Nuclear boost for my Sipp

By David Stevenson, 28 March 2011

A recent special dividend from my holding in utility giant International Power has mitigated other losses, meaning my portfolio is down around 0.20 per cent over the month compared to the FTSE All share index which was down 1.7 per cent over the same period. However, I've boosted the Sipp with some more cash.

My biggest loss was a dreadful investment in travel group Western & Oriental . The board have now decided to cancel the AIM listing and for all intents and purposes these shares are now worthless. Whilst on the subject of punts in the travel sector, I haven’t yet got around to buying shares in Travelzest , because I’ve been waiting to see where market volatility takes us.

I had been hoping to draw down on the 10 per cent of my portfolio that is cash, especially as the markets panicked over Libya, rising oil prices and then Japan. Sadly for a contrarian like me, the subsequent rebound has been sudden and sustained and there aren't many outstanding bargains out there.

The nuclear button

My two best ideas centre on alternatives to our beastly carbon energy complex. The nuclear industry has taken a real beating after the terrible events in Japan and my favoured play on the theme, a Channel Islands registered closed-end fund called Geiger Counter (GCL), is down a whopping 26 per cent over the last month. There are some energy specialist exchange-traded funds (ETFs) but I prefer to use an active fund manager who can figure out the difference between a miner who digs the stuff out of the ground and a nuclear engineer whose core business is new technology. Geiger Counter is run by the team at CQS who also manage the excellent City Natural Resources investment trust.

My sense is that the panic over nuclear power has been overdone and that we still desperately need fissile isotopes of uranium to meet our energy targets in a carbon-lite world. Maybe we’ll have to use new designs and maybe the engineers will have to plan for even more extreme eventualities - both will raise the costs - but I just don't see an alternative to nuclear for places like China. Geiger is a great play on these trends and if the sector does rebound it should rise sharply, although I worry that nuclear may remain a profoundly unloved sector for many months. You might be able to buy Geiger and other uranium-focused plays at even cheaper prices in the next few weeks, so I wouldn’t hurry.

Carbon lite

My other play on the new carbon-lite economy is my holding in Low Carbon Accelerator which has been hit by its own veritable tsunami of negative sentiment. The whole clean energy complex has had an annus horribilis and the decision by the UK government to reappraise the feed-in tariff subsidy structure for solar has bashed yet another nail into the coffin of the new energy sector. The government is right to stop the industrial-scale solar projects planned, as they were an enormous boondoggle with questionable long term value - yet I also think that the smart players like LCA have been unduly punished.

Lefter-of-field

Looking further afield, some interesting names crop up on my list of stocks that have fallen by more than 10 per cent over the past month. Avanti Communications ' shares are a very long way off their peak levels of over 700p, but this satellite broadband specialist is beginning to look interesting. The new Hylus 1 satellite is beginning to create some powerful cash flows and I think as Avanti strengthens its franchise within the infrastructure space, it'll become a takeover target for a bigger predator who wants a more developed business without the risk of launching new satellites. The downside is that Avanti is hideously expensive on any terrestrial valuation metric.

Shares in Africa Opportunity Fund (AOF) and Ocean Wilsons (an investment company that has a big stake in Brazilian port and logistics operator Wilson Sons) look even more interesting than Avanti. AOF is the most experienced listed fund that operates in Africa and has an excellent management team and a great record – I still think the whole sub-Saharan Africa story is compelling from a long term perspective. Bermuda-based Oceans is a strange mix of cash and investments in hedge funds - plus that stake in Wilson Sons. Overall it still looks very reasonably priced given its growth prospects and ability to win business in the Brazilian deep-water drilling boom.

And finally...

One last thought: Everyone seems to be piling into the Japanese stock market, seduced by the low valuations compared to historic norms and the abundance of quality blue chips. I freely admit that Japan does look cheap compared to the last thirty years. But I still can't bring myself to invest in a market where dividends are puny, colossal cash mountains loom far into the distance and price to earnings ratios tower in the late teens. I'd much rather invest in a FTSE 100 tracker than the Nikkei.

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