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Banking on a trio of themes

John Rosier explains why he thinks resources, healthcare and technology will continue to benefit his portfolio
January 14, 2021

There were some incredible returns in 2020, especially from across the Atlantic. The Nasdaq ended the year up 43.6 per cent and the S&P 500, up 16.3 per cent. The recovery in 'value' was reflected in the 18.5 per cent return of the Russell 2000. China was up 22.5 per cent, Japan 16.0 per cent and the German DAX 3.6 per cent. The underperformance of the UK stands out. UK Large capitalisation stocks, as reflected by the FTSE 100, were down 14.3 per cent. Our friends across the Channel did not do much better with the CAC 40 down 6.5 per cent. Smaller cap stocks did well in the UK with the Aim All-Share Index up 20.5 per cent and FTSE Small Cap up 4.5 per cent.

The March lows also marked a new bull market in commodities, with many important metals hitting multi-year highs in recent weeks. For example, copper has nearly doubled since March and stands at its highest level since March 2013. Likewise, the price of zinc, nickel and platinum have been healthy. Although oil staged a significant recovery, at $51 (£37) per barrel, Brent crude was down 21.6 per cent on the year. Gold performed its role as a store of value in uncertain times, gaining 24.0 per cent, although was some 9 per cent off its August peak at the year-end. First prize goes to bitcoin, which was up 310 per cent in 2020.

 

Performance

It was an excellent end to an incredible year. Both the JIC Portfolio and the JIC Funds Portfolio had a good month. The JIC Portfolio was up 9.1 per cent in December. That return was its second-best since January 2012, surpassed only by April's 17.2 per cent. The gain for the year was 23.2 per cent. In the dark days of March, I would have given my eye teeth for such an outcome. It leaves the Portfolio up 309.3 per cent since inception in January 2012, (17.0 per cent annualised), which compares to 78.1 per cent (6.6 per cent annualised) for the FTSE All-Share (Total Return) Index. The FTSE All-World GBP (Total Return) Index has proved a more difficult benchmark to beat. It returned 13.0 per cent in 2020 versus a miserable minus 9.8 per cent for the FTSE All-Share. Since January 2012 the All-World has gained 208.9 per cent, 13.3 per cent annualised.

The JIC Funds Portfolio was up 6.6 per cent in December compared with 2.2 per cent for the All-World. I'm pleased with its first six months. Since 30 June it is up 23.0 per cent versus 12.2 per cent for the All-World and 9.3 per cent for the All-Share. I'm pleased with my decision to change it from the 'Top 10 Portfolio' to a funds only portfolio. I didn't seem able to make the Top 10 Portfolio work; it ended up being a distraction. The Funds Portfolio is tilted towards 'growth' so the trick will be keeping up the performance should the 'value' recovery continue.

December’s winners in the JIC Portfolio were SDI (SDI), up 35.8 per cent, Anglo Pacific (APF), up 27.3 per cent, SigmaRoc (SRC) rose 17.2 per cent, BlackRock World Mining (BRWM) up 15.2 per cent, K3Capital (K3C) up 14.8 per cent, Sylvania Platinum (SLP) up 14.5 per cent, Renew (RNWH) up 13.1 per cent, Wisdom Tree Cloud Computing ETF (WCLD) up 11.7 per cent and Central Asia Metals (CAML) up 10.6 per cent. Only one position was down; Venture Life (VLG) was off just 2.1 per cent. There is nothing like a bull market for making one think one is a genius!

The major contributors to 2020 performance were the portfolios largest positions. Biotech Growth Trust (BIOG), one of my largest positions throughout the year, was up 68 per cent. Other notable performances from stocks that were ever-present, included Sylvania Platinum gaining 135 per cent, SDI up 54 per cent, Baillie Gifford Shin Nippon (BGS) up 49 per cent, Bioventix (BVXP) up 33 per cent, SigmaRoc up 27 per cent, Syncona (SYNC) up 19 per cent and Worldwide Healthcare Trust (WWH) up 19 per cent. I embraced the resources theme by adding BlackRock World Mining Trust and Central Asia Metals during the year. On 31 December BlackRock World Mining was up 35.0 per cent on my average price and has grown to be my largest position. Central Asia Metals was up 42 per cent on my average purchase price. In oils, I added a new position in Lundin Energy (SW:LUNE). Although only up 9.0 per cent on my average price, I hope it will do the business in 2021. Production from its two huge North Sea fields, Johan Sverdrup and Eduard Grieg, will accelerate over the next few years. 

Other new additions to the portfolio had a significant impact. Venture Life gained 25 per cent, De La Rue (DLAR) 27 per cent, K3Capital 25 per cent, Wisdom Tree Cloud Computing ETF 32 per cent and iShares NASDAQ 100 ETF 21 per cent.

 

Activity

There were no trades to report in December except that I took up my allocation in the Venture Life equity raising at 90p.

 

The 'Do Nothing' Portfolio

Last month I referred to the better performance I would have achieved if I had stuck with the portfolio as it was at the start of the year. The final tally was 27.6 per cent. In other words, if I had disappeared off to a desert island and done absolutely nothing, I would have achieved a return some 4.0 per cent better than I did by meddling. There is a great temptation, especially during fractious times, to feel one must do something. I was scared out of the odd holding like Rockrose Energy (RRE) ahead of its takeover and Tremor International (TRMR) just before the share price took off like a rocket. The third culprit was Games Workshop (GAW). I took my profits prematurely and then watched the stock nearly double over the remainder of the year. I didn't do all wrong, but I can't get away from the fact that my trading detracted value. There is no point in dwelling too much except for what one can learn from one's mistakes. I have saved a copy of the 31 December 2020 portfolio. Must do better this year!

 

The JIC Funds Portfolio

December's return was notable for all its positions bar one performing better than my benchmark, the FTSE All-World (GBP) Total Return Index. The largest holding, BlackRock World Mining Trust, was up 15.2 per cent. BlackRock Throgmorton Trust (THRG) gained 12.2 per cent and Wisdom Tree Cloud Computing ETF rose 11.7 per cent. Of the 17 positions, only Fundsmith Equity (GB00B41YBW71), with a return of 1.7 per cent, lagged the 2.2 per cent return of the Index.

It was a similar situation over the first six months of the Funds Portfolio's life. Only Fundsmith, up 10.0 per cent, Worldwide Healthcare Trust, up 3.2 per cent, and L&G Gold Mining ETF with 0.6 per cent lagged the 12.2 per cent from the benchmark.

My aim is for the Funds Portfolio to be a 'do-little' portfolio. In December, I traded twice, adding to BlackRock World Mining and Worldwide Healthcare Trust. Cash had built up from dividends received and from my sale of VanEck Junior Gold Miners Trust in November.

 

Competition Time; a bit of fun

The new year always sees a plethora of share competitions. In last year's UK Stock Challenge, my five entries were Tremor International, Sylvania Platinum, Biotech Growth Trust, SigmaRoc and Rockrose Energy. In aggregate they achieved a top quartile result, 83rd out of 398.  It again begs the question as to why I sold Tremor. In this year's JIC Competition the stocks entered four times, or more were Sylvania Platinum (10), Boohoo (9), De La Rue (6), Saga (5), Jubilee Metals (4) and Volex (4).  I hold only two of them. Last year the most popular entries were Rockrose Energy (9). It was taken over at 1,860p, 285 per cent above the March low of 480p, but 2.0 per cent down from 31 December. Tremor International was entered six times and gained 131 per cent, Sylvania Platinum four times and was up 120 per cent and SRT Marine Systems, three times and down 22 per cent. It will be interesting to see how the most popular ones do this year and certainly worth doing some work on them.

 

Outlook

Thematically, I think resources will continue to do well. Metals are in strong demand due to the twin factors of recovering economic growth and transforming to a greener economy. Electric vehicles, wind turbines, solar panels, and batteries boost the demand for copper, steel, nickel, zinc and other metals. Increased demand, combined with a recent lack of investment in new supplies, is driving prices. As seen between 2004 and 2008 and 2009-2011, the jump in prices can be quite ferocious. Healthcare and biotech are a long-term theme for me, driven by increasing global demand. Growing and ageing populations, technological advances, and improved diagnosis and treatments are driving this demand. Biotech Growth and Worldwide Healthcare Trust (except for a brief period) have been in the portfolio since the start. I expect they will continue to be for many years. Lastly, as an owner of a new iPhone 12, I'm enjoying the 5G connection speed, where I can find it, and am looking at ways to play this theme over the coming years. There will be companies that hugely benefit from the roll-out of this new technology. I intend to gain exposure to some of them.

In my last two monthly reviews, I have strayed from my usual reticence of commenting on where markets are heading. It's hard enough picking the right stocks. I have been unashamedly bullish, and while it might be tempting to put my crystal ball away, I can't help feeling that 2021 will be a good year in so many ways. Once we get through this stage of the pandemic and the economy starts to recover, I think the pent-up demand will be huge. Demand not just for goods but to have fun, go to the pub, cinemas, restaurants, theatres, holidays, etc. The UK looks particularly well placed. Apart from the pandemic, the UK has been under a cloud since the Brexit vote in June 2016. Whatever one's views on Brexit, it has happened, and that the UK nailed down a trade deal with the EU just in time for Christmas must be good news. UK assets look cheap, and I expect the pace of corporate activity will quicken. Inward investment to the UK could also pick up due to it being an excellent place to do business and. with the trade deal, reasonably unfettered access to the EU. One must always keep an eye on the US, where valuations are by all accounts stretched. I think it inevitable that at some stage this year there will be a correction. Should this occur, driven perhaps by rising bond yields, the UK and other markets will not ignore it, but hopefully will prove more resilient.

JIC portfolio 31 December 2020
No.NameEPICMkt.Cap (£m)Risk  Low, Med, HighReward  Low, Med, High% of PortfolioMy target weight %Total return so far %
1BlackRock World Mining Trust PLCBRWM905.9LH8.37.535.0
2Venture Life Group PLCVLG117LH7.57.524.8
3Biotech Growth Trust (The) PLCBIOG639.8LH7.57.5104.8
4Worldwide Healthcare Trust PLCWWH2311.9LH6.77.536.2
5Bioventix PLCBVXP228.4LH5.77.5101.1
6Sylvania Platinum Ltd SLP237.1MH5.65.080.2
7Renew Holdings PLCRNWH440.6MH5.45.036.5
8De La Rue PLCDLAR329.6MH5.45.027.3
9Lundin Energy ABLUNES5594.5MH5.15.08.8
10SDI Group PLCSDI117.1MH5.05.099.4
11Baillie Gifford Shin Nippon PLCBGS798.3MH4.65.0113.3
12L&G ROBO Global Robotics and Automation UCITS ETFROBG MH4.05.024.0
13Syncona LtdSYNC1734.6MH3.65.08.1
14Central Asia Metals PLCCAML422.5HH3.12.542.3
15SigmaRoc PLCSRC175.6MM3.12.546.5
16K3 Capital Group PLCK3C175.1HH2.82.525.5
17Anglo Pacific Group PLCAPF226.4MH2.72.5-3.4
18WisdomTree Cloud Computing UCITS ETF USD AccWCLD HH2.52.531.2
19iShares NASDAQ 100 UCITS ETFCNX1 HH2.42.520.7
20Serica Energy PLCSQZ307.9MM2.32.531.1
21JPMorgan Emerging Markets Inv Trust PLCJMG1558.9MH2.35.011.8
22L&G Gold Mining UCITS ETFAUCO MH2.22.513.0
23Strix Group PLCKETL452.9MM1.62.552.5
24Cash depositCD LL0.6 0.0