After my FT column at the weekend, some readers asked me to share my current short list of very cyclical, contrarian stocks, which I think might rebound. Happy to publish to a wider audience, with all the usual very obvious cavaets:
- Yes, it’s in deep waters (! Not) at the moment but I don’t believe the fundamentals are going away.
- EasyJet and Ryanair. Europe’s alpha dogs in regional lower cost air travel. Again, if you think the business model is bust, don’t buy. I don’t think that is the case in which case they might be cheap
- Clearly its parks are going to have a horrible time, helped along by the US taxpayer though. But this is still the world’s alpha dog in terms of content.
- My most controversial choice. You can fill it your own long list of negatives – would probably take all day. But this is only ever a two horse race with airbus and Boeing isn’t going away. Its military and contracting business is also huge. Eventually this will find its right price. Not now, but soon.
To date, I’ve only actioned one on this list above – Carnival, where I’ve been slowly drip buying stocks.
I have also got a longer list in the investment trust space. I have a column in money Week on the subject in the next few days so will focus mostly on the alternatives I watch. In no particular merit order, I’d watch the following:
- Baillie Gifford Shin Nippon – Great fund. Pity about the asset class. Short term the outlook is negative but longer term this is a core holding. Currently running on a 6% discount against average -0.1%
- Vietnam – VinaCapital Vietnam opportunity -21.8% discount versus longer term average around 15%. Vietnam is doing a decent job in the Covid space and is a natural alternative to Made in china. vs -16%
- Weiss Korea Opportunity current discount -5.8% vs average -1.8%, 3.2% yield. Income focused specialist fund with stakes in big conglomerates.
- Augmentum Fintech -27% discount versus recent average of -6.6%. One of my favourites in the battered and bruised VC space. Great management, good portfolio. Has ticked back up in recent days but still cheap
- Draper Esprit. Another favourite VC. Last seen trading at a discount of-36% vs longer term average of -8.3%
- Tufton Oceanic – ship leasing fund, discount currently at -15.4%, versus recent average premium of 6% and yielding 8.5%
- BH Global (9% discount) looks cheap versus its sister fund, BH Macro (4% premium), given strong performance and similar portfolio exposures.
- Pershing Square remains on a 36% discount despite very strong recent performance, as investors are slow to forgive poor post-IPO performance and concerns about governance.
- EJF investments – invests in US bank debt structures (ouch). Solid performer trading on a discount of -26.5% vs recent average of -7.4%, and yielding 7.8%
- Pollen Street Secured Lending, on a discount of 30.4% vs recent average of – 15% and yielding 7.2%. There’s also the putative bid at 900p versus the current share price of 670p.
Last but no means least I thought I might mention Syncona again. Most healthcare and biotech funds have had a strong last few weeks but the largest UK life sciences VC fund Syncona has by contrast drifted lower in recent days, and was down over 10% last week after news that some of its trials might be delayed because of the ongoing crisis. This popular venture capital fund has traditionally traded at a premium of over 15% to its book value (point (average premium over the last 12 months of 16.7%) but is now down at just 6%, and still remains one of my core long term buys for the genomics revolution. According to analysts at Numis the company has a substantial balance sheet to withstand any delays, with a capital pool of £780m (61% of net assets) of which 90% (£702m) is held in cash.
Leave a Reply