In the second of our monthly reviews, we look at the performance of the financial markets and how our picks have performed over that time
We discussed the impact of the Coronavirus, or COVID19 as we now know it in our January review but February has since seen the markets wildly swinging from positivity to negativity, largely dependent on the news cycle around the virus.
The Dow Jones and DAX hit all-time highs in the month at 29,500 and 13,789 respectively. However the Dow Jones subsequently fell to 25,409 at the end of the month, representing a 7 month low. The German DAX ended at 11,890, it’s lowest level since August 2019.
UK Equities
We’ve seen equities around the world fall sharply as the economic impact of the virus on China has been felt. None more so than one of our January picks, Bathroom and Kitchen supplier Norcros, which despite a positive sales pipeline, issued a profits warning on the back of product supply which is reliant on manufacturing from China. The stock went from highs of 299p to 212p over the period.
We saw huge interest in Palladium mining stock Eurasia Mining in the month with the stock rising from 3.95p when we first wrote about the miner in November of last year to its suspension of listing on 11th February on the possible sale of one or both of its mines. The stock was suspended at 7.20p.
On the back of the Coronavirus outbreak, we noted that Anglo-French biotechnology group Novacyt was supplying the testing kits needed to detect COVID19 during the month. We’d seen a huge increase in it’s share price from 48.5p at the beginning of February to 162p on 18th February and the team here felt this could prove an interesting hedge should the virus reach global pandemic status. The stock has rallied and fallen over the course of the month, generally in the opposite direction to the market – but has not reached the highs we saw during the middle of the month.
Our Shorts
Rather unsurprisingly given the market conditions, our shorts in February proved to be rather successful. We saw Burberry’s exposure to China as a potential problem for the fashion retailer and we’ve seen the share price fall from 1870.5p at the time of writing to 1649p at the end of the month.
We also wrote about building supplies specialist SIG on 21st January following on from their profits warning and this month, we’ve seen board resignations and further falls in the share price, down from 95p at the time of writing to 63.1p at the end of the month.
Our Nordic writer, Raine Lahtinen picked out Finnish Tyre manufacturer Nokian Tyres originally in January as a shorting opportunity and following a rally on the back of an attractive dividend, re-iterated the opportunity on 18th February. Shares have subsequently fallen from 26.48EUR to 23.58EUR on the back of the economic impact of the Coronavirus in China and a mild winter in the Nordic region.
International stocks
Nordic manufacturer Exel Composites was our pick on 17th February and with exposure to factories in China, we anticipated a fall in the share price. However, with shares around the 5EUR level, down from 6.56EUR at the time of writing, this could prove to be an interesting entry point.
Healthcare specialist Biohit was an interesting pick on 24th February. A potential acquisition target for the patient investor, shares have been relatively stable around the 2.50EUR mark since we wrote about them.
Canadian battery materials specialist Nano One saw its placing doubled and then further increased on the back of significant investor interest. The share price has come off its highs of 1.69CAD during February but is up 14% at the time of writing from our original report. Here at The Armchair Trader, we feel this stock has considerable potential.
Commodities
In turbulent times, Gold is often perceived by investors as a safe haven and Gold stocks often benefit from any rise in price. Gold Resource Corp was a pick for us in December and has seen it’s price rise from 4.82USD at the time of writing to a peak of 6.24USD in February. However a big sell off at the end of the month has since seen the share price fall back from its December levels. Investors should note the Gold price hike on the back of the US Federal Reserves interest rate reduction in early March. An interesting entry point for the stock perhaps?
Copper has remained at it’s four year lows since we wrote about it back on 12th February. The Coronavirus is having an impact on the price of the metal but for the investor with an eye on the long term, current levels could represent an opportunity to buy at historical lows.
