Portfolio Strategy: General Update

I wanted to give a brief update on some new positions in the portfolio - not had time lately to do any full notes with models but I have generally been making limited purchases and holding cash/metals due to the high valuation in the market and now a likely period of seasonal weakness going into the second half - years ending in seven are notoriously rocky!

Composition:

High level I am still heavily invested in Gold with a modicom of Silver for higher beta metals exposure - with negative real interest rates in the UK some Gold is something of a hedge. In addition the yellow metal tends to outperform in uncertain markets - and it has broken out of a long run technical bear market that started in 2012. So present allocation is a reasonable 20%;

Amiable Minotaur Portfolio

In more detail I have mostly GBP cash and Gold with a little Silver and USD.

Amiable Minotaur Portfolio

Equities

Additions:

The equity side of the portfolio has seen a couple of new additions and changes since my last update at the end of June. I have added AstraZeneca, The Global X Uranium ETF and CF Industries. I have sold out of the IBZL Brazil ETF.

AstraZeneca - I bought this opportunistically the day of the recent announcement of the failed trials for their new lung cancer drug. Its not a sector I have great experience in but a quick look at the debt metrics, overall valuation and the scale of the sell off meant I took a small position. It is up a touch to date.

Uranium - This I view like a long term option with limited downside. Uranium has a history of long bear markets and stratospheric peaks in pricing. This is due to the supply and demand dynamics. At present all major producers are scarcely breaking even and no new production is incentivised. At some point this could shift with explosive price consequences. So this is a small but speculative position in a very undervalued sector.

CF Industries - Much like my views on CMP - CF Industries gives nice agricultural exposure and benefits from very low US natural gas prices. The stock has done little to date but the valuation case stacks up and you get a 4% yield while you wait for the agricultural cycle to turn. I got the idea from a report by Jesse Felder and I consider all his reasoning to be very sound on the name.

IBZL - I sold this for a tiny profit - which is a shame as it has since had a major bounce - but with such a high beta market and my bearish outlook for the near term I could see little value in holding it at this point and want a better entry point for the long term growth story that is Brazil. 

Amiable Minotaur Portfolio

Weight Changes:

I have added to Next, BLADEX and SQQQ and generally reduced Tullow Oil and Diamond Offshore as I trade these a little trying to pick a low in the oil bear market.

Next Plc - has broken a multi year downtrend and recent results showed signs of improvement. This is really such an obvious value diamond in the rough and that is why I keep banging the table on it. I've taken it up to 10% of the fund now. Downside could prevail in the near term if we see a wider market sell off and a consumer panic - but in general with such low expectations it should outperform the wider market in my opinion.

BLADEX - had a weak set of Q2 results and dropped - so I bought some more. Good dividend, good banking model, growing but out of favour markets and the local central banks on your side. 

SQQQ - I have been dripping into this very risky 3x levered short position - not for the faint hearted. I think we are seeing peak 'Big Tech' and I am looking for a 10% drop in the NASDAQ to give a 30% return on this ETF. We shall see - my time horizon is 3 months on this one. 

(The only reason I have the 3x levered is it saves FX costs to buy 1/3 the amount of dollars to gain the same exposure)

Diamond and Tullow I have been trading a bit with Oil prices - it feels like a bottom is near but I fear one more major blowout like early 2016 could be on the cards to clear out the weak shale producers and rebalance global oil markets. Time will tell. The energy sector has been such a dog for such a long time it's hard to not expect some reversion and I expect commodities will outperform tech over the next 3 years for this reason.

Sectors:

I still have a large slice in Gold Miners and a large slice in Retailers - with the additions of Materials stocks and Pharma things are getting a bit more diversified. Note this is also muddled by the 3x short position which is shown at ETF share value not notional exposure. Current long equity exposure is 61% and short is 13% with a net exposure of 48%.

Performance:

Overall things have improve since June end - I am down only around 1% now in GBP (lagging the FTSE all world return of 6% since inception). 

Star performers have been generally small positions with Guaranty Trust Bank of Nigeria and Kirkland Lake Gold having very good returns but limited attribution. IG Group posted good results with a solid rebuttal of all regulatory issues seeing a major tick up in the name. Endesa Generacion Chile had a great bounce due to some reorganization - if it settles down I may buy more...if I want utilities it is a no-brainer compared to the UK selection of indebted pension schemes utilities. 

Gold and especially Silver have also started to outperform. 

Unfortunately Bed Bath and Beyond has continued to be a dog after the Q2 selloff with no signs of a bounce and that stock alongside bealeagured gold miner Acacia Mining are the main drags on performance. SQQQ has been highly variable but is down a bit, same for Diamond Offshore.

Outlook

Going into the end of the year my instincts are pricked by opportunities in Copper once the futures settle back down again - I think we could be seeing the start of a shift into inflationary plays as the USD declines. So base metals will be a place that I am looking to pick up stocks. 

With high levels of cash, metals and short NASDAQ I am well placed for a modest markets decline - it is hard to expect a crash with so much Central Bank intervention at the moment - dont forget the Bank of Japan for instance owns 2/3 of the domestic ETF market!!


Disclaimer: I have an interest in all the securities mentioned in this article at present but i may change these in the future. These are opinions only, not investment advice. Construct your own portfolios with due care and attention.  If in doubt read my disclaimer.