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Private Investor's Diary: Heading into choppier waters

With an eye on potentially tougher times ahead, former City fund manager John Rosier has been tweaking his Private Investor's Diary portfolio
Private Investor's Diary: Heading into choppier waters


Since March last year, November was my worst month and the eighth worst in 119 months for the JIC Portfolio. The JIC Portfolio was down 5.4 per cent vs -2.2 per cent for the FTSE All-Share. That leaves it up 6.3 per cent this year, some 6.7 per cent behind the All-Share. Since its inception in January 2012, the JIC Portfolio is up 335 per cent (16 per cent annualised) compared with +101.3 per cent (7.3 per cent annualised) for the All-Share.

A 19.9 per cent drop in Sylvania Platinum (SLP) due to the rhodium price fall impacted performance. De la Rue (DLAR) was off 15.4 per cent despite encouraging half-year results. Venture Life (VLG) was off 14.3 per cent, and that was before the profit warning bombshell on 1st December. Calnex (CLX) gave up 13.5 per cent following decent half-year results. Two of my 2021 successes succumbed to profit-taking. K3 Capital (K3C) was off 13.4 per cent and SigmaRoc (SRC), 10.5 per cent. The best performers were SDI Group (SDI)  9.5 per cent, Renew Holdings (RNWH)  and CentralNic (CNIC), both of which rose 5.2 per cent.

The JIC Funds’ Portfolio was down 1.6 per cent, leaving it up 7.1 per cent this year. Since its inception in July last year, it is up 31.7 per cent compared with  23.6 per cent for the FTSE All-Share and  32.4 per cent for the FTSE All-World (GBP, TR) Index. The best two were Fundsmith Equity (GB00B41YBW7) and the iShares Edge MSCI USA Value ETF (IUVF), both up 2.7 per cent. The worst was October’s best – Blackrock World Mining Trust, -5.3 per cent. 


The question that occupied markets for much of the summer and autumn was whether or not the current spike in inflation was transitory? Throw into the mix the new Omicron strain of Covid, and things become even more confusing. The US 10-Year Treasury and UK 10-Year Gilt yields both fell in November. That suggested that the bond markets believed that inflation will indeed be transitory and that as we move through 2022, we will be worrying about lack of growth and deflation again.

Against that background of falling Treasury yields, Nasdaq 100 was the best performing major equity index. Investors were happy to pay up for companies they perceived were providing safe growth. Semiconductor stocks led the way, with the likes of Advanced Micro Devices (US:AMD) up 32 per cent and NVIDIA (NVDA) +28 per cent. Apple (US:AAPL), gained 10.3 per cent to a new high. The S&P 500 was off 0.8 per cent. European markets fell with the CAC 40 down 1.6 per cent, the MIB -3.1 per cent and the DAX -3.8 per cent and in the UK, the All-Share fell 2.2 per cent. Aim and small caps lagged further behind. It felt a little like a bear market in smaller cap stocks with a buyer’s strike occurring. There were some savage moves on no news and minimal volume traded. Someone sells a few, the market makers move the price down, and someone else sells a few. Given the uncertainty, potential buyers sit nervously on their hands.

Commodity prices suffered, especially on the emergence of the Omicron variant. The concern is that economic growth would take another hit. No fall was dramatic as that of oil. The coordinated plan, led by the US, to release strategic oil reserves laid the groundwork. It just needed concerns about slower demand growth to tip the balance. Brent crude fell 15.9 per cent over the month to $70 per barrel. Its lowest since mid-August. Rhodium was down 15 per cent as the semiconductor chip shortage continued to dent car production. Catalytic converters are major users of Rhodium. Platinum was off 6.0 per cent, zinc -5.5 per cent, copper -2.1 per cent but nickel managed a 3.3 per cent rise. Gold was flat on the month.

De La Rue

Why has the share price not performed in 2021 as I hoped it would? The market is concerned about a potential overhang of De La Rue shares. Crystal Amber Fund (CRS) had a continuation vote at its AGM as per its constitution. It needed a 75 per cent vote in favour, which it failed to reach. US hedge fund Saba Capital voted its 26.2 per cent stake against continuation. Crystal Amber’s articles require it to “formulate proposals to reorganise, reconstruct or wind up the fund”. This matters for De La Rue shareholders as Crystal Amber has a 9 per cent stake. The fear is that Crystal Amber will now be a forced seller of its stake as it liquidates its position. This eventuality is something that Saba Capital has anticipated by taking out a short position in De La Rue to benefit from the fall.

Crystal Amber responded: “In the coming weeks, the fund intends to provide shareholders with specific proposals. It is currently envisaged that these will centre around the continued realisation of assets and increasing capital returns to shareholders. Based on the Manager’s assessment of the status and timing of anticipated corporate transactions, the fund is targeting additional shareholder returns of at least £40 million or 50p a share before 30 June 2022. This would bring returns of capital since the 2013 amendment to the Articles to more than £100 million. When such disposals are concluded, it is intended that returns to shareholders would be paid as soon as practicable. Further significant realisations and returns of capital are planned for the period after 30 June 2022.”

It looks as if there is no hurry for Crystal Amber to sell its stake, but eventually, it will end up in other hands. That might be through dripping it into the market or, better, in big chunks to other institutional buyers or perhaps even a trade buyer. At some stage, Saba Capital must close its short position. I am inclined to stick with De La Rue because if management keeps delivering the recovery plan, value will eventually be realised. On Investec’s numbers, the shares are valued at 8.8 times earnings for the year about to end in March 2022, falling to 6.7x March 2023 and 5.9x March 2024.



I kicked the month off with one of my worst trades in the last 10 years. I added to my position in Venture Life Group (VLG) at 59p on 1st November. Worst because on 1 December, it issued yet another profit warning. I was encouraged that Chelverton UK Equity Growth (GB00BP855B75) had acquired a 5.8 per cent position, and Octopus had moved up to 3.14 per cent. I added a new holding in Capita (CPI) on 9 and 18 November at 45.5p. On 18 November, I trimmed Lundin Energy (SW:LUNE) to my target weight of 5.0 per cent and added to Supreme, taking it up to my 5.0 per cent target.

I sold the Vaneck Vectors Semiconductors ETF (SMGB) in the Funds’ Portfolio, booking a nice profit. I switched the proceeds into L&G Gold Mining ETF (AUCO).


Other News

On 1st November, K3 Capital published its results for the year ended 31 May. They came in slightly ahead of forecasts, and five months into its new year, it sounded like momentum had continued. The dividend was increased by 31 per ent over the prior year. It has since rallied, but as I write, at 352p, it is some 12 per cent below its June high. At 352p, the shares are valued at 17.6x May 2022, earnings falling to 15.3x May 2023. Not bad for 160 per cent growth followed by 16 per cent. The May 2022 yield is 3.4 per cent on forecast dividends, rising to 4.4 per cent in May 2023.

SDI Group issued a robust trading update for its first half, ending 30 September, and followed this up with results earlier this month. On 23 November, CentralNic published its nine-month results, slightly ahead of expectations. More importantly, it “expects to trade comfortably at the upper end of market expectations, for the year for both revenue and adjusted Ebitda”. It said, “the accelerated organic growth seen during Q3 2021 year to date is expected to be sustained for the full year following the investment in new management, staff and systems.”

Calnex’s foreshadowed its half-year results in a trading update in October. It resulted in earnings forecasts being increased by 28 per cent from 3.8p to 4.9p for the year ending March 2022. It is benefiting from the rollout of 5G services. The only questions are its visibility on order flow and what valuation the company deserves. On 25 November, Serica Energy (SQZ) announced that its new Columbus field had come on stream. On 29 November, Lundin Energy jumped 13 per cent on press speculation that it was exploring a possible sale with the Lundin family looking for a way to realise its 33 per cent stake in the £8bn business. I do hope that comes to something. It would be a welcome boost after what has been a challenging year. 



It feels like we are sailing through choppier waters, requiring more caution. The Federal Reserve has become more hawkish in the face of the highest inflation in decades. Earlier this month, it announced a quickening of the pace at which it tapers its bond-buying programme. It will finish by the end of March rather than June 2022. It also signalled that there will be three interest rate hikes in 2022. The Bank of England increased interest rates to 0.25 per cent in the UK following November consumer price inflation of 5.1 per cent.  

In the coming months, all eyes will be on economic data. Employment and price and wage inflation will be watched closely for clues about the course of monetary policy over the next year. Will the Federal Reserve and other central banks need to do more to rein in inflation? The risk is they will. Earlier this year, I was bullish about the outlook, but can’t help feeling things have become muddier. If inflation proves persistent and central banks must tighten more than anticipated, it could get nasty; nasty for bond markets where record negative real yields will be untenable and bad for equity markets.

Higher bond yields will undermine elevated valuations for growth stocks, and the removal of liquidity, which has supported markets through the pandemic, will hurt. Higher energy and labour costs will squeeze corporate margins.

When the fog comes down, reduce speed, and drive more cautiously! I will be focusing on positioning the portfolio in stocks that I think will be capable of weathering more challenging conditions. Companies that can pass on cost increases and have strong balance sheets and attractive valuations should do better. In trickier markets, highly rated stocks will find it more challenging to attract new shareholders if trading slows down. I’ve also increased cash levels so that at the time of writing (17th December), I’m at 12.6 per cent in the JIC Portfolio, (up from 0.3 per cent on 30 November) and 6.0 per cent in the Funds’ Portfolio. cash is likely to be even higher by the time you read this.

Holding more cash gives me the flexibility to add should there be a decent correction. In the Funds’ Portfolio, I added a small exposure to gold miners, and in the JIC Portfolio, I have good exposure to gold through Blackrock World Mining Trust. My exposure to the broader commodity market should also help in a higher inflationary environment.

JIC Portfolio 

NameEPICMkt. Cap (£m)Price at 30th November (p)Risk  Low, Med, HighReward  Low, Med, High% of  Port.My target  %Total return so far %
BlackRock World Mining Trust PLCBRWM981544.0LH7.97.543
Serica Energy PLCSQZ569211.8MH7.15.073
Worldwide Healthcare Trust PLCWWH23123547.5LH6.07.530
K3 Capital Group PLCK3C220301.0MH5.85.035
Sylvania Platinum Ltd SLP23691.5MH5.85.074
De La Rue PLCDLAR276144.2LH5.57.5-3
Central Asia Metals PLCCAML428245.8MH5.45.026
Supreme PLCSUP216186.0MH5.35.0-7
SDI Group PLCSDI206206.0MH5.25.0166
Biotech Growth Trust (The) PLCBIOG4771182.0LH5.27.569
Lundin Energy ABSW:LUNE735332640.0MH5.25.051
CentralNic Group PLCCNIC357142.8MH5.15.033
Anglo Pacific Group PLCAPF278132.2MH4.95.03
SigmaRoc PLCSRC54285.0MH4.75.065
Baillie Gifford Shin Nippon PLCBGS724234.3MH4.45.089
Renew Holdings PLCRNWH632802.0MM3.72.584
Venture Life Group PLCVLG6035.0MH3.65.0-21
Capita PLCCPI74245.8MH2.65.0-4
Calnex Solutions PLCCLX109121.0HH2.32.511
Bioventix PLCBVXP1723300.0MM2.22.573
Surface Transforms PLCSCE10855.5HH1.92.5-2
Cash depositCD 100.0LL0.3 0