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Running bull market winners

Simon Thompson explains the dynamics behind the outperformance of four of his small-cap picks
Running bull market winners

Early last summer I set out my bull market credentials (‘Bull market rules’, 8 June 2020). It was a far less brave call than many may have assumed as I had history on my side. That’s because I had researched the quantitative easing (QE) monetary transmission mechanism to such a degree for my book Stock Picking for Profit that I had a pretty good idea which sectors would be the winners and losers when global central banks next flooded financial markets with liquidity.

For instance, I knew that technology stocks perform well in a zero-interest rate policy environment with long bond yields on the floor, and US dollar weakness created by the US Federal Reserve’s unprecedented money printing would lead to positive flows into both emerging markets and commodities. Both these dynamics have contributed to the outperformance of two constituents of my Bargain Shares Portfolios: technology group BATM Advanced Communications and Sylvania Platinum, a low-cost South African producer of platinum, palladium and rhodium. They are not the only contributory factors.

QE should drive a yield shift in certain segments of the commercial property market, too. Alternative Income REIT is one way of playing this theme. I also expect the housing market to continue outperforming in certain regions, and Scotland in particular. That’s good news for Springfield Properties.

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