Investing

Week 25: Play with fire, and you’ll burn your hand

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Background

I took a break from writing for a week but was not far from investing or following online chatter. It is unbelievable to see the risks people are seeking to make a quick profit. Bored at home, some of us are treating investing like gambling, and choosing the weakest players in the stock market. 

I am sure some of these traders are making a good profit, but some are losing everything, too. That’s gambling theory. Let’s start today’s article hoping that you won’t gamble more than you can afford when job loss and global recession are looming over us.

Market Summary

  • The best news of the week was released on Tuesday when the UK government confirmed that it had authorised the NHS to use Dexamethasone, an anti-inflammatory drug, to reduce the risk of death from the pandemic. The drug has been proven to reduce the risk of death significantly in COVID-19 patients on ventilation by as much as 35% and patients on oxygen by 20%, reducing the total 28-day mortality rate by 17%. The government has taken action to secure supplies of dexamethasone in the UK, buying additional stocks ahead of time in the event of a positive trial outcome. This means there is already enough treatment for over 200,000 people from stockpiles alone.
  • In addition to this, being a generic drug, many pharmaceutical companies around the world produce Dexamethasone under different names. Cipla in India, Hikma in the UK, Ache in Brazil and Beximco in Bangladesh are just a few of the companies manufacturing the drug and are already ramping up production to meet the demand. I hope this will reduce the mortality rate in the coming days. I talked to my brother Dr Jillur Hasan and my sister-in-law Dr Shamma Binte Hafiz, who both told me that it is a cheap drug which is readily available in the subcontinent where COVID-19 has reached its peak. The doctors would administer the medication to patients if the WHO recommends the drug.
  • Wall Street kicked off last week by making gains, as the Federal Reserve’s plans to begin buying corporate debt buoyed market sentiment. The market was on the rise as news emerged that President Donald Trump’s administration is readying a $1 trillion infrastructure package, focusing on traditional road and bridge infrastructure along with 5G networks and rural broadband.
  • The situation in some US states is not good either. Texas and Arizona reported an increase in cases since Memorial Day. These reopenings, along with ongoing protests, have raised concerns about a “second wave” of infections. Apple already decided to close branches again in Arizona, Florida, North Carolina and South Carolina after a rise in cases.
  • On Thursday, The Bank of England decided to keep the interest rate at 0.1%, a record low and pledged to invest another £100 billion in quantitative easing, taking the total stock of asset purchases to £745 billion.
  • On Friday, the coronavirus alert level across the UK has been lowered from four to three, meaning transmission of the virus is no longer “high or exponentially rising”, raising expectations that physical distancing restrictions could be cut soon. The government has already mentioned that it is reviewing the 2-metre distancing rule and will publish its decision “in days”. This will bring much-needed relief to pubs, clubs and restaurants.
Not an ideal way to measure 2-meter distance, is it?
  • Political tension between the two largest economies (and most powerful armies) erupted when twenty Indian and an unknown number of Chinese soldiers were killed in a clash in the Himalayas. The border patrols typically do not carry firearms in their disputed zones, under mutually agreed protocols intended to prevent an inadvertent escalation of violence. Indian analysts said the latest clash involved hand-to-hand combat and improvised weapons; otherwise, the number of casualties would no doubt have been higher.
Credit: Financial Times
  • Adding more fuel to the instability in the region, the Nepalese parliament has approved a new map for the country, including land controlled by India. India and Nepal share a 1,800km (1,118-mile) open border. The Lipulekh Pass is claimed by Nepal, based on the 1816 Treaty of Sugauli it entered with the British colonial rulers to define its western border with India. The relationship between the two countries is boiling, too. At least one Indian was killed, and six others were injured last Friday after Nepal border guards opened fire at a crowd that was allegedly trying to breach the country’s southern borders near the Sitamarhi district of the Indian state of Bihar.

Main Portfolio Summary

My main Stock portfolio was up by 1.26% last week after the bad performance a week earlier. On the other hand, my SIPP portfolio was slightly better, and was up more than 2% last week.

  • Metro Bank (LSE:MTRO) was the performer of the week and was up by 9.52%. On Monday, FT reported that the new chief executive Dan Frumkin looks to boost the bank’s turnaround by strengthening its lending capabilities and is in talks to buy peer-to-peer lender RateSetter. It is one of the UK’s largest peer-to-peer lenders and provides unsecured personal loans, property development loans and financing for used car dealers.
  • I took a position in Microsoft (NASDAQ:MSFT) as a defensive stock about a month ago in this portfolio. It was up by 3.95% last week and received the quarterly dividend. It has a poor dividend yield, but I am happy to consider it as a “growth stock”. I am planning to top-up my position soon.
  • Royal Mail (LSE:RMG) was up by 3.3% last week. This week it will publish its full-year earnings report. If its parcels division doesn’t come out ahead of expectations, given the higher volume of online business since the lockdown in March, it will be a disappointment. RMG’s Czech investor, Daniel Kretinsky, talked highly about the company in an interview published in The Telegraph. Additionally, the short position dropped from 8.69% to 8.14% on June 18. It seems all is going well for RMG.
  • On Monday, easyJet (LSE:EZJ) restarted flights after 11 weeks. It plans to reopen half of its 1,022 routes by the end of next month, increasing this to 75% during August. As the government is about to announce ‘Air Bridges’ with European neighbours like Portugal, Spain, Greece and France, the passenger number will keep growing every week. Fingers crossed for the travel industry!
  • Plus500 (LSE:PLUS) dipped slightly last week. At one moment, I was very frustrated and was about to sell. I mentioned my frustration in my Week 23 post. You can’t find a fault in its financial health, growth, dividend, etc. But it’s business model is its top enemy. I might sell the profit and invest in a recovery stock.
  • From my SIPP profile, British American Tobacco (LSE:BATS) was up 5.7% last week. Its current dividend yield is 6.64% and paying about 81% earnings to the shareholders. I don’t know how long it might be able to carry on doing this as it recently cut revenue expectations.
British American Tobacco (LSE:BATS): Share Price vs Fair Value
  • Another dividend aristocrat, BP (LSE:BP) paid a juicy quarterly dividend last week. Again, its dividend is at a risk and might be gone by the next quarter. Its dividend yield is hopping to 10.57%, and I am planning to use Dollar-Cost Average strategy on BP to bring my losses down. I guess this is the best way to invest in such a brilliant company and hold it forever.
BP (LSE:BP.) Future Growth Forecasts

Freetrade Portfolio Summary

My Freetrade Portfolio did an excellent job last week. It was up more than 6% last week and is currently sitting on about 14% profit.

Week 25 – Freetrade Porfolio Status
  • Cloudflare (NYSE:NET) was the top performer and jumped about 25% in the last week. Although its PB ratio is higher than the industry average, it has solid financial health. I am already planning to top-up my position due to the fact that we will be maintaining social distancing and depending on the internet for a long period of time.
Cloudflare (NYSE:NET) – Short Term & Long Term Liabilities
  • When I bought Beyond Meat (NASDAQ:BYND), I said it was like riding the hype train. For now, it seems like I took the right train as it was up 9.35% WoW. Beyond Meat has announced its first co-manufacturing capabilities in Europe with the official opening of the Zandbergen co-manufacturing facility in Zoeterwoude, the Netherlands. The new facility owned and operated by Zandbergen will produce the “Beyond Burger” and “Beyond Sausage” and is intended to allow for more efficient distribution of Beyond Meat’s products across EMEA. I believe that the Europeans are the frontrunners in global warming and climate change. This will be a great opportunity for Beyond Meat to expand its business in Europe quickly.
  • Amazon, AbbVie, Playtech, Microsoft and Apple were all up between 3% and 5%. Britain and other European countries are continuing to push for a global digital tax on technology companies such as Google, Facebook and Amazon, despite the US pulling out of the negotiations this week. Without US government support, I don’t think Europe can implement the tax; no share price drop echoing the same message.
  • Pfizer (NYSE:PFE), Walt Disney (NYSE:DIS) and William Hill (LSE:WMH) all dropped around 1% last week. Except for Pfizer, I am in the green in both positions. Pfizer is a brilliant company to invest in as it dropped due to a recent sell-off. It is 53% undervalued, according to the Simply Wall St website, and has a dividend yield of 4.55% which is higher than the market (4.4%). I am planning to top-up my position too.

If you are planning to use the Freetrade app for a zero-free investment platform, you might consider using my referral link. Both of us will receive one free share each, worth up to £100.

Trading212 Portfolio Summary

If you are a regular reader of my blog, you would know that I opened the Trading 212 portfolio three weeks ago which was quite high. It quickly jumped to 10% profit. Then I made a rookie mistake. Instead of waiting for the next sell-off, I made a number of purchases before the Week 24 sell-off. As a result, the portfolio slid into more than 10% loss at the end of the week. However, I am glad to say that it has recovered brilliantly last week, almost 7% WoW, and just 3% away from breaking even.

  • Both Premier Oil and Greggs pulled the portfolio up and rose by 15% and 8% respectively. Greggs reopened 800 of its 2,050 stores from Thursday but said it expects lower sales. As a result, it is taking a number of strategies to tackle the situation post-lockdown; such as abandoning some of its new store openings and lowering the rental payments to landlords, etc. In my opinion, its core customers are from three different groups, office workers, students and their parents, and manufacturing and construction workers. Currently, the first two groups are absent from the high street and the third group is catching up to the peak slowly. Unless footfall in the high street or stations start going back up, it will be hard for Greggs to go back to its amazing growth journey.
  • On Wednesday, I took a small position in Salesforce (NYSE:CRM). It is a Customer Relationship Management (CRM) provider to all types of businesses. Working from home has increased demand from online services like this. As a result, its share price has gone up by 50% since mid-March. Institutional investors are bullish about the company. Out of 43 analysts, currently 34 rate the company as a “Buy”. Again, it is sound financial health, as both Short Term and Long Term liabilities are covered by the current cash flow.
Salesforce (NYSE:CRM) – 5-Year Share Price Chart
  • Another stock I have been looking to buy for a while, but I haven’t found the chance to buy this is trusted online payment provider, PayPal (NASDAQ:PYPL) during a huge dip. Since the mid-March dip, it has risen almost 93%. Damn! I could not wait any longer and I took a small position on Friday. I don’t know much about Wirecard, but its financial scandal might help PayPal positively. Fingers crossed. 🤞🤞🤞
  • I also have small positions at easyJet (I love easyJet, don’t I!), Marstons, United Airlines and MGM Resorts in this portfolio. While easyJet and Marstons might go up next week after the positive news on the pandemic, the US stocks will continue suffering due to the rise in the infections I already mentioned earlier in the post.

Last week I received a free National Grid (LSE:NG.) share worth about £9 from Trading 212. If you are planning to open an account with Trading 212, consider using my referral link. Both of us will receive one free share each, worth up to £100.

Next Week’s Dividend Payments

Here is a list of companies that will be paying me dividends next week. 

CompanyPayment DateDiv TypeDiv YieldDiv Amount
Royal Dutch Shell (LSE:RDSB)Mon 22 JunQuarterly1.4%12.951p
Bank of America (NYSE:BAC)Fri 26 JunQuarterly2.85%18c

Shell already cut its dividend in April. I don’t think it will start paying any dividend again any time soon as the oil price and demand levels are quite low.

The Week Ahead

I will be following this list of reports taking place next week. For more information, check out the London Stock Exchange, NASDAQ, and other stock exchange websites.

Full-year earningsHalf/Quarterly earningsTrading update
Tue 23 JuneSt James’s Place
Wed 24 JunePremier FoodsCrest NicholsonPetrofac
Thu 25 JuneFuller Smith & Turner, Royal Mail, Auto TraderAccenture, Nike
Fri 26 JuneTesco

Conclusion

It is good news that the lockdown is easing almost every day. However, we are far from the economic downturn. We have about nine days left in Q2. I am worried that Q2 reporting sessions will be horrible, and massive job cuts will follow it in Q3. All in all, 2020 won’t be favourable to any risky investment. 

All the experts are talking about the rise of the new breed of investors (or gamblers) who are currently ruling the stock market, ignoring all the lessons from traditional investors like Warren Buffet, Charlie Mounger, Peter Lynch, et al. 

I hope none of us is caught in the hype trap and make a huge mistake. I wish you good health and a fantastic investing future.

Keep Calm & Stay Away from Gambling

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.

8 Comments

  1. Carly Griffiths Reply

    Very good write up as usual Jinnat, some good companies listed there and good honest review, I’ve dropped out of my covid stocks as I felt like I was gambling, I took a few losses but happy to dust it off and I’m pretty confident in the stocks I have now going forward, we have to remember that investing is meant to be for the long term and if our stocks drop dont panic. The stocks I now hold I have researched and am confident they are companies that will prosper in the future.

    • Jinnat Ul Hasan Reply

      Thanks, Carly. I have been investing in a stable and long-term dividend-focused portfolio. Many times COVID-19 stocks tempted me, but I have managed to ignore them 😉

      All the best with your positions.

  2. Terry Vaughan Reply

    An excellent write-up and an excellent summary of week s events and excellent critical thinking on shares to increase knowledge and provide education to his loyal followers. Jinnat Blog is a must-read for small investors as it provides valuable insight into the markets and provides trading ideas for the long term as long as you follow up with your own research

    • Jinnat Ul Hasan Reply

      Thank you, Terry, for your kind words. I am glad you liked the posts.

  3. Beautiful summary Jinnat. I particularly like how you first focus on the major events of the week before going into your portfolio trends. Almost like “cause and effect” association.
    Please do continue sharing as I find your blog’s both educational and interesting.
    Many thanks!

    • Jinnat Ul Hasan Reply

      Amazing. Thanks for your comment. I am sure as an investor; you check the background of most of the ups and downs in the market. Every action has its own reaction, right. That’s why I try to follow the news before explaining my own portfolio updates.

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