Investing

Week 15 – It’s Not Time To Indulge Just Yet

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Background

It was a short and positive week for many of the investors. Good news started coming from Asia, the markets were up, and portfolios recouped some of their losses. I heard many small private investors advising us to keep buying stocks. It’s always good to “buy the dip”, but we should always remember not to exhaust our capitals too early.

Market Summary

The market in UK is up 9.5% over the past 7 days with the Oil and Gas industry up 5.5%. My Portfolios outperformed the market up an average of 14.1%.

7-Day Return1-Year Total ReturnPE Ratio
UK Market9.5%-15.3%13.6x
US Market12.2%-4%14x
UK Oil & Gas5.5%-31.2%4.6x

A number of positive news pieces pushed the global markets up last week. While the number of deaths in some countries, including the USA, UK and Belgium, is rising every day, numbers in Italy, Spain, Germany and Iran are showing improvements. Although it is hard to believe what the Chinese government says, I just hope that the death number is as close to zero as they say.

  • The OPEC+ meeting drove the market upwards over the last two weeks, something which I have briefly discussed in my previous two posts. The meeting was delayed to make sure additional member countries could join the meeting. Despite coming to an agreement to cut the daily product by 10m barrels daily, the oil price dropped on Friday as the details were not confirmed.
  • Again Mexico refused to make large cuts to its own oil production and sign the agreement. In the end, everyone endorsed the agreement to cut production, with Donald Trump, saying that the US would help Mexico “pick up some of the slack” to smooth the deal’s progress. The UK market is closed on Monday, I am hoping the US market will start with a positive mood and the UK market will continue the trend. However, I don’t think this effort will keep the market up for longer as we have very little demand for oil and petroleum products, and all countries are struggling to continue any production or manufacturing.
  • On Thursday, Fed further ramped up its emergency action by detailing new loan facilities worth $2.3tn to deliver credit to small businesses and municipalities. Additionally, it is setting up a number of initiatives, and buying short-term notes directly from US states, including Washington DC, counties with a population of at least 2m people and cities with at least 1m residents. This all sounds good if we could control the number of deaths and infections. However, the daily news is not so positive, and as of today (Saturday afternoon), the US death toll passed Italy and currently has the most coronavirus-related deaths in the world.
  • The Eurogroup, formed of 19 members of the eurozone, agreed on a €500bn emergency rescue package over a teleconference to support the continent’s coronavirus-stricken countries and aid recovery during the ongoing pandemic. This is less than the €1.5tn suggested by the European Central Bank.
  • I have not covered the world’s fifth-largest economy, India, yet. The pandemic started in India quite late, and the number of infections and deaths are still low in terms of the total population. But I believe India and my country, Bangladesh, are both in great danger due to poor hygiene and inadequate health care. Also, like China, these governments will under-report the spread because of political gain. Both countries are in a total lock-down, but the majority of the population are very poor, and without a regular income, they won’t survive long. Unfortunately, they will break the lockdown, and face the consequences of the pandemic. On the other hand, if manufacturing in India and Bangladesh do not start up again any time soon, the rest of the world will suffer greatly due to a lack of essential raw materials and goods; from automobiles to drugs and pharmaceuticals.
India Covid-19 Lockdown
India Covid-19 Lockdown
  • Here in the UK, the government is struggling to keep the number of deaths down. In the last two days, we have recorded more than 900+ deaths, and I don’t think the government has any clue how to bring it down, while other European countries are showing clear success lately. The government is also angering the NHS doctors and nursing by failing to provide necessary PPEs and blaming them for misusing the stock.
  • After spending more than a week in the hospital, PM Boris Johnson has been discharged. Although I am no fan of his and I disagree with his policies, I am happy about his recovery. He has said he owes his life to the NHS staff treating him for coronavirus. I hope when it is all over, he will keep his words and work to improve the NHS. Just a few days ago, Matt Hancock said it was not time to discuss pay rise for nurses, while MPs can claim an extra £10,000 for working from home. The nurses are putting their lives on the line, with 22 reported deaths already, and MPs are enjoying home comfort. How on earth is this fair and acceptable?

My Portfolio Summary

It was a great week for me, like many other small private investors. All my portfolios were up week-on-week, and I am feeling cautiously happy. While my main portfolio was up by 17%, my SIPP portfolio saw only a 2% gain in the last week.

  • easyJet, Legal & General and Meggitt Group were my top performers, gaining more than 30% in the last week. On Tuesday, easyJet announced that it had secured a £600 million loan from the Treasure and Bank of England’s COVID Corporate Financing Facility (CCFF) fund. This, in addition to the $500 million credit from Revolving Credit Facility, will take its cash reserves to around £2.3 billion. The budget airline also agreed with Airbus to delay the delivery of 24 new aircraft. All in all, it was a good week for EasyJet shareholders, and we have some breathing room for now.
easyJet Share Price
easyJet Share Price

Legal & General’s share price was up this week after the insurance provider vowed a £750m dividend despite BoE warning. Over the full year, the dividend payouts will amount to more than £1bn. Other insurers, including Aviva, have already cancelled their dividends. LGEN’s ex-dividend date is on the 23rd of April, in 10 days time. The share price might go much higher than the dividend payout amount this week looking at the board’s confidence. So if you are looking to buy after the ex-div dip, you might regret it!

Legal & General (LGEN) Dividend Yield
Legal & General (LGEN) Dividend Yield
  • Lloyds, Royal Mail, Evraz, Smith & Nephew, S4 Capital and BT Group were up between 10% to 20%. The threat of a recession played a significant role in driving down Lloyds’ share price. Any scenario where unemployment rises and consumer spending falls is bad news for a bank, but a recession incited by a pandemic poses an even greater threat.
  • Smith & Nephew appointed Anne-Francoise Nesmes as the new CFO. Previously she held the same position at Merlin Entertainments, the world’s second-largest attraction operator and a non-executive director of Compass Group. She has a wealth of experience in health and pharmaceutical industries, working at different senior roles in Dechra Pharmaceuticals and GlaxoSmithKline joining Merlin Ent.
  • Mindless idiots are spreading rumours about 5G causing coronavirus and destroying the 5G masts. 11 of BT’s masts have been destroyed or damaged through arson attack and in total, 33 masts across all operators in the UK have been damaged in the last few weeks. I have seen multiple hoax messages on my Facebook and WhatsApp groups, and I protested strongly about spreading them. Unless you are one of these pathetic conspiracy theorists, please report them as soon as you see them in your groups or timeline.
Damaged BT's 5G Mast (Credit: Sky News)
Damaged BT’s 5G Mast (Credit: Sky News)
  • Despite the oil price going up, BP’s share price dropped by half a per cent in the last week. BP shares are unlikely to jump like the other smaller producers, but it has the balance sheet capacity and operational diversification to help the business pull through this storm. Additionally, it seems like it will keep paying the dividend quarterly, which has an annual 9.6% yield now.

Freetrade Portfolio

My Freetrade portfolio performed well, too. IBM, AMD and Coca Cola shares were up by more than 10% in the last week. IBM outperformed the S&P 500, and tech-heavy Nasdaq, moving up 1.85% and 14% on the last working day and week-on-week respectively. As mentioned in my previous posts, I am still hoarding cash to face a possible recession. I also believe that the market will suffer longer than everyone expects. So, I decided to put smaller positions on my Freetrade portfolio. Here is a list of four companies that I invested in:

  • I have been following Disney for weeks, and I purchased three shares on Monday at £80 per share. On Wednesday, the share price went up 3.4% as it reported that the Disney+ streaming service has added 50 million paid subscribers which would bring nearly $1 billion each quarter in 2020. Disney shares are now worth £84 each. Yessss!
  • My friend and I have been discussing purchasing William Hill shares for a while. The news emerged that the football governing bodies are discussing the possibility of restarting the matches, which would drive the share price higher very quickly. However, I didn’t want to buy a large amount. So, I changed my decision of investing in only the US shares on my Freetrade portfolio. I added £251 which I received from cashback (find out here how I earned free cash from Quidco) and bought 286 shares. This was great timing, as this position is already up by more than 14%.
William Hill Recent Share Price Drop
William Hill Recent Share Price Drop
  • On the same day, I received a free Rightmove share for inviting Peter to Freetrade. That is my fourth free share from Freetrade. You can also win a free share worth up to £200 for opening a Freetrade account using my referral link. Let me know if you are interested, leaving a comment in this post, and I will send you the link.
  • Finally, on Thursday I joined the oil rally and bought Tullow Oil shares. This one could go either way on Tuesday, when the market opens again after the long Easter break, due to the OPEC+ meeting outcome. Fingers crossed!
  • I was looking for a solid US pharmaceutical company with a sound earning and high dividend-paying record. I found Bristol Myers Squibb quickly, and it fitted all my requirements. It manufactures two of the five top drugs, Eliquis and Opdivo. The analysts believe that its earnings will grow 18% annually over the next five years and currently offer a 3% dividend yield. So I didn’t hesitate to take a small position in the company.
Bristol-Myers Squibb (NYSE:BMY) - Share Price vs Fair Price
Bristol-Myers Squibb (NYSE:BMY) – Share Price vs Fair Price
  • After the new investments and last week’s market rise, my portfolio is just 5.6% away from the breakeven point. So far I have invested in safe companies, and I hope they will act defensively in the market drops in the coming weeks and months.

Other Thoughts

Before the pandemic, Bidyanondo used to run a campaign called “1 Take Meal” which refers to “food for a single penny”. Under this program, hundreds of children living on the street get regular meals in exchange for one taka (equivalent to .0095 pound sterling).

Now it is one of the few charities helping the poor and low-income families in Bangladesh. They have been distributing ready meals and reliefs in different parts of Bangladesh. I have recently donated to their fund.

You can use your debit and credit card to pay money into its PayPal account support@bidyanondo.org. If you have some money to spare, please consider contributing to this timely initiative. Let me know if you need any assistance.

Conclusion

I hope that you had a wonderful Easter with your families, despite all the terrible news around us. Please hold tight and stay home thinking about the safety of your family. I have been talking to my family and friends on a daily basis, which helps to reduce my stress levels. Take this opportunity to spend quality time with your loved ones. If they are far away, you can use Facebook, Skype or Google Hangouts.

Keep Calm and Carry on Talking!

I am an SEO professional, expert in both on-content and technical search engine optimisation. Besides eating, breathing and sleeping SEO, I am passionate about travelling, photography, collecting vintage mobile handsets and philately. I am also keen on financial freedom - saving, investing and passive income.

2 Comments

  1. Great post – interesting insight and perspectives – been looking for the right trader account for a while. Freetrade sounds like a good platform – please send me your freetrade link

    • Jinnat Ul Hasan Reply

      I hope you are well. It’s been a long time. If you don’t have prior experience in investing (I don’t do day trading), Freetrade would be cost effective for you to invest small and learn more. I’ll send you the invitation link to your email later today.

      All the best. Thanks for the comment, Zee.

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