The Weekend Rebel Review, Dec 16th, 2023

The bears are growing horns at last

This is just some thoughts, it isn't investment advice or incitement to buy in any way, just my views - please do your own thorough research. I’m not an analyst, I’m just a private investor looking after my own money. Nothing I do or say is meant as advice or should be taken as such. Here I publish my ideas and research that I have done and discuss the way I invest.  Anything written here needs to be verified for its accuracy. Assume any stock I write about I likely own, so my views are biased. Inevitably I will get things wrong, everyone is responsible for their own decision making and what they buy and sell. Subscribing and reading this article means you accept the above and you take full responsibility for your own actions and decisions. Small Cap stocks can be illiquid and very hard to sell at times when demand is weak so caution is required. Please do your own research, know your own risk profile, understand what you are buying and make your own educated decision to buy and sell.

If we are entering the next bull market then most investors should congratulate themselves if they have hung in there over the past 30 months.  We have just lived through one of the toughest bear markets in living memory.  It may have left you feeling totally teed of but that’s probably the most valuable 30 months investing you will have ever done.  Anyone surviving that will hopefully have learned a massive amount which you cannot put a price on.  In bull markets, everyone is an expert. In a bull market you need to be pretty dumb to do badly.  In a bull market most think they are Billy Big Balls, they think they are skilled investors when really they are just punters in a great market.  It’s the bear markets that sorts the fruit from the nuts as far as investing goes.  If a bear market like this can’t beat you then you will be primed for maximum gains when the bull markets return, and this feels like the real deal to me. I’ve noticed a lot of City ‘Experts’ suddenly getting a little bullish as they see inflation falling, interest rates topping and no recession in sight – now the FTSE250 has bounced 12%+

The S&P carried on up and broke out this week on the Fed’s words, not only that but it made a beautiful curve up to, this is like the right side of a bowl and a powerful ‘increased buying’ signal imo, breaking through a long term resistance.

It’s not all about the US – the FTSE250 broke out too, a scruffy little bowl and break out – strong signal.

Anecdotal evidence around here is houses selling faster and better prices in December, what is often a dead month.  Leaving interest rates aside, people have had 10% pay rises while house prices have stayed flat, making houses much more affordable.  Okay, a mortgage may cost more now but at least people can plan now rates are expected to fall and mortgages have already started falling, so there is more confidence to buy.  Stuff like BDEV and HWDN have risen 30% + since October.

Want more bullishness?  Here’s the Drewry shipping index, up nearly 10% in a fortnight on what looks like a rounded bowly bottom.

Here’s the £ v $ chart over the last month – a stronger £ will help inflation in the UK too if this continues, energy for one is priced in $

The bowl on the right of the Vix has fallen over which is great news:

Interestingly the Russell 2000 has gone through, well, 2000 interestingly. This is now testing multi year resistance levels that it attempted to break 3 times before in the last 18 months – if this breaks out it will be uber bullish

Fear/Greed hasn’t hit Extreme Greed yet or got high into it so there’s a way to go before punters have over bought the mkt short term imo. The real big  share price moves come in extreme greed times imo.

Therefore I’m pretty sure this rally has legs and I’m fully invested still. I am now currently  25%+  up from the bottom in October on my 40%/40% doubling plan by Oct24, having made another 2%+ this week and need to do another 12% by the end of the year to get to 40% - doable, a bit of an ask with just 7 trading  days left in the year. I’ve had good enough Santa rallies in the past to do that. I was up 2.5% more than that early on Thurs but gave back in the back end of the week. 25% since late October wouldn’t be a bad result in itself imo, but I don’t mind giving back a bit at times. As nice as it is to see the portfolio up every day, charts need to show small pull backs in order to entice new buyers in, or else new buyers fear buying on a high.  It’s healthy to have a pull back and it allows the next leg up to be all the stronger imo. I try to think of it as a pause while batteries re-charge, watch the percentages, not the pounds too, it’s less emotional.

Here’s a few thoughts for you. Just like in the US, when the mkts suspect a rate cut is coming here, then we will be off to the races.  What we need to see is inflation coming down.  Here’s a chart that Julian Jessop posted on Twitter this week:

It shows just how UK inflation has tracked the US with a lag.  Why would we expect that to differ going fwd?  We will likely have inflation down around 2% in a few months.  Now think about April.  Pensions  will rise 8.5% against inflation at 2%, this puts a lot of cash in pensioners’ pockets. At the same time we have a budget that is going to ease things for consumers.  We may also be nearing a rate cut. All of this makes for good news for the stock market and helps buy an election, as governments do in the run up to one. How much does a positive stock market drive the economy forward?  I’m not sure the economy drives the stock market as much as we believe, it’s partly the reverse too.  Rising stock markets drive economic business, IPO’s, corporate investment, all of which have a trickle down to a greater or lesser effect.  All this economic stuff is more important to the UK than any other country – it’s what we do best.  This will have a trickle down to other businesses selling cars, houses etc. Once a bull market is established they usually keep going and build until something big down the road knocks it off course imo, like a war, or inflation or a virus. Bull and Bear markets are self feeding until you reach a major break in the cycle.  We’ve had just a taster of the bull market so far.  The temptation is to sell and bank some profits.  While I might top slice some big winners to feed the seedlings of growth in the portfolio, I try to remember what are the conviction buys and not get tempted into snatching profits.  Snatching profit is fine for trades but trying to hop in and out of larger long term holds is likely to burn my finger so I try to stay fully invested in my main holdings.

So onto this week and as many stocks have made new all time highs, another bull market signal, MSI released their interims.  Very impressive and the shares moved up £1 on results day.  Or near 15%.  It gave back a bit but still made a new all time high.

HEAD had a trading update out which wasn’t exactly stunning, but they did say recent trading had picked up.  I was holding as there was a nice bowl on the chart.  A 12p sell off firmed a bit that day and on Thurs it rallied 11p.   It’s nearly up with the recent high on the little bowl.  I bought for the bowl, not a big holding but holding for now to see what’s driving that bowl. I can’t make this a long term hold I don’t think, it’s likely a trade as I think I have faster and better stocks but never say never.

RR. added another 10% before giving a tad back, it has been a real star, up over 50% in 6 weeks since the capital markets day, that’s a small cap style move  from a FTSE100 giant. I still hold but top sliced 10% this week to reinvest elsewhere. I don’t expect this dip to last long or to be very deep, with lots of brokers with £4 targets and the funds all trying to build positions, when it bounces it will likely bounce strongly imo.

Citywire point out today that Tommy Hilfiger and Calven Klein owner, and AAA-rated online travel agent Expedia were the big movers this week – good read across for WOSG and OTB which I hold, I feel. Consumer stocks have been very unloved imo.

I added a couple of stocks this week, each could become long-termers but I need to research more – both exhibit bowls here.

The first of these was Eurocel (ECEL). These make and supply building materials. I’ve watched them a long time but they really have under-performed.  The CEO was replaced nearly a year ago by Daren Waters.

“Darren has extensive experience and knowledge of the building products and fenestration sectors in the UK, both from his current role at Ibstock and from his previous position at Tyman plc, where he was the Chief Executive of UK and Ireland from 2012 to 2020. Prior to Tyman, Darren held senior management roles at Kenda Capital BV, Anglo American plc and RMC Group plc.”

He seems to have excellent experience. Directors have been buying shares too:

The results presentation on Investormeetcompany is well worth watching imo. 

https://www.investormeetcompany.com/investor/meeting/investor-presentation-426

What interests me is the fact that 30% of the plastic windows they supply are made from recycled plastic.  ESG has become a big thing for businesses and investment funds and they have to show their environmental credentials so recycled plastic windows should see strong demand. Safestyle and several other window co’s have gone pop too.  Lastly. They say that their main competitor is Epwin.  If you read their recent trading update Epwin say trading has been robust recently.   Coupled with the very big long term bowl on the chart (which I have to credit Jon @briefedUp for highlighting) , I decided to buy here

:ECEL is rather illiquid and difficult to trade at times so bear that in mind. The recent firmness in housebuilders suggests to me the bottom is in for the sector too, BDEV and HWDN up 30-40% for example, in little over a month. Some large trades and volume have been going through this week.

The other interesting position I have bought is Liontrust (LIO)

https://www.liontrust.co.uk/?sc_camp=542313CC58FB4CEDDEBC891EE9090A5D&gclid=Cj0KCQiAj_CrBhD-ARIsAIiMxT--Zl81-QU8y_3qYH-LblbO8aXNBjcritybZh2Et6Pj4XQjtO6UKWEaAlV-EALw_wcB

These are an investment trust in their own special situation.  Investment trusts have had a torrid time and they tend to take a beating in falling markets as their assets fall in value and also the premium to assets that they normally might trade on reduces to a discount, so there is often a double whammy effect on the way down. However the reverse is often true on the way up as asset values rise and they also see a premium build.  Rather special this time tho is the fact LIO get kicked out of the FTSE250 on Monday.  To my thinking, that should reduce selling from the likes of tracker funds and FTSE250 targeted mid cap funds. As they adjust their holdings LIO hopefully start to rise in value with the birth of this bull market.  If so, this should see the stock stating to outperform imo.  There’s a stonking bowl just starting to bottom it seems too imo  You can see how this stock can bounce by the bottom it made last October. 

Directors started buying in August but I suspect, like me, they know  that the time to buy is when a bull market starts, they have probably waited till they get booted out of the 250 too, once that looked likely. Again, this is all just my opinion, I’m just a private investor and as I hold these shares mentioned here then I am likely biased. You make your own decisions regarding buying and selling stocks, do your research and don’t take my word for things, I get stuff wrong being human.

So that is about it.  Things quieten here for news but stocks still move. This will be the last weekend review until the end of the year and then I’ll do the year end review and 2024 preview, rolled into one, on the New year weekend.  Have a very happy Christmas and a happy and healthy New Year and thank you to all the 1638 subscribers who have joined since April and read my weekly waffling.

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