How did we get on in December 2021

December is always a game of two halves in stocks, with the market slowing down considerably in the second half of the month as most of the trading world packs its bags for the ski slopes, the Caribbean, or the festive hideaway of their choice.

This leads the equities market to do strange things as liquidity drops. This year the focus was also on the advance of the Omicron variant of the Covid virus, which was causing some knee jerk reaction selling from some nervous investors. Inflation in the UK and US, and indeed globally, was also a theme. We flagged this up in our 2022 risks forecast and we expect it to be an ongoing theme in 1H 2022 which investors will have to take into consideration.

Royal Mail Group

We added Royal Mail Group [LON:RMG] to the shorter horizon portfolio largely because it still seems so cheap and we feel the market has not yet got to grips with the crazily low valuation on the stock. We started looking at it more closely after the company was flagged up by fund manager Ian Lance of RWC Partners in his ‘stocks for free’ analysis – i.e. arguing that if one slice of the Royal Mail business is worth what the market is currently valuing it at, then the rest of the business if effectively free for investors. We entered the trade at 495p just before Christmas.

Kingfisher

Kingfisher [LON:KGF] was another company that popped up on our radar just before Christmas. We bought shares at 343p on Christmas Eve. Kingfisher has already been a big earner for investors, and we remain bullish on its future prospects in 2022, especially its forecast EPS growth. Revenues also continue to look impressive, up by 18% over the course of 12 months. Kingfisher also has an extremely impressive balance sheet and operating income which is also up 31%. All the numbers seem to be pointing towards further growth in 1H.

S4 Capital

We sold out of S4 Capital [LON:SFOR] when it triggered our 10% trailing stop loss level on our tactical trading portfolio. We entered the trade originally at 580p on 16 April and rode it to its high point which it achieved on 23 September. Since then the stock has been slipping, forcing an exit at 790p. This still allowed us to lock in a gain of 36% on the trade since April. S4 Capital reported this month (January) that trading was still ahead of guidance, but we are not as bullish on the stock as we were in April. We will continue to monitor it as we still think it represents an excellent business in the advertising sector which is ahead of the curve in its thinking.

Generac Holdings

Leaving the buy and hold portfolio on 1 December was Generac Holdings [NYSE:GNRC]. We liked the stock because it is in the power storage space in the US, where we feel there will be considerable demand. The market seems to have agreed and we saw the price head up from our entry at $430 on 16 July to hit a peak at $524. The stock has been on a downtrend since then and finally triggered our stop loss. We would agree with Alpine Capital’s view on the stock, that it represents a long term buy and  hold opportunity for investors who are prepared to ignore drawdowns in excess of 20%.

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 31st December 2021

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 31st December 2021

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 31st December 2021

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