areas. Croda, the company’s partner in the cosmetics market, is on course to scale up manufacturing using SkinBiotix technology ahead of a launch of ingredients that can be added to existing skin treatments.
“Earlier this year, a placing and open offer at 16p a share raised £4.45m. According to broker Cenkos, there should still be cash in the bank at the end of June 2022, even if there are no revenues.
“That means that there should not be any need for share issues in the medium-term.”
John Kingham, of the UK Value Investor blog picks Admiral Group PLC (LON:ADM).
“I chose this car insurance giant as my pick for last year and it produced a total return of about 35% in 2020, which is not too shabby.
“The fundamental attractions remain in place, so I’m going to stick with Admiral again.
“Those attractions include: Management focused on the long-term; low cost operations; rational insurance pricing; multiple European businesses just turning profitable after a decade of building scale; a proven ability to move into adjacent markets such as home insurance and loans and a potential cash return to shareholders if it sells its comparison website business.
“And as if that wasn’t enough, a double-digit historic growth rate and a dividend yield of 5% are the icing on the Admiral cake.”
Chris Beauchamp, chief market analyst at IG, opts for a safety-first pick of Halma Group PLC (LON:HLMA).
“Halma is not one that trips off the tongue of many people, and even seasoned UK investors may have overlooked this firm, but as one of the FTSE 100’s most consistent performers it is time the group stepped into the spotlight.
“Halma is a safety equipment firm that has seen steady share price returns since 2009, and has also managed to increase its dividends by 5% or more for four decades. It is not cheap, but then investors have to pay for quality in this market.
“And it weathered the storm of Covid very well, dropping by nearly a third but then rebounding swiftly.
“As one where the fundamentals and technical appear to align, it looks very interesting heading into 2021.
(HLMA: 2,398p) )
Richard Hunter, head of markets at Interactive Investor, goes for a more lowly rated FTSE 100 name, NatWest Group PLC (LON:NWG):
“NatWest rounded off the recent banking season with a surprise swing to profit for the quarter.
“Awash with capital and a Tier-1 ratio increased to 18.2%, its ability to weather any oncoming economic storms is comforting, and with the regulator having opened the door to a return of dividend payments in the New Year, NatWest could be well placed to mirror its previous yield of over 4%.
“There remain issues and risks, including the economic effects of the latest Covid-19 outbreaks and the outcome of the UK/EU deliberations, low interest rates and the overhang from the government’s 62% stake.
“But with the shares having declined by 33% in the year to date, looking past the pandemic, the garden could be rosier than many are currently thinking.”
Ryan Hughes, head of active portfolios at AJ Bell, picks an investment trust, Fidelity Special Values PLC (LON:FSV).
“The UK market is at an interesting inflexion point as we run into 2021. It has lagged global markets for a number of years as the structure of the market with a large allocation to ‘old economies’ such as oil and a large financials weighting has hampered returns.
“With the conclusion of Brexit finally here, there is a chance that investors once again begin to look at UK equities and for that discount to close.
“Fidelity Special Values, managed by Alex Wright could be very well placed to capitalise on this with his focus on solid but out of favour companies.
“The burst of performance seen late this year when news of the vaccine was announced shows how much performance potential is in these stocks and this is helped by the 18% gearing Wright has currently employed to take advantage of price weakness.”
Darius McDermott, managing director of FundCalibre, chooses a unit trust focused on an out-of-favour market, the Man GLG Income Fund.
“More than one vaccine and early approvals should help us get on the path to economic recovery in 2021.
“Brexit will be resolved (one way or another) and this will bring to end a lot of the uncertainty that has been hanging over our stock market for almost five years. The UK market is cheap, unloved, and under-owned.
“With cash near zero, even though dividends are down due to lockdown they remain very attractive – just look at the millions of savers moving out of NS&I.
“Man GLG Income fund is ideally placed to benefit from a pick-up in sentiment and economic recovery. It has a value-driven approach and invests no less than 80% in UK companies of all sizes.
“It can also invest in continental European companies that derive a substantial part of their revenues from the UK and has the ability to selectively invest in corporate bonds if the manager feels the risk/reward characteristics are more favourable.”
(Acc unit: 267.4p)
Peter Higgins, of the Twin Petes Investing podcast and Conker3 twitter fame, reckons one investment that will head north in 2021 is Polar Capital Holdings PLC (LON:POLR).
“A magnet for income seekers, Polar Capital is an investment management company with approximately £16.9bn of assets under management for investors large and small across a range of geographies and sectors.
“Among several strong performing funds is the FAAANMGTAASTICQ (pronounced fangtastic) £3bn winner, the Polar Capital Technology Trust (LON:PCT), for investors that wish to gain access to the likes of Facebook, Amazon, Apple, Alibaba, NVIDIA, Microsoft, Alphabet, AMD, Samsung, Tencent, Intel, Cognex and Qualcomm.
“The manager is a resilient company with strong fundamentals, including net profit margins above 27%, a return on investment of almost 35%, 195p of dividends since 2014 and earmarked to yield 5.12% in 2021.
“After providing investors with total annualised 10 year returns of 19.86%, POLR is still looking to scale new heights and increase its global footprint.”
Vince Stanzione, author of the bestseller The Millionaire Dropout, is glowing in his recommendation of the yellow metal that’s not been on everyone’s lips in 2020 – uranium.
“Nuclear power is a very credible and clean way to generate electricity.
“Yes, Homer Simpson works in a nuclear power plant and for many the Fukushima Daiichi nuclear disaster is still fresh in their minds after almost 10 years, but you cannot ignore nuclear power.
“There is no tradable uranium futures market and you certainly don’t want to buy physical and store it at home, so investing in uranium stocks is the way to play it.
“The safest uranium play is perhaps Cameco Corp (NYSE:CCJ, TSE:CCO). If you fancy a higher-risk play look at Energy Fuels Inc (AMEX:UUUU, TSE:EFR), which has risen almost two thirds in 2020 and could go up the same again in 2021.
“There are also a few ETFs, one being HURA Horizons Global Uranium Index ETF (TSE:HURA).”
Oliver Haill – Last but by only some means least, is me, and I’m going for the iShares Electric Vehicles and Driving Technology ETF (LON:ECAR): This is a punt on the electric vehicles market. I’ve become increasingly interested in thematic ETFs this year – and this theme is a no-brainer for me.
They offer a great way, I think, to invest in a sector or idea as a whole. There are other EV and associated ETFs that I could equally go for, but I picked one that is trading in London and has exposure to legacy carmakers, who I think will start to catch up with the likes of Tesla in the coming year or two.
The ECAR fund, which was launched in 2019, has its biggest holdings in specialist EV manufacturers Tesla and China’s BYD, but also has stakes in legacy carmakers Kia, Fiat, GM and Hyundai as they all pivot to EVs, as well as technology specialists like Xilinx, Infineon and Samsung.
If you want something more cutting-edge, I also like the SPDR S&P Kensho Smart Mobility ETF (NYSEARCA:HAIL), which offers a more techy tilt, with its two biggest holdings being China EV specialist NIO and hydrogen fuel cell systems maker Plug Power, followed by Tesla, electric delivery vehicle maker Workhorse, auto component suppliers BorgWarner and Visteon and others like Yandex and Ambarella. (It also has the best ticker code, but is not available on all UK fund platforms.)
Breaking Down The Barriers Preventing Millions From Investing In Companies That Do Good – Forbes
In the age of sustainability impact investing and ESG (Environmental, Social, and Governance), the non-financial factors that investors apply to identify material risks and growth opportunities, have become buzz terms. But not for everyone. According to research from new investment fund manager DUGUUD, this industry jargon leaves many people mystified and this is holding them back from investing in businesses that help the environment and society.
The survey of 3,000 adults found that just 10% were aware of the term impact investing and could explain it, yet when it was explained to them 60% agreed that it could create positive change in the environment and society. And three times more people agreed than disagreed that if they had funds to invest, they would want to invest in this area.
“It’s time for the whole financial services industry to ditch terms like impact investing and ESG and to start talking in a language everyone can understand,” says DUGUUD’s CEO and serial entrepreneur David Scrivens.
DUGUUD, the trading name of Amberside Capital, is an FCA-regulated fund manager launched this month, with a focus on climate change, increasing biodiversity, improving public health, reducing inequality, and improving education. It was born out of a need to create a platform that allows the general public to invest in companies that make a genuine and positive difference to the world.
“It is difficult and costly to create a fund that’s open to the public, and it takes a lot of marketing spend to reach them,” says Scrivens. “Most fund managers get institutional investors, such as pension funds, to meet the minimum investment level required to launch a fund, but this route is often to the exclusion of the general public.”
The research also revealed a significant level of cynicism, with 58% of respondents of the opinion that most businesses claiming to be doing good are actually spending more time and money marketing their environmental and societal intentions than on taking tangible actions. Two-thirds (67%) also agreed that there are now so many businesses claiming to run their business in a way that is better for the environment and society that they find it difficult to trust the real impact of most of their claims.
“It is extremely difficult to prove environmental and social change, and comparing organizations is also tricky,” says Scrivens. “There is no easy solution to this without government intervention to create tools for measuring impact.”
However, he insists that DUGUUD will not allow the companies it invests in to focus on just the one area of good they may be doing, but will hold them to account for all aspects of their business. They will also show investors tangible examples of what companies are doing, for example, how the company has moved to greener energy, not just by paying an electricity supplier to certify that they are getting green energy when it just comes through the grid, but by building additional green energy generation.
The team has already invested in several projects, including £17 million in Sterling Suffolk, which produces tomatoes in what has been dubbed ‘Europe’s cleverest greenhouse’. The semi-closed hydroponic glasshouse is considered 25% more energy efficient than a traditional one and allows for greater carbon absorption, and potentially creates better-tasting crops.
Wildanet is a Cornwall-based fiber company aiming to bring much-needed high-speed internet to rural communities in the region to improve digital inclusion. DUGUUD has raised the company around £50 million to help them achieve this goal.
Other investments include Virti, which trains medical staff remotely using virtual reality, and which has been incredibly valuable during the pandemic, and Ateria Health, which has developed a way to improve gut bacteria in humans that could help with common issues such as irritable bowel syndrome.
Another key finding of the research was that 67% of adults who were asked about investing would expect independent financial advisors (IFAs) to understand this area and supply options as part of the funds they discuss with customers, while 59% would also expect any pension provider to consider these kinds of investments in how they manage, invest and report on the pension fund.
This highlights the role that IFAs and pension firms have to play in creating more clarity for their clients around investing for positive change. “We believe that all professionals should be helping to spread the word about investing to make an improvement for society, and we aim to work with as many of them as possible,” says Scrivens.
Looking ahead, the plan is to create a fund that draws on the investment team’s infrastructure experience to make larger environmental and social projects come to fruition, and to launch a science-based fund focused on investment in technologies that can make a huge difference to the planet or society, but preferably both.
Scrivens adds: “We are also considering whether to offer a small part of our own company for individuals to invest in so that people can join us on our journey to make a real positive difference and help more companies that do good get the investment they need.”
The best investment I ever made – Shreveport Times
I started in the investment advisory business in January 1987. My timing was great as I experienced my first “market crash” in October of that year. Today that correction in the market is barely a blip on the screen. I was numb to bumps in the road at that stage in my life. Having just spent 6 years at an aggressive independent oil and gas company had prepared me well – especially when they turned the lights out on the entire industry in 1986. I found myself “earning” $205/week on unemployment! It was a very inspirational time during which many of us reflected on our professional future. Regardless of the events of 1987, it was one of those character building periods that added to my survival instincts.
As my title above suggests, I’m frequently asked my opinion regarding this investment or that opportunity in which they (or more likely, their friend) might pursue their fortunes.
True confession: It seems all the “good stuff” always eluded me. No one ever even approached me with any of the local scams that sounded awfully good at the time and sent some folks to jail. Apparently, I was “out of the loop” on the juicy deals. Full disclosure, some dear friends of mine did offer to have me join them in Tulsa to form a new oil and gas company. I declined. They did get rich and built and sold numerous oil and gas companies. Not even Warren Buffett gets it right every time!
One more aside, before I answer the question about my “best investment”! I have had what I consider to be real success with some of those filthy, dirty, expense laden variable annuities. Due to a selection heavily into their stock sub-accounts they have outperformed most of the popular indices. If the bottom ever falls out, I sleep well knowing their guarantees will pay me for life. Other than that, just because you might be curious by now, I’ve found comfort with Exchange Traded Funds and Mutual Funds managed by my Harvard/Stanford educated, brilliant friend and partner in Birmingham, Rick Wedell. He’s the best! Not to be out done, I also cling to a group of blue-chip, high-dividend paying stocks I lucked out and bought last year on March 20th – three days before the market hit the bottom. I promise, it was luck – not great timing on my part. At those low prices the dividends were just so high I couldn’t resist any longer.
My best investment, however, was in a little-known guy named Tommy Williams. In 1997 I formed a totally unknown company aptly called Williams Financial Advisors. That was accomplished with the guidance and advisory contribution of more mentors than I can name in this writing. I dove headfirst into the world of entrepreneurship. Along the way I established key relationships with the best (in my opinion) broker/dealer in the country, some wonderful and supportive clients, and ultimately some very bright – and much younger – partners. That next generation ultimately, over time, bought bits and pieces of the firm. One day in November of 2020 they asked me what I wanted to do with my furniture! It was a real win-win and my wonderful desk, credenza, etc. are still in storage awaiting something… To anyone reading this who asks for advice due to their similar role in a startup venture I would say this. You already know all the cliches – never give up, work hard, try to establish a win-win with everyone you come across, don’t burn bridges, etc., etc. But you may not be thinking about valuation. That is, the value of your enterprise to a successor(s). I was fortunate – I had that type of advice years before and it changed the way I viewed the Company – thus creating enterprise value and becoming my best investment ever! Only in America. I’d recommend an investment in yourself to anyone.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal.
RFG Advisory and its Investment Advisor Representatives do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. Please consult your own tax, legal, and accounting professional for guidance on such matters.
Visit us at www.williamsfa.com. Tommy Williams is a CERTIFIED FINANCIAL PLANNER™ Professional with Williams Financial Advisors, LLC. Securities offered by Registered Representatives through Private Client Services, member FINRA/SIPC. Advisory products and services offered by Investment Advisory Representatives through RFG Advisory, a Registered Investment Advisor. RFG Advisory, Williams Financial Advisors, LLC and Private Client Services are unaffiliated entities. Branch office is located at 6425 Youree Drive, Suite 180, Shreveport, LA 71105.
A classic investing read for summer (psst … it’s free) – The Globe and Mail
Is there a good book you recommend for retail investors? I have read several that explain how markets and trading work, but I have found very few that discuss the strategies one should use to invest profitably. One of the hardest decisions I have is when to sell, since if I don’t have extra cash the only way to buy another stock is to sell something first.
As I discussed in a recent column, I’m not a fan of trying to create wealth by trading. Instead, I believe in building a diversified portfolio of solid companies, or exchange-traded funds, and holding them for the long run. Focusing on stocks that raise their dividends regularly has worked well for me, as a growing payout is usually a sign of a healthy company and provides a powerful incentive to stay invested instead of constantly trading in and out.
When I was starting out, one of the most influential books I read was Lowell Miller’s The Single Best Investment: Creating Wealth with Dividend Growth. It is an engaging and accessible read that will not only give you the tools to identify great dividend stocks, but will help you deal with the 24/7 onslaught of market noise that often leads small investors astray.
I’m not exaggerating when I say the book might very well change how you think about investing.
As Mr. Miller, the founder and now-retired chief investment officer of Miller/Howard Investments, writes in the book’s introduction:
“Investing isnʼt some athletic event where agility and flashes of virtuosity are the secrets of success. Rather, investing really is investing – the methodical accumulation of capital through a sensible and disciplined plan which recognizes that ‘shares’ are not little numbers that jump around in the paper every day.
“They represent a partnership interest in a real and going business. Your plan, very simply, must recognize that you will manage your investments by actually being an investor – a passive partner in a real and going business.”
Even though it’s a U.S. book and the latest edition was published in 2006, the principles are still relevant to Canadian investors. Here’s the best part: The book is now available as a free PDF download from Miller/Howard’s website at: bit.ly/SingleBestInvest.
Prefer a hard copy? Check online or at your local library.
In The Single Best Investment, Lowell Miller writes that a company’s bonds should have a Standard & Poor’s credit rating of BBB+ or better – considered “investment grade” – to qualify as a suitable stock. Is the bond rating something you consider when buying a stock for your model portfolio? Is there an easy way to check this for individual companies in Canada? I have tried scrolling through lists of bonds in my brokerage account but I can’t seem to find bond ratings for individual companies.
Yes, I consider the credit rating when buying stocks personally and in my model Yield Hog Dividend Growth Portfolio (tgam.ca/dividendportfolio). A lousy credit rating indicates that a company could have trouble meeting its obligations, and in such cases the dividend is often the first casualty. For that reason, I usually stay away from companies whose bonds are rated as “speculative,” or below investment grade.
Mr. Miller’s minimum credit rating is slightly more stringent than the common definition of investment grade, which includes anything rated BBB- or higher by Standard & Poor’s. According to S&P, companies in the BBB family generally have “adequate capacity to meet financial commitments, but [are] more subject to adverse economic conditions” than those rated A, AA or AAA. (Fitch and DBRS use a similar letter rating system as S&P, while Moody’s defines investment grade as anything rated Baa3 or higher on its scale.)
(One exception to the investment grade rule in my model portfolio is Restaurant Brands International Inc., whose debt is rated BB by S&P. However, the agency recently upgraded the owner of Tim Hortons, Burger King and Popeyes to “stable” from “negative,” saying it expects a continued rebound in sales and profitability as the pandemic recedes and the company opens more franchised restaurants. So I’m comfortable giving Restaurant Brands some slack on its credit rating.)
There are several ways to find a company’s credit ratings. One is to check the investor relations section of its website. A Google search of “BCE credit rating,” for example, brought up a company web page with all of BCE Inc.’s bond, commercial paper and preferred share credit ratings from S&P, Moody’s and DBRS. BCE and other companies typically provide additional credit rating information and analysis in their annual reports.
Another option is to go directly to the credit rating agencies themselves. For example, the DBRS website – dbrsmorningstar.com – lets you search for a company and read detailed reports about its recent credit rating changes or confirmations. This will give you an even deeper understanding of the company’s financial position and outlook. S&P and Moody’s also make credit reports available, but you’ll need to register to get access.
E-mail your questions to firstname.lastname@example.org. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.
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