Investing

Week 16 – I Feel Honoured & Humbled… Thank You!

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Background

A long time ago, I used to write about SEO in Bengali. It was one of the most popular blogs in Bangladesh. I continued writing it for more than three years before stopping it due to my busy work life. However, I have recently started posting weekly articles again. After writing about the Bangladeshi charity in the previous article, a number of readers reached out to me about the donation, and some readers have sent me emails about starting their own investment portfolios.
 
I consider every response I receive, a success, and I truly feel honoured and humbled.

Market Summary

The market in the UK is down -1.4% over the past 7 days with the Oil and Gas industry down -10.9%. My Portfolios underperformed the market down an average of -2.3%.

7-Day Return1-Year Total ReturnPE Ratio
UK Market-1.4%-16.9%13.5x
US Market2.8%-0.8%13.6x
UK Oil & Gas-10.9%-39%4.1x
  • I was mostly right about doubting the oil price gain ahead of the OPEC+ meeting. All the speculation around the meeting and the record-breaking deal ended in a drop in oil price. Agreeing to cut 10% of global supplies failed to reassure the market, and oil and its producers’ stocks dropped when the market opened last week. The traders doubt that the pact will be enough to boost prices much further in the short term.
  • The markets started the week in the negative as the doomed earnings season approaches. The S&P 500 closed down 1% on Monday, shaving some of the 12% gains it made last week when dramatic action by the Federal Reserve promised to shore up the economy and credit markets.
  • The International Monetary Fund (IMF) has warned that the world faces its worst recession since the Great Depression of the 1930s. It also believes that the coronavirus pandemic has exposed “cracks” in the global financial system and “will likely” see banks suffer both credit losses and market losses that will test their reserves. According to its prediction, the UK economy will drop by 6.5% compared to overall Euro area economic growth, which would shrink by 7.5% this year.
IMF 2020 Economic Forecast
IMF 2020 Economic Forecast
  • China announced that its economy shrank for the first time in more than 40 years after COVID-19 put a stop to the growth that had gone uninterrupted since the 1970s. Its GDP in the first quarter dropped by 6.8% year-on-year. This fall in GDP will put pressure on the country’s leadership to provide further stimulus to avoid a second-quarter decline that would plunge China into a full-blown recession. China is not only the second-biggest economy in the world, but it also has invested heavily in different countries, e.g. Belt and Road Initiative (BRI or B&R) involves nearly 70 countries and organisations in Asia, Europe and Africa. I am sure a recession would have far-reaching impacts on these economies.
China GDP Growth by Quarter
China GDP Growth by Quarter
  • Another week, another 5.24 million people added to the US job loss figure. More than 22 million Americans lost their jobs in the first four weeks, according to government figures. There was a drop of 1.37 million from a week earlier, but higher than an estimated 5 million. After the $1200 stimulus check, Democrats are discussing a plan, called “the Emergency Money for the People Act”, to provide $2000 per month to all Americans over 16 who make less than $130,000 annually.
  • Wall Street shares were on track for a higher opening on Friday after a report suggested a coronavirus drug developed by Gilead Sciences had shown positive results in a clinical trial. This initial optimism faded as it was revealed that none of the patients on the Chicago trial had been on invasive ventilation, which tends to be an indication of a more serious condition and worse outcomes. Gilead’s share was up more than 9% on Friday. Gilead might currently have an advantage when it comes to finding a COVID-19 vaccine, but almost all pharma companies are working on the vaccine. There is a lot of chatter and speculation buying taking place. Whoever comes up with the vaccine would be worth billions of dollars. Putting any money on this would, therefore, be a hit-and-miss investment, so I have decided not to gamble at the moment.
  • On Tuesday, the Office of Budget Responsibility (OBR) painted a grim picture of the UK economy. It said that the British economy could shrink by 35% and unemployment soar by more than 2 million due to the coronavirus crisis. Further to that, government borrowing could rise to around £273bn, or 14% of GDP. This would be the biggest peacetime budget deficit, although OBR believes that spending is necessary to tackle the coronavirus damage to jobs and growth.
GDP Forecast by OBR
GDP Forecast by OBR

My Portfolio Summary

As mentioned above, two of my portfolios dropped slightly higher than the UK market due to various reasons, specifically the drop in oil prices in the last week. UK Oil and Gas shares dropped sharply by about 10.9% week-on-week. Both of my portfolios, the main portfolio and the SIPP account felt the heat and dropped by 2.7% and 1.7% respectively.

  • There is not much news on the shares I currently hold in my main portfolio, other than the OPEC+ meeting agreement. As a result, both of my oil stocks, Shell and BP, were the worst performers of this week. Shell decided to go ahead with its $6.4bn gas project in Australia, despite the slump in the energy market.
  • Citigroup analysts downgraded Smith & Nephew (LON:SN.) to ‘neutral’, suggesting that the hospitals would defer orthopaedic surgeries to allow for treatment of coronavirus patients. As a result, the company would have difficult trading in the coming months. I have mentioned in several previous posts that Smith & Nephew is a fantastic share to hold for a long period of time, and no momentary blip will make me change my mind.
  • Another piece of good news comes from my other favourite company, Legal & General (LON:LGEN). Its investment arm, Legal & General Capital, has taken a 36% stake in Kensa Group, a British company, specialising in ground source heat pump technology. About 80% of UK homes are still heated by natural gas and finding a new way to keep the home warm is vital to achieving the target reduction for greenhouse gas emissions to net-zero by 2050. I am sure the government and other companies will put more investment and resources into this in the coming days, and the use of green energy will keep rising every day.
  • On the other hand, British American Tobacco’s (LON:BATS) share price dropped last week after The Times reported that the world’s second-biggest tobacco group is subject to an investigation by The U.S. Department of Justice (DoJ) and Office of Foreign Assets Control (OFAC). It is not clear if it is a criminal investigation or not.
  • S4 Capital and GlaxoSmithKline were the top performers this week. As mentioned earlier in the post, many pharmaceutical companies are working on the vaccine. GSK has also teamed up with Sanofi to develop a cure. The candidate vaccine is expected to enter clinical trials in the second half of 2020 and, if successful, to be available in the second half of 2021. On the other hand, Sir Martin Sorrell said in an interview that Q3 will be a bloodbath. We have to wait until Q4 and 2021 to see “very interesting opportunities”.

Freetrade Portfolio

Last week, my Freetrade portfolio was up by only 1% as my gamble on Tullow Oil (LON:TLW) didn’t go as I expected. However, it is a small punt, and other shares managed the loss well. My other two investments from last week performed well.

Tullow Oil Share Price
Tullow Oil Share Price

Both William Hill (LON:WMH) and Bristol-Myers were top performers in my Freetrade portfolio. While researching US pharmaceuticals, I decided to invest in AbbVie Inc (NYSE: ABBV). It not only produces HIV/AIDS drugs but also holds the patent of Kaletra which might have become a cure for COVID-19. It also acquired Irish-based Allergan plc, which develops, manufactures and markets aesthetic treatment solutions, famously known as Botox. I am sure the demand for Botox will skyrocket after the lockdown.
 
After purchasing the AbbVie shares, I had a few quid left in my Freetrade account. Instead of keeping the money idle, I bought some Pfizer shares. After the last two weeks of investments, Heath is the third biggest sector (22%) in the portfolio. Technology (29%) and Entertainment (24%) are at the 1st and 2nd position respectively.

SectorDistribution
Technology29.0%
Entertainment23.8%
Health22.2%
Fashion9.9%
Energy7.8%
Food & Drink6.8%
Other (ETFs, Trusts & Cash)0.3%
Property0.2%

One of my friends called me 1am last night and told me he has been following my blog for a while, and he is now ready to invest. Wow!
 
He said that before reading my blog, he had no idea about investing in shares. It made me laugh when he said he thought he would need thousands of pounds to buy shares. I said to him that you could buy a share instead of a cup of coffee. Further, the caffeine hit would last for a maximum of three hours, while the share will be yours forever. He has already opened an Investment ISA with Freetrade and placed a number of orders, as He could not wait until Monday.
 
Damn! I am an awesome motivator, right?

Let me know if you would like to start investing, too. I will help you as much as I can. Also, don’t forget to leave a comment for a Freetrade referral link. You would get a free share worth up to £200.

Other Thoughts

As I briefly touched upon at the beginning of this post, I was actually surprised to hear that readers came forward to donate to the Bidyanondo charity I mentioned last week. I have been following their activities on Facebook regularly, and every day they significantly increased their efforts to help the needy. However, in their last few statuses, they have mentioned that they haven’t met their targets. They were planning to prepare food for 22,000 people, but only managed to prepare food for 16,000. They are now trying to save money to arrange food stock for the month of Holy Ramadan, during which Muslims fast from sunrise to sunset in the name of the almighty.

I would again like to ask my readers to consider donating some money to the charity in this difficult time.

Conclusion

According to today’s coronavirus update, there has been a significant drop in the number of deaths in the UK.
 
Amen! What a piece of good news it is!
 
I hope the number will keep dropping and we will get our normal lives back soon. Until then, please take care of yourselves, stay home, and stay safe.

Keep Calm & Carry On Thinking Positive

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.

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