As ever thought I would do my usual end of year review.
Hasn’t been the best of years for me, doing value investment with a skew towards natural resources was pretty much the exact wrong sectors to be in. I am up about 8%, though it honestly feels far, far less, with BTC up 100%+ and NASDAQ up 30% am far off the pace – if you view it like that. Still not tempted to join the madness – not my scene but big changes to my portfolio are needed next year.
I haven’t put enough time into the portfolio – been working on other things, plus unambiguously good ideas have been very hard to come by, might well be just as hard to put time in first half of next year…
In terms of life the portfolio represents about 35x (this) year’s spending (ex Russia) (spending which is very, very low vs most people), increasingly frustrated I can’t give the portfolio one last push to get out of employment. Just one more 30-40% year would work wonders. I am doing this to get rich, not to just cruise along – though the risks of taking a hit haven’t escaped me. I am now mid 40s, never really bothered with much of a career, worked part time (now remote) in mediocre (being charitable) jobs. Its potentially beginining to look like I may not make the fortune I always thought I would on shares, little stuck on what to do next – being an employee just doesnt work for me, investments are not really working well. To some degree this is linked, I dont have sufficient time to look into investments and performance is linked to this. I may well have enough to quit employment but not realize it – I have property which (with some volatility) covers my living expenses but its not terribly diversified and is very hard to manage, so I keep the job for security.
It hasn’t been a good year as I have struggled for ideas and those I have had havent worked. I don’t trust cash/ fixed income so have bought/held shares like Vodafone and to some degree Phoenix group that I thought would be a place to park cash – it hasn’t worked and would have been better off literally doing nothing or holding gold.
Performance has been extremely volatile, particularly after the Trump election – which I didn’t think would move anything, but instead, moved everything (before this I was up 14%). Performance has been very volatile, I am up 3% in the first few days of 2025 (not included). It’s a long term game and I have found through the years that I spend a lot of time doing nothing then money comes along. It happened this year in September when China went on a run and in March when many resource companies jumped.
Usual performance chart is below – please note inc Russian figures are not accurate as IB stopped updating Russian stock prices, but it’s a rough indication…. Figures given exclude Russia
Current holdings are below. Last time I posted this I got quite a bit of comment from people who were not familiar with what I do – mostly this is London listed stocks with a few non UK / Romanian / Chinese, country is based (mostly) on country of operation not country of listing. I simply dont believe the dominant narative that US tech will take over the world and is the only place to be. Its cost me – NASDAQ has slaughtered me in performance terms, but will never buy an index on a PE of about 37….
By sector / country is below:
I am broadly happy with sector / country allocation, roughly I limit weights to 10-15% in non-stable countries. I want to be heavily exposed to resources – all the money is in tech, resource companies are very cheap and earning good returns / paying good dividends. As the sector has been underinvested in and has long lead times these returns should persist. The only issue is it is reasonably easy for government / managements to steal / waste these returns and there is a great deal of inherent cyclicality. Little concerned my way of analysing doesnt quite cover all the risk I am taking – for example Chile ETF counted as country but that country is heavily exposed to commodities.
I have vaguely considered more tech and had the odd tech investment Playtech PTEC.L (Gambling software) being one. It isn’t right for me though. Company on a PE of 20/30 with faster growth and maybe a bit of a moat to me just isn’t as appealing as one on a PE of 3-10 with minimal growth, even if it isn’t growing as quickly/ is exposed to natural resource prices, I can vaguely see why people don’t see it that way particularly with companies in commodity sectors but am not tempted to change. Didn’t manage to fully profit from PTEC – tech seems toppy for me so I reduce / sell at the first opportunity.
I have far too many holdings(47), its difficult to manage and monitor, I will aim to cut back down into the 30s/40s, having said that some are very similar – ie various junior gold / gold ETFs, uranium / junior uranium etc so the number I need to actively monitor is lower. I have noticed some of my smallest weights are by far my worst performing. Only issue is some of these are my cheapest (SQZ/KIST) and I would like to add on valuation grounds. Past poor performance can rapidly turn around – Anglo Asian (AAZ.L) was a terrible performer – down over 50% this time last year – up 89% this year.
Best performer was CMC markets (CMCX.L) driven by earnings forecast improvements and a low starting valuation / low expectations. I was lucky / had the judgement to raise the weight in February before taking it off through the rest of the year – at its peak it was 216% up rather than a ‘mere’ 140% and I took some off. I don’t believe the current weakness is justified and may raise the weight a bit shortly. I still think it would be a good acquisition target for someone and the tech they have may still be undervalued, but I need to do more work to be sure before I raise the weight.
My best ideas, and some of the stocks which I have done best in, are in China/ Hong Kong, I really like my Chinese Pharma basket of 1681.hk, 2877.hk and 915.sz. High margins, low PEs, good yields, good underlying economics / growth with the aging Chinese population. China Blue Chemical (3983.hk), Ammonia producer is ridiculously cheap. I would ideally have 30-40% in these sort of stocks but am limited as I don’t want to take a hit if China does something on Taiwan. Want to limit it to 10-15% maximum. I shouldn’t forget $HAUTO in all this – they do auto shipping, increasingly dominated by Chinese exports. Have done quite well – up about 17% in the year, plus a 25% dividend, was shaken out a bit due to volatility. Want to raise the China weight a bit – to about 10-12%. 883.HK deserves a mention – I exited but made around 70% on the position.
Nervous about raising the weight in China too much – I think a Taiwan invasion is a significant possibility, verging on likely and I don’t want another large amount frozen /seized in the event of invasion. I haven’t been able to work out a good /cheap way to hedge that risk.
Russian shares still frozen, haven’t done well any way you want to cut it, if it does pan out have a large amount of dividends coming, likely in a severely depreciated paper currency. None of this really matters, future value is dependent on terms of any settlement. Former holding JEMA up 50% over the year (which I got very little of). Sold a while back as I couldn’t justify more exposure to Russia with my large amount of already frozen shares. Market seems to be pricing in favourable deal with Trump’s election. It’s a possibility but if you are Putin and are slowly winning militarily – albeit at the cost of huge human and economic losses wouldn’t you want to push on rather than sign up to a peace deal that you are going to find it very hard to go back on later. I can argue it either way. Tend to believe stopping the war is more risky for Putin than continuing it. Not convinced US/EU invested enough to really put a stop to it, high degree of uncertainty each way. Remember it was only 2023 when you had a column marching on Moscow.
Still have quite a bit in Uranium – again hasn’t done well but not too concerned. Lots more plants being started and in a world with more AI / datacentres it’s hard to imagine some form of nuclear won’t be a big part of the future. Happy with my exposure being via URNM, with a little URNJ Yellowcake and Kazatomprom.
Gold has done well for me – large weight, up around 25%, gold miners haven’t kept pace, surprisingly. Happy to wait this one out, somewhat concerned shareholder unfriendly management / bordering on corruption across the sector make them mostly un-investable. Have some in gold mining ETFs but they haven’t done well. Aim is to cut weight in gold as I find better ideas.
Exited coal – did OK since I invested a couple of years ago but not convinced bulk commodities are where I want to be longer term.
Have a few investment managers – biggest holding by far is ASHM.L – Ashmore, has assets worth almost the market price – P/B of 1.2 – £600m excess capital (at least plus about another £300m in-use but liquidatable assets) vs a market cap of £1.1bn and a business generating c£90m earnings on a bad(ish) year. Earnings can get to £200m+ on a good year. I also like their strategy and the EM sector they work in but they haven’t actually succeeded in carrying it out. I think that it is worth more than where it is trading. It’s been hit by Trump / a stronger USD fears. I am still positive EM, though less so fixed income (which they specialise in). I also hold a bit of Jupiter (JUP.L), and Walker Crips (WCW.L) less convinced by these now (even though I own them) I am tending to own things for the sake of owning them / not having cash/gold, I need to get more / better ideas in.
In terms of other large weight holdings Kurdistan stocks, GKP.L has done OK over the year up 6% plus about 10% yield. GENL.L has done much worse, down 16% over the year and more since I bought it /raised weight. They have achieved the dubious honour of being one of the few companies to lose a legal case vs the Kurdistan govt. None of this matters really, only thing that will really move these are legitimisation of contracts, opening the pipeline and getting debt paid. There appears to be evidence that the legal situation is firming up for what its worth but this is a part of the world where laws are at best loosely applied, and at worst overridden by chaps with guns so I don’t place too much reliance on them. Really like the Kurdistani stocks – but 10.5% weight is more than enough.
Investment trusts like Schroder European (SERE.L), Foresight Solar Fund (FSFL.L) and Gore street energy (GSF.L) have also done badly – hit by expectations of higher interest rates. I think they will come back but my timing has been way off. Also a little concerned of correlation with commodities. Schroder European likely to be acquired at some point.
Bigger resource holdings (CAML.L, IGO.AU, KMR.L, AAZ.L, THS.L) various performances, favourite would be IGO – very low cost lithium producer, stable jurisdiction lithium appears low as does the stock. I also like Kenmare Resources (KMR.L) but am concerned about the renewal of their ‘implementation agreement’ which allows them to operate. They say it will all be sorted and it has been before, and management are reliable, but its hard to put much faith in the government of Mozambique. AAZ is improving operationally getting control of more mines but politically Azerbaijian is obviously risky. CAML is operating well, paying off cash at a healthy rate – 11% yield PE of around 8-9. But this isn’t the sort of stock people want to rerate at the moment, there is also concern about them diluting to do an acquisition – an idea I hate. With all these resource companies its very hard to find one who is sensibly valued, with good margins that isn’t poised to do something irredeemably stupid / potentially corrupt with shareholder funds.
Beximco (BXP.L) had a bit of a scare lately – it was briefly suspended as the parent group were placed into administration due to alleged fraud. There are no links to Beximco Pharma apart from the name, a director and small shareholder. Still I allowed the price to recover before liquidating a bit of my stake at a small loss. I can’t risk a 100% loss at a larger weight, even if I believe odds are very low. There is always the possibility of some very elaborate fraud taking place, though I think its very unlikely as Beximco is actually a pretty substantial operation and pharma is very highly regulated. Still think it’s a solid company doing well at a significant discount to the local listing.
Romanian funds Evergent capital and Lion Capital – still trading at c50% discount to NAV, haven’t done much, 5/6% dividend yield but a discounted holding of a cheap holding makes them compelling. Considering going back into Fondul Proprietea – but they are getting rid of their London GDR and holding local Romanian shares is highly tax inefficient for me.
My best ideas for 2025 are probably gold mining stocks, Chinese pharma and my Kurdistani oil stocks. Kurdistani oil stocks have potential to 2x/3x if the news flow is accommodating and we get a pipeline reopening and debt repaid – odds of which look good…
The aim for 2025 is to radically reshape the portfolio, I want to get out of VOD/ PHNX / Gold and into something I actually have confidence will do well. I would like to ‘improve’ if possible my direct mining investments – particularly CAML, THS. WCW, SQZ and KIST also on the potential cut list – less so with SQZ/ KIST, still think they could turn. Plan to exit PTEC when sale happens and remaining value becomes a bit clearer… I will also review my Kurdistan oil co’s – not entirely sure I am in the best stocks given the changing situation. I recon about a third of the portfolio needs a change – so lots of work to do to come up with better ideas.
As ever, comments and ideas appreciated.