Contrarian Chat

[johnhemming]

I had my post as to the stocks I bought today viz TLW@10 BILB@16 and DGOC@64.5 deleted from HYP practical because two of the stocks are not HYP.

I am often happy to be described as a contrarian because often when people are selling I am buying although I hold stocks for various reasons.

I thought it might be worth starting a contrarian chat to discuss a number of stocks that people think are oversold. In many ways this is good time.

I don't think the Russians are going to keep this oil war going for that long, but who knows. In the mean time there are hedging strategies in place for DGOC and TLW which provide some protection and with a bit of luck we will find out more about TLW on Thursday. DGOC had their reports today.

[dspp]

Good thread call. You could also try this as :

1. An entry point for TSLA if you think the underlying thesis still has legs.

2. Ditto an entry point for HUR if you still think the fractured basement full of easily produced oil has legs.

3. Entry points for RDSB and BP if you still like the look of oil majors.

4. A fantastic entry point for Airbus, (AIR.PE, down from 133 to 89) especially if you think Boeing are not going to be able to come off the ropes fighting.

Those are my ideas. I'm overweight the first three, and so overweight oil I will not be ananalysing your picks, so maybe I will sweep some spare cash into 4. Hmmmm......

regards, dspp

[johnhemming]

I don't really invest outside the London market. The London market has a lot of international stocks. I spend most of my time on my new business (

Moderator Message:
Company name removed

) which is going quite well so I don't want to spend too much time on market research.

Hence I monitor about 30 stocks which I pick up as stocks which I think are undervalued.

Hence I have no view on TSLA that is well informed. It strikes me as toppy, but is is not the sort of stock I would be likely to invest in anyway (much that I did look at making electric cars in the past).

I have no view on HUR.

I sold most of my RDSB in early February, but have not spent much time studying it in detail. I think it is probably too big for me to get easy answers. I am a little worried as to where its hedging position is, but it is probably OK.

I have BP on my monitor, but only really for monitoring trends. I would prefer RDSB to BP any day and there would have to be a big difference in FCF yield or dividend yield for me to consider BP.

I have no view on Airbus.

I sold most of my FXPO a few weeks ago, but regret not selling all of it. I have, however, held onto certain UK stocks (NAH, REDD) for stockpicking reasons.

What seems to be happening is a general selling of the market. I expect over time for there to be a differentiation, but I think the index tracking is causing a failure of differentiation.

[dspp]

I don't really invest outside the London market. The London market has a lot of international stocks. I spend most of my time on my new business (

Moderator Message:
Company name removed

) which is going quite well so I don't want to spend too much time on market research.

Hence I monitor about 30 stocks which I pick up as stocks which I think are undervalued.

Hence I have no view on TSLA that is well informed. It strikes me as toppy, but is is not the sort of stock I would be likely to invest in anyway (much that I did look at making electric cars in the past).

I have no view on HUR.

I sold most of my RDSB in early February, but have not spent much time studying it in detail. I think it is probably too big for me to get easy answers. I am a little worried as to where its hedging position is, but it is probably OK.

I have BP on my monitor, but only really for monitoring trends. I would prefer RDSB to BP any day and there would have to be a big difference in FCF yield or dividend yield for me to consider BP.

I have no view on Airbus.

I sold most of my FXPO a few weeks ago, but regret not selling all of it. I have, however, held onto certain UK stocks (NAH, REDD) for stockpicking reasons.

What seems to be happening is a general selling of the market. I expect over time for there to be a differentiation, but I think the index tracking is causing a failure of differentiation.

You may be right about the influence of index trackers, I've not looked for any hard data. You could make the reverse argument.

I agree with your preference for RDSB over BP, though events could swamp the differentiator.

For Airbus you will have to go to Paris, Amsterdam, Frankfurt, Madrid. I'm afraid Westminster couldn't be bothered. The main short term risks are the extent of cancellations/delays due to client weakness arising from the CV epidemic; the possibility of Boeing getting a solution for the 737-MAX; and the medium term risk of global economic weakness and/or pivot away from aviation. The A400 woes have largely passed, and regrettably they closed the 380 line to get another 320 line in. If Boeing accelerate their 737 replacement then Airbus will have to respond, but Boeing are weakened on so many fronts I am not sure Boeing could do that and retain any pretence of being a private corporation.

I had taken the view that at 138 the MAX opportunity had passed me by (up from 83 in late 2018) and so mentally berated myself. It is now back down to 89. Order book remains strong, for now .... Low oil price will help a swift rebound.

Whether there are any benefits on preferring one or the other exchange I do not know - can anyone help ?

(In the past I have found Madrid has a witholding tax that was a PITA on Santander. From RDSA I recall similar. Are Frankfurt or Paris any different ?)

Any other views out there ?

Not that I generally sit on a lot of dry powder so this would be a small buy. Is there a reason to rush ? Are the Russians and the KSA just engaging in something pre-cooked ?

regards, dspp

[johnhemming]

You may be right about the influence of index trackers, I've not looked for any hard data. You could make the reverse argument.

I think the fact that pretty well everything is being sold is symptomatic of that.

For Airbus you will have to go to Paris, Amsterdam, Frankfurt, Madrid.

You may be right about potential. This, however, would take quite a bit of number crunching. It is not necessarily the sort of stock I would pick up.

(In the past I have found Madrid has a witholding tax that was a PITA on Santander. From RDSA I recall similar. Are Frankfurt or Paris any different ?)

AIUI quite a bit can be accounted for under dual tax, but if you are using a tax wrapper it is an issue. I do hold SAN (as SAN rather than BNC) RDSA is in a sense a reason for the existence of RDSB.

[monabri]

I don't think the Russians are going to keep this oil war going for that long, but who knows

I had the same thought...it does the Russians and Saudis no good to go down that route.

[hiriskpaul]

I have made quite a few small purchases this morning across our family accounts. Broad geographical trackers plus top ups to some FI positions I already hold, Enquest/Premier Oil bonds which have been hit very hard, Co-op Group 2026 final repayment notes (ytm back to 6.65%), Raven convertibles RAVC (ytm 11.3%) and even Balfour Beatty prefs BBYB. BBYB matures at the beginning of July and will produce a profit of 2.3% after costs. Small gain, but much better than cash and chances of default extremely remote. I was hoping to pick up some more of the safer PIBS, but there has been very little movement so far. Trimmed back on a US Treasuries ETF in my SIPP to help raise funds.

ps, the markets view on bank shares look overly pessimistic to me, but I have not purchased as I still have significant exposure to bank prefs. I reckon governments and central banks will throw the kitchen sink at keeping the global economy from going into a prolonged slump, so effectively bailing out the banks again.

[dspp]

I picked up a few Airbus at €93, using Paris as the withholding tax was lower than Frankfurt or Madrid. I was wrong about it being on Amsterdam, it is just a Dutch holding company.

The US will now announce that the 737-MAX will fly or else, and I'll be out of pocket knowing my luck !

regards, dspp

[redsturgeon]

I'm being contrarian by not buying anything today. I think things will get worse before they get better.

John

[Howard]

I’m retired and possibly a bit contrarian and, having seen a few downturns, have a significant cash element in my portfolio which has been earning virtually nothing for a few years. But, apart from a minor flutter, am not investing yet.

The reason is that I have seen a major change in the behaviour of my immediate social group. To my surprise, forty year old friends who share my sporting activities, suddenly stopped shaking hands a week or two ago and now are giving apologies. A couple of group activities for age 60+ participants are being cancelled for the foreseeable future, involving significant financial cancellations. And personally Mrs H and I are happy to go to the supermarket etc but are now cancelling plans to attend a couple of events involving travelling to London. It is likely that the events will be cancelled as we are typical potential attendees.

I can’t believe that many affluent retired people will be booking cruises, international holidays or even anything involving mass catering. Nor can I believe, judging by friends’ behaviour, that they will be considering shopping trips, buying a new car or committing to substantial expenditure involving meetings in crowded places.

So, if I’m right about this group of affluent consumers, the economy is in for a fairly lengthy shock.

And I’m very sympathetic to those who are working in people oriented operations. Casting my mind back to a role running an operation involving a large amount of human contact it must be very difficult to plan the immediate future.

For these reasons, now may not be the time to invest more cash.

regards

Howard

[johnhemming]

I would agree with the idea that there will be a knock on effect. I still expect the infectiousness to reduce over the summer and pick up in the winter, but I think the genie is essentially out of the bottle.

Hence from an economic perspective things hospitality is likely to suffer.

[flyer61]

Slightly off topic (I think).

Doris and I have just returned from a two day sojourn to our Capital. Specifically we were in the West end area. It is quiet! Harrods was very quiet, Fortnum and Masons was positively glacial. Bought a small purse/bag and we were given champagne at F and M!

Had a good look at the shops along Sloane Street and the staff are doing their nails and playing on their phones.

Smokers are still in abundance. Expect big tobacco to ride this out.

In the two days you could count on less than 2 hands the number of people wearing a face mask. BBC please take note.

I am sensing we haven't reached the bottom yet there maybe further big down days to come.

[johnhemming]

there maybe further big down days to come.

You may be right about this for individual stocks. The response of the Saudis to the oil glut has added to this last few days' exercise. I would not myself expect a lot more general selling of the market as a whole. I would expect the market to bumble along roughly where it is until we have a better idea as to what is happening.

Carnival, for example
https://bgr.com/2020/03/09/carnival-cor ... ap-prices/

Will suffer in this FY. What will happen in future years is unclear.

[dspp]

I picked up a few Airbus at €93, using Paris as the withholding tax was lower than Frankfurt or Madrid. I was wrong about it being on Amsterdam, it is just a Dutch holding company.

The US will now announce that the 737-MAX will fly or else, and I'll be out of pocket knowing my luck !

regards, dspp

I think that's a shrewd move that might just pay back handsomely. Of course, Boeing won't go out of business, US politicians will ensure that. But - I have a sneaky feeling that the 737 Max might just get an early retirement. As quietly as possible of course and with as positive a spin as possible. It seems every time engineers look again carefully, they find more technical issues with the 737 Max. I would think by now that there is a top level team working in secret on the new 737 Max replacement and I expect they are working flat out to accelerate the new single isle air frame in record time whilst being totally focussed on the mistakes made on the 737 Max. I'd have my very best engineers on that right now. Meantime that means Airbus Indutstrie can make hay while the sun shines. I also expect that the new single isle aircraft the Chinese are licensing, I forget the name, will be getting the hard sell in Asia and African states too.

You mean the Comac C919. I too think this will give Comac a good run at an opportunity, though it will be the subsequent aircraft that will be the properly competitive one. I have considerable respect for Chinese engineers.

My timing could have been better. Now down to €89. Anyway it is now back to sitting on my hands waiting to see how this all plays out.

regards, dspp

[Howard]

Looking at the US market behaviour, it could be argued that anyone making a big investment now is betting that President Trump and his main Democrat rivals are not going to be tested positive for the virus.

After years of a bull market we are conditioned to think that downturns are transitory and it is worth buying the dip. I am asking myself the question: if a major figure in the US is tested positive, won’t the US market drop like a stone? If this happens the rest of the world's markets will drop too.

So I’m not buying and don't expect to for some time to come.

regards

Howard

[redsturgeon]

Looking at the US market behaviour, it could be argued that anyone making a big investment now is betting that President Trump and his main Democrat rivals are not going to be tested positive for the virus.

After years of a bull market we are conditioned to think that downturns are transitory and it is worth buying the dip. I am asking myself the question: if a major figure in the US is tested positive, won’t the US market drop like a stone? If this happens the rest of the world's markets will drop too.

So I’m not buying and don't expect to for some time to come.

regards

Howard

Hmmm I was thinking the same but then I thought if Trump was tested positive would he actually admit it?

John

[johnhemming]

I think Merkel is essentially right about the virus. Over a period of 2-3 years we should expect the majority of people in temperate climates to be infected by the virus. This will happen moreso during colder periods. Ministers of health are not immune to infection. People who we should worry about are the vulnerable: over 70, smokers, diabetics, people with hypertension, certain genotypes, etc.

Otherwise we will have to live with it. As far as Europe is concerned I think the CFR will be quite a bit less than the WHO are stating. I think the number of people who are infected has been substantially under measured. It is only really on cruise ships that there has been anything like exhaustive testing and I don't know if even then everyone has been tested.

The more complex question is when the weather gets warm enough to reduce the rate of infection.

[Howard]

My view is that markets may still have some way to fall. In my earlier comment about the reaction of the US market to a senior politician contracting the virus, I should, of course, have added that the reaction may be the same if a couple of US celebrities are infected. Tom Hanks may be the first example?

And I wouldn't bet on plane manufacturer shares increasing in the near future. There may well be a surplus of nearly new planes available to surviving airlines for almost as long as it takes Boeing to redesign a safer single-aisle jet.

On a slightly different front. Have others thought that the coronavirus problem in a month or two might be emanating from the USA? Do we want all US air travellers to Europe to mill around in Heathrow waiting for connections?

regards

Howard

[dspp]

My view is that markets may still have some way to fall. In my earlier comment about the reaction of the US market to a senior politician contracting the virus, I should, of course, have added that the reaction may be the same if a couple of US celebrities are infected. Tom Hanks may be the first example?

And I wouldn't bet on plane manufacturer shares increasing in the near future. There may well be a surplus of nearly new planes available to surviving airlines for almost as long as it takes Boeing to redesign a safer single-aisle jet.

On a slightly different front. Have others thought that the coronavirus problem in a month or two might be emanating from the USA? Do we want all US air travellers to Europe to mill around in Heathrow waiting for connections?

regards

Howard

Well Airbus are down to 77 now, so clearly I am the kiss of death for any shareprice.

regards, dspp

[Howard]

My view is that markets may still have some way to fall. In my earlier comment about the reaction of the US market to a senior politician contracting the virus, I should, of course, have added that the reaction may be the same if a couple of US celebrities are infected. Tom Hanks may be the first example?

And I wouldn't bet on plane manufacturer shares increasing in the near future. There may well be a surplus of nearly new planes available to surviving airlines for almost as long as it takes Boeing to redesign a safer single-aisle jet.

On a slightly different front. Have others thought that the coronavirus problem in a month or two might be emanating from the USA? Do we want all US air travellers to Europe to mill around in Heathrow waiting for connections?

regards

Howard

Well Airbus are down to 77 now, so clearly I am the kiss of death for any shareprice.

regards, dspp

Sympathies! My portfolio has probably fallen just as much so I'm in the same boat (plane?) .

And forgive me for continuing to refine my earlier comment, I should have also forecast that the markets would tumble further if the US President was apparently healthy but making even more irrational decisions.

regards

Howard