This is a tricky time of year for anyone who writes about money – the time to flick through the year’s columns and admit what went wrong and why. But let’s start with what went right.
In big-picture terms, I haven’t had a bad year at all. I started out reiterating all my usual themes. I worried about the strength of the economy as a whole and in particular (as ever) about the residential and commercial property sectors.
It’s taken much longer than I thought, but both are now in trouble: commercial property funds are in a state of semi-collapse and house prices appear to be falling across the country.
There was, I said, given the level of demand, no way that oil could stick at its then level of about $40 a barrel. It did not. Today a barrel will cost you $91. I suspected that would mean alternative-energy stocks would keep rising, especially those related to nuclear energy (the only alternative at the moment).
I suggested buying a few obscure stocks: UK-listed Uramin, UrAsia, and International Nuclear Solutions (INS), as well as Thorium Power of America (THPW). The first two were quickly taken over at premiums to their January prices and the others are currently up 19% and 16% respectively. So that’s nice.
Lonrho bounces back
I stuck with the commodity theme in February, suggesting Shell (RDSB) (up 12% since) and BHP Billiton (BLT) (up 59%), and then moving the argument out to suggest high commodity prices and Chinese investment would mean that Africa might end up being a good home for your money.
At the time there weren’t many ways into Africa so I suggested buying shares in Lonrho (LONR), which after years in the doldrums was starting to reestablish itself as a pan-African investment company. I’m really pleased with this one, particularly as I have Lonrho in my SIPP: the shares have risen 83% since I mentioned them. I’m keeping them.
March found me still on the commodities bandwagon. I kept being told by fund managers that it was impossible for me to stick with a position that was bearish on the American economy (the housing crash was making me nervous) yet bullish on the commodity markets.
I wasn’t convinced. “Sure,” I said, “Chinese growth was kicked off by the gobbling greed of the US consumer for cheap jeans and flat-pack furniture, but it isn’t really about that any more. Instead, it’s about the rush to build infrastructure all over the emerging world.”
With that in mind I suggested everyone buy more BHP and more Rio Tinto (RIO) (up 79% since). Next I found myself, after a conversation with a green investor, interested in electric vans. This led to a tip for shares in Tanfield Group (TAN), which produces a unique range of environmentally friendly vehicles. I never got around to buying the shares for my own portfolio, but I wish I had; they are up 139%. I’d sell these if I had them (100% plus is quite enough to make on one bet).
April had me begging readers not to even think about buying houses anywhere, particularly not in Florida and Spain, where prices were falling and the bulls were swearing there were bargains to be had. There were not, and prices are still falling.
Instead, I suggested you put your money into precious metals via exchange-traded funds. This hasn’t been a spectacular bet but it has been a solid one in volatile times: the London-listed ETF that tracks a basket of precious metals (PHPM) is up 11% and the one tracking gold (PHAU) is up 16%.
I also returned to soft commodities while I was on the subject of ETFs and suggested AIGG (AIGG), which tracks a basket of grain prices. Wheat, corn and soy prices had already moved up a good amount but they have kept going: AIGG is up 55%.
The rest of the year saw me getting increasingly pessimistic – reiterating advice to get out of buy-to-let, to buy precious metals and grains and very often just to hold cash. It all sounds pretty good, doesn’t it? So let’s have a look at my disasters.
Small caps disappoint
Most involved small-company shares, though I don’t think this necessarily reflects flaws in their businesses. Nervous investors have sold out of anything remotely risky and small companies fall under that heading.
So, Polymer Logistics (POLL), which produces “retail-ready packaging” not just for transporting and storing goods but also for display (thus cutting waste), has fallen 36%, while my fishing-related stocks, Aker Biomarine (AKBM) and Copeinca (COP), are down 55% and 47% respectively.
Speymill Property (SYG), which invests in the new gambling mecca of Macau, is down just over 13%. More embarrassing is the fact that, despite saying I wouldn’t touch most banks in January, I thought HSBC (HSBA) looked too cheap and tipped it as a buy. The shares are down 9%.
My most notable disaster is Japan. I suggested buying the market in January, in May and again in October on the basis that not only is it cheap but the yen should rise too, giving a double whammy of both equity and currency gains. Oh dear. The yen has strengthened a bit but the benchmark index, the Nikkei 225, is down 9% and the index of smaller companies – which I have been keen on – down 15%. I should probably give up but I am not selling. There is value there; perhaps 2008 will be the year someone else notices.
First published in The Sunday Times 23/12/07