2023 Stock Tips: How did we get on in June?

Last month we were rewarded by a couple of macro trades, namely long Bitcoin and short oil. Both were fairly tactical in nature and based on what we could see as longer term trends in the market. Interestingly, in the case of oil, we are seeing efforts by OPEC members like Saudi Arabia try to stem the drop in oil, but the bear case is too strong for cosmetic production cuts to make that much of a difference, in our view.

We continued to beef up the presence of thematic investment trusts in the portfolio in June, identifying a couple of good quality names in the market. We are now entering a slower period in the market over the summer months, and anticipate that the market will be driven more by macro-economic data (inflation and the mutterings of central bank officials) than fundamental numbers coming out of the corporate sector.

Severn Trent Water [Short LON:SVT]

Turmoil in the UK water industry, with Thames Water almost going bust and having to be bailed out, has shone the light on the way this particular corner of the utilities sector is managed. Mis-managed is probably closer to the mark. We’ve been hearing the inside story on another major water company from a senior manager, so it actually came as no big surprise to us to hear Thames Water was in trouble. As the investment community woke up to this, we thought it was time to put a tactical short on Severn Trent Water.

India Capital Growth [LON:ICG]

The first of a couple of investment trusts on the list for this month, India Capital Growth [LON:ICG] is a small and mid caps India-focused investment company, advised by Ocean Dial Asset Management in India. The fund has been putting out some pretty consistent numbers, and is investing in a market which has been doing better than most over the last few years. India Capital Growth has a compound annual growth rate of 12.9%. In the last 12 months it had an NAV total annualised return of 30.26%. Ocean Dial is now in the process of being acquired by Martin Gilbert’s AssetCo – no surprise there.

Yext NYSE:CRM

Yext organises business facts to provide answers to consumer questions in North America and internationally. It operates the Yext platform, a cloud-based utility for businesses that allows its customers to provide answers to consumer questions, to control the facts about their businesses and the content of their landing pages, and to manage their consumer reviews. We like Yext because it looks like a second tier tech stock that is limbering up for a shot at the big time. It has a big following on Wall Street. Definitely one to watch, even with the recent profit taking on the shares.

Literacy Capital LON:BOOK

Literacy Capital seems to us like the gift that keeps on giving. The sweet spot for this fund is businesses which are generating between £1m and £10m EBITDA and with their HQ in the UK. One of Literacy Capital’s key differentiating factors is that the majority of its directors have founded or scaled large businesses. It is structured as a permanent capital vehicle which means the management team can be both more patient and more ambitious. Literacy was set up with a charitable purpose, rather than solely to generate returns for shareholders. The fund makes an annual donation to literacy charities, equivalent to 0.9% of net assets at the end of each year (hence its name).

Sold in June: Silver, Next Energy Solar

So how are our picks getting on?

Tactical trading portfolio

These are shorter term equity and commodity trades which we can see playing out within one to three months. We will sometimes keep these on longer if the trade is still quite range bound but we are anticipating further upside. These trades have the tightest risk parameters.

*Prices as of close of play on 30th June 2023

Longer term buy and hold portfolio

These are positions where we see a longer term growth scenario, usually in the small to mid cap space, but sometimes larger companies. We will typically be keeping these stocks on the list for at least six months and often longer. Consequently our risk tolerance is higher for these positions than for the trading list.

*Prices as of close of play on 30th June 2023

Venture portfolio

These are companies which we see as having long term and considerable growth prospects. Due to their size and the nature of the business they are in, we feel that our normal risk management constraints should not be applied to these stocks.

*Prices as of close of play on 30th June 2023