Our 2022 Picks: How did we get on in December?

As I mention on our next podcast, which is in post-production, 2022 is not going to be a year which many investors will remember fondly. The volatility is not something which is discouraging active traders, however, if data out of broker Capital.com is to be believed. It was a year that required a fair bit of agility in terms of portfolio management, and some out of the box thinking too. But I'm personally glad to see the back of it.

Like many other investors, we had our disappointments. But the house cleaning we did earlier in the autumn meant that we gave the rest of the portfolio room to breathe. We also took the opportunity to add a couple of short positions onto the trading portfolio in late November which paid dividends in December (see below).

The performance numbers below on short trades are without leverage: if you are shorting stocks with leverage, for big stocks like Tesla you can get x3 in the ETF / ETP market, and with CFDs you should be able to get x10. So picking short trades can be a profitable art in itself, even in these markets.

Babcock International Group [LON:BAB]

We added Babcock to our longer term 6+ months portfolio. I wanted another defence stock in that portfolio which also had scope for some upside growth. This looked to me like a very positive recovery story, with scope for at least x3 ascent in the stock price. Babcock was still cheaply priced when we bought stock at 291p. Bear in mind Berenberg recently issued a target price of 425p in November. The financials are strong: a peer analysis exercise showed that Babcock looks in better shape than BAE Systems for example. It also has a new management team which should start to make its presence felt in 2023.

Brent Crude (Short)

A quick word on this short position, which we added when oil was looking toppy at $92. I felt that the legs were about to come out from under the oil price, which has admittedly been a decent long trade in 2022 (see our 40% gain on BP shares for example). This is the kind of trade which could be effected using an inverse Exchange Traded Fund on Brent crude or indeed Contracts for Difference or spread betting. I could see a number of factors coming into play in December as the global oil market adjusted to the ongoing war in Ukraine, and with the potential for new sources hitting the market. $100 oil just seemed too far out of reach.

Tesla (Short)

Tesla was another stock which was just begging for a short in November. I think the big catalyst for me was the closure of Elon Musk's acquisition of Twitter. We had been short Twitter when the deal was done because of what we considered to be the undisclosed issues surrounding Twitter's business model. I felt Musk would be distracted now with sorting things out at Twitter, and would take his eye off Tesla. There are a variety of other factors underpinning a further decline in the value of Tesla, not least the crazy valuation on the stock and further competition from mainstream auto makers.

HealthEquity

Sadly we had to sell HealthEquity as the US healthcare support services stock breached its trailing stop loss. Ironically this comes at a time when market sentiment around the stock is changing. We note there was a significant decrease in the short interest on the stock in December, down 11.3%. Goldman Sachs moved the company from sell to neutral. They have also now moved their price target to $70. Deutsche Bank also raised its target price to $68. We wonder whether the company's debt is still keeping institutional investors away from the stock, although it is not outrageous. Still, the rules are the rules...

Sold this month: - HealthEquity

So how are our picks getting on?