Be Debonair

“You must never confuse genius with a bull market.” (An Englishman’s Commonplace Book, Roger Hudson)

It’s not hard to recommend shares when the market is going up, as it has been for a decade. There have been a few wobbles, especially in March last year, but that was an opportunity to load up with some cheap stuff. Is the techy Nasdaq a bubble about to burst? If so, super-star investment trusts like Scottish Mortgage and Monks will take a beating.

Risk management is a funny business.When I had a job there was a risk manager to tell me if a client was wading in over their wellies. Risk managers, as a breed, are a type that want to be traders but don’t cut the mustard. They are efficient stable door shutters after a catastrophe; credit managers, ditto.

Now I’m my own risk manager and I wonder what impact a melt-down in tech stocks might have. I think my exposure is maximum 25%. The ballast that will keep my portfolio afloat is McInroy & Wood, Personal Assets and MP Evans. As far as I am aware the palm oil market has no correlation with stock indices and certainly not with tech stuff. M & W and PA are both loaded up with bonds and gold. Dull dogs when the market is on fire. They perform creditably but as an M & W director told me; “We don’t want to shoot out the lights”.

So I will not be taking profits or top-slicing anything except a matitunal boiled egg.  I will display the careless insouciance epitomised by Sir Percy Blakeney,  blowing imaginary fluff off his Mechlin cuffs, while experimenting with a new Dry Martini recipe. Last year I sold all the Scottish Mortgage in my pension as a precaution, now 30% of my portfolio in another pot is in SM.

I never bought Neil Woodford’s funds in his glory days at Invesco Perpetual, so I eschewed Woodford Patient Capital in 2015. He had a good track record and a CBE, so I might have been tempted. If I’d backed him instead of Scottish Mortgage, in a Sliding Doors moment, my savings would be greatly diminished. I also didn’t notice Terry Smith whose career is not dissimilar to Woodford’s with a few differences. Terry’s Fundsmith Equity goes up: 449.3% since inception in 2010 and Terry puts his own money in his funds, very re-assuring. It would be hubristic to compare myself to Terry Smith. However, he does not think tech stocks will crash. They make up 29% of his £23 billion equity fund.  You may wonder why the Fundsmith Equity Fund is not in the FTSE 100. If it were, it would slot in betwixt Tesco and Ferguson. The latter, to digress momentarily, does not make tractors. Formerly called Wolseley, Ferguson is a distributor of plumbing and heating stuff. Scottish Mortgage, £18 billion, has NatWest and Associated British Foods as neighbours in the FTSE 100.

Terry Smith’s funds are unit trusts, as are McInroy & Wood’s and as were Woodford’s. Unit trusts used to have much higher fees than investment trusts but the gap now is negligible and some of my investment trusts charge a lot more than M & W. Unit trusts do not have a mechanism to survive if there is a sudden rush to sell by their investors. If investors rush for the exit in an investment trust the price is driven down to a discount. Monks has been one of my best picks but look at its discount only five years ago. You could have bought Monks at a double-digit discount and I hope you did when I suggested it in August 2016.

Here’s some good news from Opera Holland Park, a venue within walking distance for me and with relatively inexpensive tickets.

Our 2021 Season with resident orchestra City of London Sinfonia will open on 1 June with new productions of Mozart’s The Marriage of Figaro, Janácek’s The Cunning Little Vixen,  Mascagni’s L’amico Fritz, a revival of our celebrated 2018 staging of Verdi’s La traviata, and a co-production of Gilbert and Sullivan’s comedy, The Pirates of Penzance, with Charles Court Opera. 

British Youth Opera, a training company with which many of our artists and creatives have cut their operatic teeth, will also be making its Holland Park debut in August 2021.

I hope it goes ahead; the first performance is planned for 1st June. I will be snacking at Il Portico and the rhythm of life will be restored.