FTSE 100 was rising last month, despite the fact that we are still under lockdown and the pandemic is causing havoc in every part of the world. On the last two days of last month, we had a slight reality check. I saw countless messages in different Facebook groups from members talking about their losses and asking if it is the end yet. I am neither a financial advisor, nor an experienced investor yet, but thanks to having spent a few years in the market, I can see that this is nothing compared to what might be ahead of us. Unless you are prepared for the worst, the stock market is definitely not for you.
The market in the UK was up 1.4% over the past 7 days with the Online Retail industry also up 1.8%. My portfolios underperformed the market but still up an average of 0.5%.
|7 Day Return||1 Year Total Return||PE Ratio|
|UK Online Retail||1.8%||2.3%||20x|
- BREAKING NEWS: On Saturday, Warren Buffett announced that his conglomerate had sold its entire position in the US airlines because “the world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way”. His stake was worth $4bn in December, including positions in United, American, Southwest and Delta Airlines. It is nothing new that the airline industry is struggling big time, and Buffett’s withdrawal from the industry is another sign of the deep-rooted cracks. I expect that UK airline stocks will drop tomorrow when the market opens. I will be holding my nerves in the coming weeks and months as airline stocks are a big portion of my portfolio. The industry might change how it does business in future, but it’s not going to go extinct anytime soon – we will always need planes to travel.
- The week started in a positive mood. It seems that the Fed has not lost its appetite for pumping more money into the economy. It has offered a $500bn lending facility set up to backstop municipal bond markets, in a move that will allow smaller US cities and counties to access liquidity from the central bank. Its initial plan of a $4tn municipal bond was criticised as only large 16 counties and 10 cities were eligible for the purchase.
- Here in the UK, Chancellor Rishi Sunak said in parliament that more than 4m workers have been furloughed since the pandemic started. He also revealed a new microloan scheme for small businesses, which will allow them to borrow up to £50k, up to 25% of their annual turnover. So, it looks like money is not a problem, but survival is! The government is planning a gradual exiting of the job retention scheme where the taxpayer currently pays 80 per cent of the wages of furloughed staff up to £2,500 a month.
- A think tank, The National Institute of Economic and Social Research (NIESR), said that Britain’s economy is likely to lose out on £800bn of income over the next 10 years as the lockdown and a spike in unemployment leave deep scars on the private sector. It expected the economy to bounce back next year, but not to its previous level. The lockdown has pushed down the UK’s national income (GDP) by 30% and will leave the economy 7.5% smaller at the end of the year than when it started.
- On Wednesday, all the markets were up on positive data from a trial of a potential coronavirus treatment. Gilead said in an update that its potential coronavirus drug remdesivir had produced positive results in a US study. However, the same drug was unsuccessful in another trial in China. In a dramatic turnaround, the US Food and Drug Administration (FDA) issued an emergency approval for the drug to be administered to seriously ill patients in the US.
- While the US tech giants kept producing bumper earning reports, it was the oil producers who published one horror story after another. Google, Facebook, Microsoft – all stocks were flying high as we are consuming and using more and more digital content. Amazon also reported an increase in earnings but warned investors that it would invest up to $4bn to keep the supply chain moving and ensure the workers’ welfare.
- Trump’s warning to China about the trade deal shocked the market. His threats to reignite the US-China trade war over coronavirus has triggered another sell-off in global financial markets, as the economic costs of the pandemic continue to mount. All the major indexes dropped on Friday.
|Index||Last Close||Friday’s Change|
- Trump has come up with a new strategy to hide his failure in tackling the pandemic before the election. He has started blaming China for creating the virus in a laboratory and his administration is drawing up a long-term plan to punish China on multiple fronts, despite the US intelligence community still not having any evidence. Under pressure, they issued a statement, saying “The IC will continue to rigorously examine emerging information and intelligence to determine whether the outbreak began through contact with infected animals or if it was the result of an accident at a laboratory in Wuhan”.
- British Airways’ parent company IAG is preparing to cut almost 30% of its whole workforce as the pandemic wreaks havoc in the aviation industry. This could result in 12,000 jobs losses. IAG shares dropped almost 8% on Wednesday in the morning. Ryanair also announced that it would cut 3000 jobs as 99% of its flights are currently grounded. Even Rolls-Royce has announced plans to cut 15% of its global workforce, and about 8,000 jobs will go as it has slashed production to cope with the plunging demand from airlines. Other manufacturers such as Airbus and Boeing have already made similar decisions.
- Sometimes I think Elon Musk is like marmite – either you love him or hate him. Tesla added $13bn in market value after revealing a surprise first-quarter profit. The share price spiked as much as 9% on Thursday. An investor’s dream, right? Nope! Here comes Elon Musk! He published a Tweet on Friday evening, and it wiped $14bn from Tesla’s value in minutes. However, this is nothing new for him, and he has done something similarly erratic many times in the past. I am sure a number of lawsuits will appear against him in the coming weeks. It is difficult to depend on someone like him, no matter how talented the individual is.
My Portfolio Summary
My main portfolio was up by just 0.8% and SIPP dropped by 2.4% week-on-week, thanks to the poor performance of the oil producers.
- Royal Dutch Shell (LON:RDSB) cut its dividend for the first time since the Second World War after the pandemic almost halved its quarterly earnings, and the stock dropped 11% week-on-week. This was big news and shows that no company or industry is immune to this crisis. It warned investors that the situation would be “more severe” in the second quarter, and it is currently taking the first steps of a “fundamental shift for Shell over the next 30 years”.
- British Petroleum (LON:BP.) was also another poor performer. The stock dropped about 3.2%, despite its earnings plummeting by 66% and a rise in debt in the first quarter. It promised to maintain its dividend of 10.50 cents per share. However, to maintain the books and keep paying dividends, it needs the oil price to increase more than $35 a barrel, which is around $25 right now. The investors might be happy to get the dividend for this quarter, but I can’t see how it will be able to continue paying these dividends.
- GlaxoSmithKline (LON:GSK) beat analysts’ expectations, and its profit was up by 41% year-on-year. Despite the impressive performance, GSK is sticking with its full-year guidance of a one to four per cent fall in profit. As a result, the stock went flat and dropped by 4.5% in the last week. It kept the first interim dividend 19p per share equal to the previous year.
- Lloyds saw its first-quarter profits plummet by 95 per cent, from £1.6 billion to just £74 million. The bank has been forced to set aside a whopping £1.43 billion to cover the financial fallout from the Covid-19 crisis on its business. Lloyds scrapped its financial guidance for the year, saying the longer-term impact of Covid-19 on its business remained unclear. The group’s top brass will not be receiving a bonus this year. Finally!
- Royal Mail Group (LON:RMG) was the best performer, with a moderate 8.9% week-on-week increase. There is an interesting development around RMG this weekend. This is Money reports that a Czech billionaire, Daniel Kretinsky, who owns Sparta Prague football club, has bought more than a 5% stake in the company. However, RMG will keep struggling until the BoD and CWU come to an agreement. On Wednesday, the company announced plans to scrap Saturday deliveries from May 2 until further notice, putting 20,000 jobs at risk.
- Since merging and moving my previous pensions accounts in SIPP in January, I have not contributed anything so far. Last week I decided to invest small amounts in funds and asked Facebook members to suggest some of their favourite funds. I chose “Accumulation” over “Income” as I am not looking for any dividend for now. I would prefer the growth of my funds while I am working full-time. I also went for technology-heavy funds as other industries are suffering right now, and nobody has any idea when we will get out of the misery.
After some digging, I decided to go with the following four funds:
|Fund Name||Current Buy||Net Ongoing Charge||2019/20 Return|
|Legal & General Global Technology Index (Class I) Accumulation||66.12p||0.32%||18.87%|
|AXA Framlington Global Technology (Class Z) Accumulation||441.90p||0.83%||9.49%|
|UBS US Growth (Class C) Accumulation||175.87p||0.83%||10.67%|
|Baillie Gifford American (Class B) Accumulation||1,048.00p||0.52%||27.32%|
My Freetrade portfolio performed much better than the rest, and was up by 4.1% in the last week. In addition to this, the three free shares, worth £15, were unveiled last week. They were PayPoint (LON:PAY), MoneySuperMarket (LON:MONY) and Avast (LON:AVST).
- I was very happy to receive that PayPoint stock as I have been following the company for a while. PayPoint allows customers to pay bills, utility and mobile top-ups, collect and send parcels and transfer money. This FTSE 250 constituent is undervalued by 50% and offers a low PE ratio (10.8%). PayPoint owns Parcel+, a joint venture between PayPoint and Yodel, which is becoming very popular with busy office workers who want to collect their parcels at their own convenience.
- However, William Hill (LON:WMH) was the clear winner of the week, and was up by 24%. I have mentioned William Hill in my last two posts. Earlier this week, the English governing bodies discussed finishing the premier league behind closed doors. They planned to host the matches in ten neutral venues which are far away from dense populations; like Brighton and Hove Albion’s AMEX Stadium, West Ham’s Queen Elizabeth stadium, etc. I don’t know much about the AMEX stadium, but the latter is just a stone’s throw from one of the busiest shopping centres (Stratford Westfield) and communication hubs (Stratford) in the UK. Anyway, other sports are also planning to reopen their season, too. So, I can see William Hill going up in the coming weeks.
- I made three new and one top-up investment last week. I bought shares of Ibstock (LON:IBST), JD Sports Fashion (LON:JD.), and The Renewables Infrastructure Group (LON:TRIG). As some housebuilders have already resumed construction work, I am hoping to see the brick and concrete market Ibstock shares rising in coming weeks.
- I am an admirer of JD Sports as a brand. I worked as a part-time shop assistant there in the past, and I know why the young generation prefer JD Sports over Sports Direct or Footlocker. Its share has performed brilliantly over the last 5 years and was up by 614% before dropping 57% due to the pandemic. It has gone up by more than 80% since the crash. Although it is overvalued by 16%, it has a healthy balance sheet. And I also know that it has a perfectly working website and a loyal customer base. It will only go upwards, in my opinion.
- TRIG is an FTSE 250 listed investment company whose purpose is to generate sustainable returns from a diversified portfolio of renewables infrastructure that contribute to a zero-carbon future. I believe we will look at the world differently after we overcome the crisis. The share has gone up by 20% in the last 5 years, despite the recent dips. It is undervalued by 36% and has a very low volatility (Beta: 0.22).
- I topped up my position in Coca-Cola (NYSE:KO) last week. The US is poised to open shops and entertainment facilities soon, and the UK government is planning to do the same. Soft-drink consumption will surely rise in the coming weeks. Additionally, Coca-Cola also owns Costa Coffee, which has already opened a number of outlets for take-away orders.
- The worst performer was JD.com (NYSE:JD), as Trump threatened China about the trade deal. The e-commerce giant is pressing ahead with plans for a secondary listing in Hong Kong within the next few months despite the coronavirus pandemic still roiling financial markets. This deal could raise at least $3 billion for the company.
- AMD’s share price dropped by more than 6% last week, despite a positive quarterly report. Its net income was $162 million, compared to $16 million a year ago. The chip manufacturer has provided earnings guidance for the 2nd quarter and expects revenue to grow approximately 21% year-over-year and 4% compared to Q1. In other news, AMD and Oxide Games announced a multi-year partnership to co-develop graphics technologies for the growing cloud gaming market. The online gaming market is huge, and AMD could be a very strong player in this sector.
As many of us are stuck at home, there is an influx of new investors in the market. In previous posts, I spoke about my friends who have started asking me “how to buy shares”. It’s not just my friends – I saw thousands of posts in different Facebook groups from members asking how to buy shares, or if X, Y and Z stock are good to buy. You could clearly see that they are not interested in investing, but in buying stocks.
I made the same mistake when I started about 5 years ago. I visited the LSE website and checked which were the top rising shares. Then I made one or two purchases without any research or looking at the balance sheet. As a result, I lost some money. Those amounts were small, so they didn’t hurt much much. It looks like people are playing the same game, but they are putting money in that they can’t afford to lose.
Nope, you are in the wrong place to make “quick” money. To make money quickly, you have to invest in very risky shares which can go either way. I am sure that the £10k is not your child’s pocket money. Don’t play with it.
The post does not make any sense. And you should not spend a penny until you understand investing. Stay away!
There are a number of pharmaceutical companies and laboratories testing the vaccine, but we don’t have a vaccine yet. Are you saying you want to invest in the hype rather than the company? What will happen when you invest in X because everyone is talking about it, but Y comes up with the vaccine?
If you have done your homework and invested in a long-term portfolio, you should not be worried about a short-term loss. Again, if you can’t take the loss, just sell your positions and leave the market. There is nothing in loving “the market”.
The first rule in investing is Do Your Own Research (DYOR). What is the point of asking for others’ thoughts when you have already made the investment? Fortunately, this person has invested in a good stock, Aviva. But there are many “investors” who are not this fortunate and are bound to lose money in future.
This is the first time I have shared screenshots of Facebook group members in my post. My intention is definitely not to offend anyone, but trying to warn readers from making the same mistakes. I hope you won’t make any rash decisions and invest in the hype. It is better not to invest at all than invest in a poor decision.
Stay home, stay safe, save lives.