A quick update today on some of my recent investment ideas. Good news on the Ranger front where a proper debate about what to do with this direct lending fund seems to be underway. Last week major shareholder Oaktree decided to open up with its views about what the fund should do next – namely wind down. Spot on. The board shot back its rebuttal which sounded less like a spirited defense and more like a holding statement before announcing its strategic review. For me, there is no argument. Either wind down the fund over the next 18 months and maybe build up a few side pockets that can be given back to investors immediately – or give the fund to new managers. Either way, the fund as it currently exists can’t carry on. The share price bobbed back over 800p a share and I must admit I sold out my holding, after collecting the last quarterly dividend of just over 2.5%. I regard a 15% uplift in the space of just four months (I purchased at 720p) as more than enough. I don’t doubt there will be more upside, but for now, I’m happy to take my profits.
It’s also nice to see the share price of infrastructure fund HICL tick up 8.5% over the last few weeks. Unfortunately, I wouldn’t get too carried away with this buoyancy. The main drag on performance hasn’t been anything operational – the fund is fairly conservatively managed. Rather confidence has been sapped by policy risks and the Labour Party. I’d humbly suggest that this isn’t going away and in fact is likely to intensify. Labour will do well in London and we’re fast approaching the point on Brexit at which everything muddles through or we hit a real crisis. I hope we muddle through (still my 60% probability) but I still think there’s lots of potential for real fireworks. If that does happen, Labour could suddenly surge again, and we’d see the infrastructure funds sag back again. We’ve already had a hint of this with the aborted Gravis Diversified Infrastructure fund which was pulled week before last. I had my own doubts about the appetite for this fund, so wasn’t surprised, and I think it speak volumes to the underlying worries about infrastructure as an asset class. I still think the share price will hit a low of around 125p to 130p, so, for now, I’m happy to sit on the sidelines and watch.
On a more positive note, Empiric Student Property brought out some more than half decent numbers and its recovery plan seems to be on track. I’m still bullish on this stock although I’d prefer to buy in on any weakness, with the share price closer to 80p.
Last but by no means least, I find myself watching the gold price. I am very far from being a gold bull – I tend to share Buffett’s dismissive view of the precious metal – but I think we might be close to a turning point. The chart below from Sharepad is for 1-year price returns and we can see a steady upwards trading range of $1220 to $1360 an ounce. I don’t think there’s any imminent break out here but I would make three simple observations.
The first is that the gold price hasn’t been enormously volatile over the last few years. Many investors, me included, have tended to shy away from this supposed ‘alternative to fiat money’ because the price has been much too volatile. Call me old-fashioned but if you’re after a safe harbor asset, a relatively stable price is a necessity. By comparison, the chart below shows the spot price for Ethereum, the Number 2 cryptocurrency. To say that this modern alternative to money fiat is a tad volatile is the understatement of the century.
The next obvious statement is that there has to be a decent chance the dollar will weaken. Traditionally that’s been a positive signal for gold prices – oil prices have also firmed substantially, another potential tailwind.
Last but by no means least, echoing a blog from last week, we must be close to the peak of the current bullish cycle. Maybe we have another 12 to 18 months left. I hope we do. But the odds are a sharp slowdown must be growing by the month. If that happens, we’ll see an increase in volatility and we could also see a flight to gold – although investors might also buy the dollar which could complicate matters considerably.
Nevertheless, on the balance of probabilities, I think it’s fair to suggest that gold might be about to benefit from some strong tailwinds over the next year or so. I wouldn’t be a buyer at prices much over $1300 an ounce but the shiny metal is now – at the very least – on my watchlist.