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.)
JPMorgan's profits jump as economy, investment bank recovers – BNN
CHARLOTTE, N.C. — JPMorgan Chase & Co., the nation’s largest bank by assets, said its fourth quarter profits jumped by 42 per cent from a year earlier, as the firm’s investment banking division had a stellar quarter and its balance sheet improved despite the pandemic.
The New York-based bank said it earned a profit of US$12.14 billion, or US$3.79 per share, up from a profit of US$8.52 billion, or US$2.57 per share, in the same period a year ago. Excluding one-time items, the bank earned US$3.07 a share, which is well above the US$2.62 per share forecast analysts had for the bank.
The one-time item was JPMorgan “releasing” some of the funds it had set aside last year to cover potential loan losses caused by the coronavirus pandemic and subsequent recession. Banks had set aside tens of billions of dollars to cover potentially bad loans, and JPMorgan had been particularly aggressive in setting aside funds early in the pandemic.
Releasing those funds goes straight to a bank’s bottom line when it reports its results, but it’s not money that the bank generated from loans, customers or borrowers. It’s just funds that were effectively put into escrow and are no longer in escrow.
The US$1.9 billion release is only a fraction of what JPMorgan set aside last year, and with the pandemic raging across the globe and particularly here in the U.S., it’s uncertain how much more the bank will release in the upcoming quarter.
“While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over US$30 billion continue to reflect significant near-term economic uncertainty,” said JPMorgan CEO Jamie Dimon in a statement.
The driver of JPMorgan’s profits this quarter was the investment banking business. The corporate and investment bank posted a profit of US$5.35 billion compared with US$2.94 billion in the same period a year earlier. JPMorgan said it saw higher investment banking fees — money banks collect to advise companies on going public or buying other companies — as well as higher fees from its trading desks.
Shares in China’s Xiaomi tumble after US investment ban – Financial Times
Shares in China’s Xiaomi sank after the US government added the smartphone group to an investment blacklist, in a move that is likely to thin its ranks of American shareholders.
The Beijing-based company’s stock dropped 10.3 per cent in Hong Kong trading on Friday, hours after the Pentagon added it to a list of companies with suspected ties to the Chinese military. That, in conjunction with a separate executive order, will block US investors from buying its shares 60 days from now and will require Americans to eventually sell their holdings.
The move marks a significant blow for Xiaomi, which had been a big beneficiary of Washington’s campaign of sanctions against Chinese competitor Huawei. That had helped Xiaomi’s sales to surpass US group Apple’s, making it the world’s number three phonemaker by units sold in the third quarter.
Its shares soared 227 per cent last year, pumping up its market value at the end of 2020 to $108bn. Large Xiaomi shareholders include US fund managers BlackRock, Vanguard, Fidelity and State Street, according to Bloomberg data. Friday’s share price fall cut Xiaomi’s market capitalisation by more than $10bn.
State Street declined to comment on its Xiaomi holdings. Vanguard, Fidelity and BlackRock did not respond to requests for comment.
“Xiaomi’s political risks have dramatically increased,” said Wu Yiwen at Strategy Analytics, adding that the blacklisting could threaten the company’s “aggressive expansion plan and affect partners’ confidence”.
An executive order from US President Donald Trump in November targeted US investments in Chinese businesses alleged to have ties to the country’s military. The Pentagon’s list included China’s three big state-owned telecom carriers, prompting the New York Stock Exchange to de-list the companies.
S&P Dow Jones Indices, MSCI and FTSE Russell all removed China Telecom, China Mobile and China Unicom from their global equity indices. But State Street decided that its $13.4bn fund that tracks Hong Kong’s Hang Seng index, which contains two of the telecom groups, could continue trading in securities of the sanctioned companies.
Wendy Wysong, a partner at the Hong Kong office of law firm Steptoe & Johnson, said the Trump executive order did not apply to foreign subsidiaries of US companies. However, she added that “a US company cannot evade the prohibitions by directing their Asian subsidiary to deal in the securities”.
The US defence department said the move against Xiaomi and eight other newly listed Chinese companies aimed to counter the country’s “military-civil fusion development strategy” but offered no evidence of the smartphone maker’s involvement in this.
Xiaomi said in a statement to the Hong Kong bourse on Friday that it was not controlled by, or affiliated to, the Chinese military and that it was “reviewing the potential consequences of this to develop a fuller understanding of its impact on the [company]”.
China’s foreign ministry said on Friday the US was abusing its state power, adding that it would “take necessary measures to protect the legitimate interests of Chinese companies”.
Analysts say the case against Xiaomi is thin and could be reversed under the incoming Biden administration.
“Although it won’t be Biden’s priority to undo each and every one of Trump’s outgoing moves, the Xiaomi investment ban’s deadlines could be postponed — most likely for a few weeks at first, then possibly more durably,” said Andrew Bishop, head of research at policy risk consultancy Signum Global.
CK Lu, an analyst at research firm Gartner, said the investment ban would not affect Xiaomi’s products or supply chain but could hit its ability to raise capital if US shareholders could not buy its shares.
Nian Liu contributed reporting from Beijing.
Couche-Tard Plans $3.6 Billion Investment in Target Carrefour – BNN
(Bloomberg) — Alimentation Couche-Tard Inc. plans to pump 3 billion euros ($3.6 billion) into Carrefour SA as the Canadian convenience-store operator seeks to defuse mounting French political concerns over the proposed $20 billion takeover of the French retailer.
Couche-Tard plans to spend that amount over five years, prioritizing investment over cost cuts or job reductions, according to a person familiar with the situation who asked not to be identified because the information isn’t public.
Carrefour shares fell as much as 5.2% after French Finance Minister Bruno Le Maire said Friday that he was prepared to give a “clear and definitive no” to the deal. He previously cited concerns about a French supermarket chain falling into foreign hands, saying the country needs to maintain domestic control over its food supply.
Bloomberg reported Thursday that the finance ministry is ready to study the proposal once the Canadians officially present it, citing people familiar with the matter who didn’t want to be identified. They said President Emmanuel Macron’s administration plans to take as long as needed to assess its impact on jobs and the sector.
Carrefour employs around 100,000 people in France and is the country’s largest private employer. The company has been implementing a turnaround plan under Chief Executive Officer Alexandre Bompard that involves investments in online shopping and organic food. Analysts point to the absence of geographical overlap between the companies.
The investment plan was reported first by Les Echos, which is owned by Bernard Arnault’s LVMH. Arnault also controls a 5.5% stake in Carrefour.
©2021 Bloomberg L.P.
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