Investing

Week 27: Do you think that 24-hours was a sign of something worse to come?

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Background

In my Week 26 post, I mentioned that the perfect storm might be heading to our way. Two days after publishing the article, one employer after another started announcing job cuts. In less than 24-hour, Airbus, SSP Group, EasyJet, Harveys, Accenture, and TM Lewin announced store closures and the loss of at least 11,500 UK jobs. 

The pandemic might be slowing down in the UK, but the aftermath of COVID-19 is getting more visible every day. The good news is that pubs, restaurants, parks, galleries are open from this week. Let’s enjoy it for now!

Market Summary

  • On Monday, Gilead said it will charge governments $2,340 for a 5-day course of Remdesivir, a drug that has been shown to shorten the time it takes Covid-19 patients to recover. In its publicity stunt in April, it donated 1.5 million existing doses for free. Extraordinarily, the US bought all Remdesivir stock Gilead could manufacture in July, August and September, leaving nothing for the UK, Europe and the rest of the world.
  • There is no sign of COVID-19 slowing down in the US. On Friday, it recorded the highest number of infections while Trump said: “I think that at some point that’s going to sort of just disappear, I hope.” About 57,562 people across the US tested positive for coronavirus in just 24 hours according to a tracker. That was a one-day record and the third straight day of more than 50,000 new cases, having crossed the milestone for the first time on Wednesday.
  • On Thursday, the global stocks rallied on a positive job report from the US. American businesses added 4.8 million nonfarm payrolls during the month, according to the Bureau of Labor Statistics. That exceeded the 3 million payroll additions expected by economists surveyed by Bloomberg.
  • Good news is also coming from China, as well. China’s services sector expanded at the fastest pace in over a decade in June as the easing of coronavirus-related lockdown measures revived consumer demand, a private survey showed on Friday, though companies continued to shed jobs. The Caixin China services purchasing managers index rose to 58.4 in June from 55.0 in May.
  • It seems like the pandemic has taught the Britons how to save money, at last something positive! UK households’ bank savings increased by a record amount in May while consumer credit borrowing remained lower than usual. According to the Bank of England, the household deposits increased by a record £25.6bn in May to £1.5tn, following strong increases in March, when they rose by £14.3bn, and April, with a £16.7bn increase. This is the most significant rise since records began in 1997 and well above the six-month average to February of £5bn.
  • UK housebuilder Redrow decided to pull back from London, pointing to a very interesting trend it has been watching since the pandemic started. It said, “In particular, there is a desire for more inside and outside space, wanting to live closer to green spaces and having a better home workspace.” It looks like we have accepted that working from home will be normal from now on. So, homebuyers are looking for larger, cheaper homes and gardens outside London. I would be interested to see if other homebuilders follow in their footsteps. In other news, it was said that the nationwide house price index showed prices in June were down 0.1 per cent year on year, having increased 1.8 per cent the previous month, marking the first decline since December 2012. Finally, I might be able to join the property ladder.
  • Earlier last week, the government imposed a local lockdown after a spike in infections seen in Leicester. Multiple reports said that garment factories were operating during the nationwide lockdown, and it seems likely that it was one of the reasons why the number of infections in Leicester is going up while the rest of the country is recovering. Shockingly these “almost illegal” factories pay as little as £3 an hour in some cases. Unfortunately, that’s the modern-day slavery in the UK.

Main Portfolios

If you have been following my posts, you might have noticed that I am now buying more US stocks than UK. As a result, Simply Wall St started comparing my portfolios with US indexes from this week. 

According to the website, the US market was up 4% over the last week with the online retail industry growing a massive 6.1%. Compared to that, my portfolios underperformed the market, but were still up by an average of 3%. The good news was, I beat the FTSE 100 index where there was no movement at the end of the week. It stayed totally flat, and dropped only 2 points which is 0.0% movement 😉

  • On Tuesday Sir Martin Sorrell’s S4 Capital (LSE:SFOR) announced that it is acquiring Australian digital strategy and analytics consultancy Lens10, and would merge it with its media consultancy MightyHive. On the same day, it also announced that Mr Sorrell’s old colleague, Miles Young, formal boss of Ogilvy, one of the biggest WPP agencies, joined the S4 Capital board. Both these news pieces pushed the share price to an all-time high, which was up by 11.6% last week. This was not a surprise move, as I mentioned that S4 Capital was looking to set up a new office in Australia after job adverts appeared in different sources. Now, S4 Capital has set up offices in almost every part of the world, except Africa, to my knowledge. While other large agencies are struggling (as I hear from my ex-colleagues), S4 Capital is growing every quarter.
  • Metro Bank (LSE:MTRO), Microsoft (NASDAQ:MSFT),  Meggitt (LSE:MGGT), Royal Mail (LSE:RMG), Smith & Nephew (LSE:SN.) – all did pretty well compared to the FTSE 100, and were all up by more than 3.5% in the last week. On Thursday, Meggitt provided revenue guidance for the first half of 2020. Group revenue in the first half is expected to be about 15% lower than in the first half of 2019 on an organic basis.
  • Smith & Nephew also provided quarterly revenue guidance. It expects a second-quarter underlying revenue decline of around negative 29%. However, revenue is growing as life is returning to normal and surgeries have started operating. Its revenue dropped 47% in April, 27% in May and just 12% in June. It is a solid FTSE 100 company and I have no doubt it will continue to grow in the coming months.
  • BP’s new CEO Bernard Looney started his mission to “reinvent BP” and turn the group into a net-zero emissions company. BP has decided to sell its petrochemicals business to Ineos, owned by one of the UK’s richest men, Jim Ratcliffe, for $5bn. Its share price was up Monday, but gradually dropped over the rest of the week, and was up just 0.5% at the end of the week.
  • My latest purchase Hikma Pharmaceuticals dropped 2.5% last week. I love pharma and tech stocks, as you might already know from my weekly posts. I also explained why I bought Hikma shares and would love to acquire more. If my position dropped 10% to 15% negative, I would exercise Dollar-Cost Averaging and lower my average buy price. In the past, I repurchased Metro Bank shares too early and it became my worst nightmare 🙁

My funds in the SIPP portfolio is doing pretty well, too. Here is their current status:

FundsGain / Loss
Baillie Gilford America (Class B) Acc26.66%
Legal & General Global Technology Index (Class I) Acc12.78%
AXA Framlington Global Tech Fund (Class Z) Acc8.24%
UBS US Growth (Class C) Acc6.80%

For July, I added one more fund, Rathbone Global Opportunities (Class S) Accumulation, to the monthly saving schema. It is one of HL’s Wealth Shortlist fund, and performed very well since the pandemic started, up by 18.51% in TTM.

Freetrade Portfolio

My Freetrade portfolio stayed almost the same as last week, just up by 0.1% week on week. I didn’t add any money to my account last week but made a number of transactions.

  • Drugmaker Pfizer was the winner of this portfolio, and was up by more than 7% last week. The share price jumped on Wednesday after a coronavirus vaccine from Pfizer and Germany’s BioNTech showed a positive trial result, generating immune defences in participants that were stronger than those of the average recovered Covid-19 patient. Pfizer is a fantastic company to invest in, IMHO, no matter whether it comes up with the vaccine or not. A vaccine will be awesome for the company, and humankind!
  • Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and AMD (NASDAQ:AMD) performed very well among all technology stocks. All of them were up by more than 4% week over week. It is fascinating to see the heightAmazon’s earnings might reach in the coming years. Analysts are expecting a 38.4% annual earnings growth in the next 1 to 3 years. Its earnings will go from $10.5b in March 2020 to a staggering $53.6b in March 2024! I am therefore planning to go big on Amazon 🙂
  • Another stock I am very positive about and recently topped up with a large amount is Microsoft. Microsoft is one of only two publicly traded stocks that bears the AAA credit rating from Standard & Poor’s. This means S&P has the utmost confidence in Microsoft’s ability to repay its outstanding debt. Microsoft has prioritised its software-as-a-service (SaaS), and as a result, its operating margin has soared from 25% in 2017 to 37.5% on a trailing-12-month basis. 
  • I thought my Beyond Meat (NASDAQ:BYND) stock was becoming risky and decided to sell it for a small loss. Unfortunately, after two days, it announced a partnership with Alibaba to enter the Chinese retail market, and the price soared. DAMN! Anyway, no point regretting this. With the money, I bought Boeing stock as the FAA cleared it for test flights. It has already completed a series of tests. I understand that the FAA will take weeks, if not months, to give Boeing any green light, but I am hoping that the stock will soar upon any positive news coming from the authorities.
  • I already have big positions in BP and Shell, and I thought it was time to sell Tullow Oil (LSE:TLW) at a 15% profit. I closed my position and bought a graphics chipmaker Nvidia (NASDAQ:NVDA) stock. Since the pandemic started, it has already risen by 97%.! Anyway, I know I am late to the party, but who knows, right! It has a very high PR ratio of 70.75x, compared to other semiconductor companies. However, it has solid financial health, and its short term assets exceed both short term and long term liabilities.
Nvidia (NASDAQ:NVDA) Financial Health
  • Bookie William Hill (LSE:WMH) stock price has been steadily declining since the California sports betting decision was delayed, and my profit dropped significantly. So I decided to keep a 20% profit and close my position. I used the cash to buy DS Smith (LSE:SMDS) stock after it dropped 10% after it published its Final Results on Thursday. Its revenue dropped by 2% but the basic EPS was up by 7%. I thought the result was quite good and the price drop was an overreaction. I am hoping for a quick recovery.
  • Brickmaker Ibstock’s (LSE:IBST) share price has been dropping for the last few weeks, but Boris Johnson’s pledge of significant investment for the construction sector might be good news for the company. Key elements of Johnson’s plan include reform of planning regulations to make it easier than ever before for homeowners to extend their homes, £100 million worth of investment for UK infrastructure (including 29 additional road networks) and £12 billion of investment, across eight years, to strengthen Britain’s affordable housing stock.

Trading 212 Portfolio

Although the Trading 212 portfolio is still in the losses, as mentioned in my previous posts, it was up by 2.5% last week. I am hoping for a recovery in the coming weeks. Like the Freetrade portfolio, I didn’t add any new money to this portfolio, either.

  • Facebook (NASDAQ:FB) was the clear winner of the week. I topped up my position when Unilever and other brands decided to boycott Facebook and Twitter in the previous week. Last week it recovered from the dip and reached close to its all-time high. I am very keen to top up again if there is another dip like this one 😉
  • Loss in EasyJet shares reduced this week as it was up by 7.37% week-on-week. It will take more than a year to reach its pre-COVID price, but it has the potential to go up more as the lockdown is easing and the government announced air bridges with many European destinations. I just hope we will have a long summer this year so that the travel industry can recover its losses.
  • MGM Resorts (NYSE:MGM) share price was up more than 7% last week, despite the infection number going up sharply. Although some of the Las Vegas casinos reopened earlier last month, shares in the US entertainment industry are still very vulnerable to the pandemic. However, MGM has a very low PE ratio of just 3.1x compared to the hospitality industry average of 21.2x. According to Simply Wall St, it is more than 72% undervalued than its current price. If you look beyond the pandemic, it might be a good investment in my opinion.
  • Both Salesforce(NYSE:CRM) and PayPal (NASDAQ:PYPL) are doing well for me, too, and were up by 5% and 4% respectively. As mentioned in my previous posts, I bought these stocks to bring stability to my portfolio, and they are exactly doing what I was expecting. 
  • Marston’s (LSE:MARS) share price is still struggling and dropped by more than 6% last week. As the pubs are open now, I expect the stock price will stabilise slightly next week. I can’t see the price recovering any time soon as social distancing won’t allow the hospitality industry to fully back on foot just yet.
  • National Grid (LSE:NG.) offers a high dividend yield of 5.27% annually. As a utility service provider, it is considered a safe stock. On Thursday, it dropped more than 5% due to the ex-dividend date, more than its annual dividend price. I made a quick decision to sell my Aviva (LSE:AV.) for a little profit and topped up my National Grid position.

Next Week’s Dividend

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

CompanyPayment DateDiv TypeDiv YieldDiv Amount
Glaxosmithkline plc (GSK)July 9Quarterly4.92%19p

GSK is in my SIPP portfolio and HL will automatically invest the dividend to buy more GSK shares. British American Tobacco (LSE:BATS) and BP (LSE:BP) are also in the same portfolio. I am hoping for a handsome portfolio, powered by compounding when I retire in around 30 years.

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
Tuesday 7 JulyJD SportsMicro FocusWhitbread
Wednesday 8 JulyFirstgroupBarratt Dev.
Thursday 9 JulyWalgreens BootsPersimmon, Rolls-Royce

Conclusion

Later this month, companies will be publishing their quarterly reports. Some of them; including the hospitality and service sector reports, are expected to be really awful. This is why we should always take time to do our own due diligence before committing to any purchase.

Keep Calm & Do Due Diligence

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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