Week 12: Stay home, stop panic buying and have some empathy

Background

It was another very upsetting and stressful week. The number of deaths is rising at an alarming rate in Italy, Spain, and other European countries. This week, the total deaths in Italy exceeded those in China, and the bad news is that deaths are rising faster in the UK than Italy. It is normal to panic, but panic buying is making the situation worse. Supermarket shelves are empty; from toilet roll to bread. It is a particularly stressful time for the elderly and vulnerable people when the government is asking everyone to go into self-isolation for an indefinite time, and there is nothing left to buy in the shops.

Market Summary

Ah… what a week we’ve just had! So many news items and topics to discuss, that I can only talk about a few of them.

• Governments globally are trying their best to calm people down, as well as the markets. They have already promised to add billions of dollars to the market. In my previous post, I talked about the Fed and British governments’ efforts already. This week Riyadh has unveiled a $32 billion emergency support for businesses and banks.
• A number of Wall Street financial institutions, including Goldman Sachs, Deutsche Bank, JPMorgan and the Bank of America, are forecasting a sudden US recession due to the economic damage caused by the coronavirus pandemic.
• In Spain, Prime Minister Pedro Sanchez pledged financial support of €200 billion, while the government announced measures to take over private health care providers. Sweden’s central bank increased quantitative easing after an emergency meeting, and Denmark introduced liquidity measures for jobs and businesses.
• European equity markets bounced in the final two days of the week after the BoE decided at an emergency meeting to cut the bank rate by 15 basis points (bps) to 0.10% and increase asset purchases by £200 billion.
• Chancellor Rishi Sunak has been really busy in the last few weeks, and made an unprecedented announcement on Friday, just days after announcing a business bailout package worth £350bn. The government announced a scheme offering up to £2,500 (about 80% of salary) per month, in an effort to save hundreds of jobs. This is a very brave initiative, but it might bankrupt the government if the current situation continues for months.
• On Friday, PM Boris Johnson also announced a total shutdown of clubs, pubs, and restaurants to stop the spread. This will put more pressure on the supermarkets, which are already struggling to stock up. Supermarkets have started hiring more staff, and about 30,000 jobs are expected to be added in the coming weeks.
• After an emotional video of a caseworker, Dawn Billbrough surfaced addressing the empty shelves in supermarkets, supermarkets are now offering special hours for emergency workers (doctors, nurses and ambulance staff) and elderly customers.
• One of the best pieces of news came from China. A report said that there were no new cases of coronavirus in Wuhan in the last three days. Wow… the whole world has been waiting desperately for news like this.

Portfolio Summary

Both of my portfolios recovered their losses on Friday, and actually outperformed the market this week. I saw investors rejoice after the European markets rose in different groups and message boards. I don’t think pumping money won’t be a permanent solution. It will keep every week until we are free from the coronavirus (and a possible recession).

• The Financial Times says that the UK government is planning to buy equity stakes in airlines and other British companies. British Airways, EasyJet (Lon: EZJ) and Dart Group might be included in the list. This could be good news for worried investors, and shares might go up on Monday.
• Sir Martin Sorrell’s S4 Capital (Lon: SFOR) has reported a loss of £10 million for 2019 amid a 292% rise in revenue and 41% organic growth. Mr Sorrell is on an acquisition spree, and it was one of the reasons for the loss. He mentioned that so far there was “no material impact from coronavirus” to the business, and I can understand the reason behind this. He is trying to create a new type of media agency, very different from traditional brick and mortar agencies like WPP, his former company, whose share has dropped by 54% since 2nd January.
• Both financial uncertainty and ex-dividend date made Meggitt (Lon: MGGT) the worst performer in my portfolio. Although it has dropped 62% year-to-date, it has a good financial track record. It has paid dividends for 10 consecutive years, and the dividend has increased by 7.55% in the last 10 years.
• According to Simply Wall Street website, Legal & General (Lon: LGEN) share is 75% undervalued than the fair value of 638p. This week LGEN has dropped more than 18%. I am a fan of LGEN, it is a fantastic company to hold. I plan to top-up my holding in the coming weeks, depending on the market conditions.

• BT Group (Lon: BT.A), Royal Mail Group (Lon: RMG), Plus500 (Lon: PLUS), GlaxoSmithKline (Lon: GSK) and Smith & Nephew (Lon: SN.) were in positive territories week-on-week. OMG!
• No more crashes for Evraz (Lon: EVR) this week. It has dropped more than 44% year-to-date, and it is one of the most vulnerable holdings in my portfolio. It has a Beta of 1.31.

Freetrade Portfolio

My Freetrade Portfolio was the worst performer out of all my portfolios. PLI, Coca-Cola, Boohoo, Microsoft and International Business Machines (IBM) – all performed poorly last week.

JD.com (NasdaqGS:JD) announced a share repurchase program, with the aim of repurchasing up to $2,000 million worth of its shares. The repurchase program will be valid for the next 24 months. If the coronavirus situation in China keeps improving, JD.com will recover from this dip soon. Disney+ announced a streaming service for the first week of April, for £5.99 a month or an annual subscription fee of £49.99. It says it will stream at a slower speed to reduce congestion on the broadband networks. Disney+ will face tight competition from Netflix, Amazon Prime, Google’s YouTube etc.

Walt Disney share price was at the same level in August 2014. It is looking very tempting right now. Let’s see if we have any announcements coming from China regarding the closed amusement parks.

Other News

• I created two stock-related charts using Google Sheets last week. The first chart shows how the FTSE 100 companies have done since the beginning of the year. It also shows the number of years they have paid the dividend consistently, and if the dividend went up or down in a 5-year and 10-year period.
• You can download the daily share data (e.g. Open, High, Low, Close, Volume) of any FTSE-listed companies using the second chart. Both charts are using Google Finance API data, and they are automatically refreshed every 15 minutes.
• Four European countries, France, Italy, Spain and Belgium, have applied temporary bans on betting against the prices of a range of shares in an attempt to calm markets shaken by the coronavirus. I hope the UK government and regulators will follow the same path and stop people profiting from others’ misery.
• In my Week 10 report, I mentioned Cineworld’s share price crashing. There was a director’s buy and a massive lay off for zero-hour contract staff. And all of a sudden, the share price is up more than 18% week-on-week. However, I don’t think we are out of the woods yet.

Conclusion

I was totally shocked to read that Brits have spent £1 billion on food in just three weeks to stockpile at home – that’s ridiculous. In a developed country like the UK, I don’t think anyone is likely to die of hunger. I am sure the government will do everything to keep the food supply running. I visited my local Tesco Superstore on Friday, and it was totally empty. We need to stop this idiotic behaviour. Don’t buy unnecessary stuff, please! Also, we need to stay at home, as advised by the health professionals. Young people have a better survival rate than the elderly, but that does not give them the right to spend time outside, where they actually risk spreading the virus to others, especially to the vulnerable and elderly.