At beginning of 2017 stated the following
"2CentView is that 2017 could be a great opportunity to make 15-20% if Trump delivers on his election promise, tax cuts and infra-structure spending could really boost company earnings." – this has turned out to be true and the US market performed well in 2017.
2CentView portfolio returned 17% for year vs 12% benchmark, outperforming by 5%.
The benchmark return for the portfolio is 50% of S&P 500 return (18% for the year) = 9% + 50% FTSE100 return (6% for the year) = 3% so 12% in total.
Overall return since 2013, 103% (20.6% annually).
Unlike 2016, 2017 was not volatile and global stock markets had a good year – except perhaps the UK market which rallied a bit on the last few days of the year – Brexit still a concern for investors.
2CentView did well holding core position in FaceBook, Apple, Google and Nvidia. Financials also did well – MS, GS and HSBC. 2CentView also had a small position in Bitcoin though the XBT tracker and holds a core position after it doubled. X (US Steel) also did well as US Infrastructure rally on hopes of Infrastructure spending in 2018.
Biotech – namely Celgene (down 35 per cent in one week!), Acordia, Alexion all had a tough ride costing the portfolio around 2%. Positions in UK stocks (DLG, TW. etc) were fairly flat.
Themes for 2018
- The scale of US tax reform and tax cuts is huge and will lead to US Companies being awash with cash leading to a higher US Stock market as money is spent on on infrastructure, technology and buy backs. However, wages will rise (unemployment already at lows), leading to inflation and interest rates going higher – stay long the banks as an inflation hedge. Keep an eye on US 10 year bond yields – above 3.50% could trigger a major correction
- Economies in Europe – which are lagging the US by 18-24 months should play catch up and perform well in 2018 if inflation stays low.
- BlockChain technology will be adopted by the Banks and perhaps also other industries such as HealthCare as we look for more secure , transparent and cheaper ways to transact and hold information. Be careful of the hype though – an ice tea company put the word BlockChain in its name and rallied 500 per cent!
- Commodity prices could be poised for a rally according to Jeffrey Gundlach (the ‘Bond King’) who sees commodity prices at a relative low with respect to potential growth in the economy. Energy stocks which have under-performed in 2017 could also do well in 2018 as they repair balance sheets and as oil stabilizes and could head towards $75, having some energy exposure is also a natural hedge against rising domestic fuel costs.
- Bitcoin and crypto will be volatile – if you decide to get in prepare for volatility and invest small – only 2-3% of your portfolio. XRP could be a winner in 2018. Crypto and Digital currency will transform the method and cost of making cross-border payments.
- There may be some rotation out of tech and into more value stocks (the so-called reflation trade), but long term tech will do well as US companies spend their excess cash on tech- stay long names like FaceBook, Amazon, Google, Nvidia, Apple and Microsoft. Driverless cars will soon become a reality on our roads – Google’s share price does not reflect the potential of Waymo.
- Volatility remains very low – look at the chart of of the VIXY ( it looks like a reverse image of BitCoin peaking at 15000 in 2008) – but 2018 could see a pick up in volatility which tends to pick up as economic activity increases – there are also still geo-political risks out there like North Korea and Israel/Middle East following the decision to make Jerusalem the capital. 2CentView has taken a long position in the VIXY.
- Retail and Media – 2 industries being threatened by a secular decline, will continue to stage their fight back: [2017: Shopping malls consolidate (Hammerson buys Intu, Westfield/Rodamco and in the US General growth properties by Brookfield), retail stocks rally and Disney announce a deal buy media assets of Fox]
For full list see Conviction ideas in the sheet (requires subscription).
If there is not a single stock you like in a sector then , look at ETFs rather than single stocks – there are thousands of ETFs – e.g. XLF, XLE etc. including the BitCoin investment trust – all of which are pension fund eligible.The NYSE also plan the so-called ProShares Bitcoin ETF and ProShares Short Bitcoin ETF which would track the markets for bitcoin futures. Look for a good commodity or materials ETF like the XLB.
Be careful with Bitcoin and BlockChain investments and investment trusts – seek specialist financial advice on these.
Finally, keep your portfolio diversified across sector and geography and have a mix of stable, growth, recovery and speculative plays. If you need some help in constructing your tweet me direct.
Happy 2018 from the 2CentView team.