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Our 2020 Picks: How did we get on in July?

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The reality of the situation that global economies are finding themselves in appears to be hitting home for investors.

We’ve seen the bulls and the bears jostle for position throughout July as the economic realty of COVID-19 starts to bite. The threat of a second or even third wave of the coronavirus and subsequent lockdowns has begun to emerge and confidence of a quick recovery is beginning to wane.

The financial markets have been quick to react to developments with news of vaccine research breakthroughs providing optimism, only for new lockdown measures around the world to bring hopes back down to earth.

To make matters worse, the world’s largest economy is struggling to deal with the pandemic with President Trump favouring an attack first strategy that’s designed to deflect from his own national struggles and attempt to bolster his looming presidential election campaign. Global markets often take their lead from the two strongest economies, the US and China, but a lack of real leadership and direction in the US in this time of crisis is creating a domino effect for stock exchanges around the world.


The Armchair Trader’s July picks

The team here at The Armchair Trader feel that commodities have been slow to show any signs of recovery since the coronavirus crisis began. We think they have been significantly undervalued and this has been our theme for the month with our July picks.

Copper has been through a short, and bumpy ride since we last visited it properly in February. At the time we saw the price under pressure from COVID-19. China was already in lockdown with the commensurate impact on heavy industry in the country. We thought the price drop was overblown. Last month, we saw some of the core fundamentals underpinning the price creeping back into place with China’s unwrought copper imports (e.g. anodes and cathodes) rising 50% in June while data from the Commodity Futures Trading Commission has shown that hedge funds are now taking more aggressive positions in the copper futures market. We added Copper to our picks on 16th July.

This week, we added Gold to our picks.  We have been bullish on the prospects for gold since the early weeks of the coronavirus spread out of China and we are now seeing a sustained rally in the gold price with both short term traders going long gold CFDs and others piling into long gold ETFs. The yellow metal has seen its fortunes rise as the USD has weakened and with the Federal Reserve committed to injecting further money to bolster the US economy, there could be more upside available for investors.

Our final pick was a short for Boohoo LON:BOO back on 7th July following a lengthy article in the Financial Times on working conditions in a small clothing factories in Leicester. We saw this situation representing a short term shorting opportunity for CFD traders at 250p. Having bottomed out at 210p, investors have been jumping back in, tempted by the sizeable discount on offer, which has seen the share price move back up to the 260p mark. If the business can shake off its reputational damage, it may yet come back in to favour. However, investors should consider there may be more fall-out to come as professional portfolio managers operating under strict internal ESG (environmental, social, governance) rules pull their money out of Boohoo to avoid their own reputational damage.

We have had some fantastic successes this month too. Nano One, the battery materials technology specialist saw its share price hit C$2.70 while Finnish sauna giant Harvia shrugged off the current crisis with strong Q2 results. There was further cause for cheer with Remedy Entertainment and Netflix both enjoying excellent gains over the course of the month.

Here’s how our picks are performing

Company/Instrument Start price Current price* Percentage change
Nano One 1.13CAD 2.97CAD +162.8%
Remedy Entertainment €14 €23.3 +68.8%
Netflix 357.12USD 485.80USD +36.0%
Harvia €8.86 €13.2 +49.0%
AstraZeneca £76.15 £87.50 +14.9%
Kodiak Copper 0.24CAD 0.42CAD +75.0%
Thunderbird Entertainment 1.05CAD 1.32CAD +25.7%
Mineral Commodities 0.23AUD 0.24AUD +4.3%
Citycon 6.33 6.16 -2.7%
Verkakkaupa.com 5.56 5.18 -6.8%
Royal Mail (Short) 181.25 165.55 +8.7%
Yellow Cake 211.50 217 +2.6%
Copper 2.90 2.914 +0.4%
Gold 1931 1942.3 +0.6%

Prices as of close of play on 30th July 2020

Removed from The Armchair Trader’s current watchlist: Nikola Motor Company, Taylor Wimpey and Burberry Reason: For our larger company picks, we include a 10% stop loss designed to minimise losses. We can’t win them all.
Boohoo Reason: short term trade, 10% stop loss in place

Data sourced from SharePad. The UK’s no.1 investment data & analysis software for Private Investors as voted for by FT/Investors Chronicle readers.  Discover the advantage at www.sharescope.co.uk/sharepad.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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