Just when it seemed that COVID-19 or the US and China trade war was not enough to trouble the economy, here come more issues between the US and China. Both China’s plan to impose a new national security law on Hong Kong, which was slammed by the US and the US Senate’s bill to delist the Chinese companies from American exchanges were enough to bring the market down last week. It is not looking good for the coming weeks, either.
The UK market was up 4% over the past 7 days with the capital markets also up by 4.4%. My portfolios outperformed the market, rising an average of 4.7% in the last week.
|7-Day Retrun||1-Year Total Return||PE Ratio|
|United States Market||3.5%||6.1%||15x|
|UK Capital Markets||4.4%||14.4%||14.8%|
- FTSE 100 ended the first trading day of the week with a burst of optimism after positive vaccine news from Moderna and a proposed joint rescue fund by Germany and France. It was up by 4.3% at the close of the day – it was the third-best day since the COVID-19 crisis began. Nearly every member of the FTSE 100 rallied, led by cruise operator Carnival (+14%), mining giant Anglo American (+11.6%) and airline groups IAG (+11%) and EasyJet (+10%).
- Moderna’s hope of a vaccine was short-lived as the details of the trial began to emerge, and it seemed that the medical and science communities were not convinced by the findings. I won’t comment on the topic as I don’t have expertise in this field, but I will say that something doesn’t seem right. Moderna’s share price soared on Monday and rose by 30%. Then the news started appearing that the biotech company is planning to raise a whopping $1.25 billion selling shares in a secondary offering. Oops… looks like someone is trying to use the news to manipulate the market. If you were not shocked, the next news will definitely shock you. CNN reported that according to the SEC filings, Moderna’s Chief Financial Officer (CFO) and Chief Medical Officer (CMO) executed options and sold nearly $30 million of shares combined on Monday and Tuesday. Ouch!
- China announced that they would push national security laws to Hong Kong at its annual meeting of the parliament. The decision to bypass Hong Kong’s government and legislature shatters any pretence that the city still enjoys “the high degree of autonomy” that it was promised in 1997 when Hong Kong was handed over to China by Britain. As news of the decision broke out, the stock market plunged by 5.5%, its biggest fall in five years, with property stocks and banks among the worst hit. The turmoil spread to global markets, too. HSBC’s (LON:HSBA) share price has dropped by 10% since Wednesday. World leaders, including the US, warned against the change and promised to take measures. I am sure China won’t backtrack and go ahead with the decision which will escalate the turmoil further in the coming days.
- In the US, the Senate passed a bill on Wednesday, The Holding Foreign Companies Accountable Act, to delist companies (targeting Chinese companies)who won’t certify that “they are not owned or controlled by a foreign government”. It would also require the Securities and Exchange Commission to bar trading in any shares where the company’s auditor hasn’t faced an inspection from the Public Company Accounting Oversight Board for three consecutive years. Doing business in Chinese (or in Russia) is not straightforward like in the west. One way or another, almost all businesses are influenced by the government, and Luckin Coffee (NASDAQ:LK) accounting sandal is just a tip of the iceberg.
- The Office of National Statistics (ONS) reported on Friday that the UK government had borrowed £62.1billion in April. It was £51.1bn more than in April 2019, and the highest borrowing in any month since records began in January 1993. Shockingly the government borrowed £62 billion in the whole of the last financial year. Retail sales fell by over 18% compared with March, due to the widespread shutdown of non-essential shops, taking turnover down to its lowest level since 2005.
- Hertz, the car rental group backed by US billionaire businessman Carl Icahn, has filed for bankruptcy, joining a growing list of illustrious American companies; as JC Penny filed for bankruptcy a week earlier, forced out of business due to the impact of the coronavirus pandemic. Carl Icahn’s Icahn Capital LP owned 38.9% of the company. I remember watching a YouTube investment celebrity’s video, talking about using the dip to buy the share as the billionaire was buying in March. DAMN! The first rule of investing, “Do Your Own Research”, don’t follow someone blindly, especially when they don’t have a long track record.
Main Portfolio Summary
My stock and SIPP portfolios ended the week higher than the market despite the dip, up by 5.4% and 2.9% respectively. My weekly tracker is showing that my main portfolio has recovered about 14% since the biggest dip during the 3rd week of March. Here is a list of news regarding some of my holdings.
- Both EasyJet (LON:EZJ) and S4 Capital (LON:SFOR) were up more than 11% in the last week. On Thursday, EasyJet announced that it will resume some flights from 15th June. However, the government’s strict quarantine measures for incoming travellers won’t make the flight operators’ life any easy when the rest of the world is easing lockdown and resuming business.
- A report published by Forbes stated that Royal Dutch Shell’s (LON:RDSB) 2020 revenues will be a whopping $165 billion lower than 2018 figures. This marks a steep 42% decline in the top line from the level of $397 billion in FY2018. It is not hard to imagine that BP will have a similar or worse result as BP depends more on oil than Shell. BP’s (LON:BP) share price might drop again if it cancels its dividend. Its current dividend yield is 10.68%, and the earnings do not cover its dividend. Unless the oil price goes up soon, there is no way BP can keep paying quarterly dividends.
- Plus500’s (LON:PLUS) share price has been rising for weeks now. I mentioned the company several times in my previous posts. It is a well-maintained internet based company which has not been affected by the pandemic. Its revenue and profit are improving quarter-on-quarter after the massive dip after the law was reformed in early 2019. I am hoping it will start paying a special dividend as the profit is growing.
- GlaxoSmithKline (LON:GSK) and Samsung Biologics have teamed up to give GSK additional capacity to manufacture and supply its pharmaceutical therapies. The deal is worth more than $231 million and involves making biologic products over the next eight years. This will give GSK ammunition over its nearest peers like Merck and AbbVie. GSK’s share price is up 21% since reaching the lowest after the pandemic hit, and is still more than 10% lower than its 52-week high at 1857p in January.
- Legal & General Group (LON:LGEN) declared a final dividend of 12.64p per ordinary share at its Annual General Meeting held on Thursday 21 May. Last year it was 11.82p per share.
Freetrade Portfolio Summary
My Freetrade portfolio was up 3.3% last week, and currently sitting at more than 6% profit. I made a sudden decision regarding one of my shares, so let’s start with that news first.
- I already mentioned that the US and China relation is getting worse for many reasons, and delisting the Chinese companies is one of them. JD.com’s share price dropped more than 10% in the last three working days. I got nervous about the coming unstable days, and sold my JD.com shares and kept about 20% profit.
- William Hill (LON:WMH) was the winner of the week. It rose by about 9% last week. William Hill share price climbed nearly 6% early trading on Wednesday after it emerged that William Hill and GVC are expected to reclaim up to £350m from HMRC after bookmakers and casinos won a £1bn legal battle over tax paid on fixed-odds betting terminals (FOBTs).
- JD Sports’ (LON:JD) share price has started picking up the pace after the acquisition debate with CMA regarding Footasylum take over bid two weeks ago. Despite the failed bid, it’s share price rose 93% since the 52-week low in March.
- The NBA is holding talks with Walt Disney about playing the basketball matches at Disney’s Wide World of Sports Complex in Orlando in July. It would be a single site for an NBA campus for games, practices and housing. I believe it would be a win-win for everyone, from the NBA, Walt Disney and basketball fans all over the world. It will bring revenue to my other holding, William Hill 😉
- The Renewables Infrastructure Group Limited (LON:TRIG) share price dropped when it issued 100 million new ordinary shares at 120p, at a 5.8% discount to its closing price on 18th May. The company said it will use the capital in repaying amounts drawn under the Revolving Acquisition Facility and the acquisition of further investments. I am planning to increase my holdings in renewable energy companies, including Greencoat UK Wind Plc (LON:UKW).
- Lastly, last week I bought fractional shares of Amazon. Every time we talk about the e-commerce giant, we often see how much shopping we are doing on the website, but we don’t realise how much more Amazon is doing in the cloud. Amazon Web Services (AWS) is powering many social media and e-commerce sites; from Netflix to BP, from NASA to Airbnb. According to a 2019 report, Apple spends over $30 million per month on Amazon cloud computing services. We may spend less on shopping baskets, but these websites need to run, and as long as they run, Amazon will be cashing in.
The Week Ahead
This is a new subsection of my weekly post. Here I will mention some of the reporting happening next week. I will only include the companies I am interested in. For more information, you can visit the websites, like London Stock Exchange, NASDAQ, etc.
|Full-Year Earnings||Half/Quarterly Earnings|
|Wed 27 May||Biffa, British Land||Britvic|
|Thu 28 May||PayPoint||Costco|
I am getting increasingly frustrated with Freetrade. As a startup, it offers many amazing features, and for small private investors, like me, makes it easier to invest. However, a number of things have started annoying me lately.
- A limited amount of stocks available on the platform. I don’t expect them to have thousands of stocks, but they should at least have all the FTSE 100 companies. Two weeks ago, I wanted to buy a small number of BAE Systems (LON:BA) shares. Can you believe that the biggest British defence, security and aerospace company is not available? I contacted the Customer Service team, and they said they will add my request to the wishlist, but can’t give me a date when it might be added.
- Its daily pricing graph is different from all the other platforms. For example, it will show the percentage based on the day’s opening, not from the closing price of the previous day. It often confused me, and I am sure it does to many others. It will show the share price as negative if a share price opens high and drops during midday, even though the midday price is higher than the previous day’s closing price.
- There is no way to top up your account from the app once you use the £1000 PayPal limit. You need to log on to your bank account, pay into your account, and wait for at least an hour.
- I don’t mind that it has little information about the companies and their stocks, but I am sure this would be a useful feature for many others.
As aforementioned, the above issues are not critical to investment, but are frustrating nonetheless. I will keep using the investment app and will keep exploring my options. Trading212 is probably the next best option right now. I will continue to update you with my feedback.
Other than Freetrade, I am currently using IG and HL for my investment portfolios. I explained my reasons for using 3 different portfolios in a previous post.
The number of deaths from COVID-19 is dropping every day and the government is relaxing the lockdown measures. Now, it is our duty to continue to keep ourselves safe and protect our families.
Please don’t stop taking preventive measures right now. Use face masks and gloves if possible, wash your hands after coming in from outside and stay away from unnecessary public gatherings. I wish you good health and a bright future.