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Asset Allocation Changes and Market Commentary

During September the investment team made no changes to the Portfolio.

This is now the second month in which we have made no changes.  The eminent Benjamin Graham said, “Sometimes the hardest thing to do is to do nothing.” “an investor should act consistently as an investor and not as a speculator.” I have been steadfast in following this mantra as it seems ridiculous making changes unless clients would be significantly advantaged rather than purely for marketing purposes, or to follow the herd.  Our previous changes to increase the weighting within “value” stocks, avoid very low yielding government bonds, and to increase the amount hedged back into £ sterling have been beneficial, and we believe these trends have further to run.

I read an interesting article in the Financial Times recently in which it refers to “Lansdowne Partners, one of Europe’s biggest and most influential hedge funds, is betting that financial markets are on the brink of a reversal that will see a big fall in “idiotic” bond prices, a slump in technology stocks and a revival in UK equities”.  It is always interesting to see how stock prices react to disappointments.  There is danger in investing in very highly valued stocks with high expectations, as only a small reduction can have a disproportionate hit on the share price.  On 24 October 2019 Twitter announced that third-quarter revenues rose 9 percent year on year to $824m, $50m short of Wall Street’s forecasts and that it shared some users’ data with advertisers without their consent.  The shares lost 21% of its value, a more than $6 bn loss in market value.

Furthermore, there is a very strong concentration of power into a handful of large tech companies, as highlighted within this recent Bloomberg article, that Apple Inc. and Microsoft Corp., are now worth almost as much as the entire Russell 2000 index of smaller companies.  Given the “super profits” earned by these dominant companies, there is an increased chance of government intervention into such companies, which may reduce their future growth and thereby their stock prices.

Source: Bloomberg

Alan Miller – Chief Investment Officer, 25th October 2019

For full underlying holdings, please download the excel document here