‘My shares have soared’

Di­ary of a Pri­vate In­vestor

The Daily Telegraph - Your Money - - FRONT PAGE -

On the sur­face it looks as though shares have done noth­ing much over the past month. But be­neath the calm ap­pear­ance, there has been rad­i­cal change.

Big multi­na­tion­als and oil com­pa­nies, such as Royal Dutch Shell, have fallen back while com­pa­nies that pri­mar­ily op­er­ate in Britain have re­cov­ered strongly.

My big­gest hold­ing, Lloyds Bank­ing Group, is a dra­matic ex­am­ple. It fell heav­ily after the Brexit vote – from 72p to a mere 47.7p at the close on July 6. It be­gan to re­cover the next day and set­tled for a while in the low 50s.

But more and more in­for­ma­tion then came in sug­gest­ing that the Bri­tish econ­omy was not go­ing to have the sud­den slow­down – or even re­ces­sion – that cer­tain politi­cians had fore­cast. House prices have stayed up. Un­em­ploy­ment has fallen. Ex­ports, of course, have been boosted by the lower pound. Re­tail sales have risen.

The mis­er­able short-term fore­casts are be­ing proved ut­terly wrong.

As the grow­ing ev­i­dence of this grad­u­ally re­as­sured doubters, Lloyds shares moved up out of their former range on Au­gust 23 and have reached 61p at the time of writ­ing.

They have re­cov­ered by a stun­ning 24pc since the post-Brexit low, al­though they are still well short of their level be­fore the vote.

This sea change is a great re­lief to me since, as I ad­mit­ted in my pre­vi­ous di­ary, I took heavy losses on my Bri­tish-ori­ented port­fo­lio in late June and early July when such shares took a dive.

I was not brave enough at the time to mea­sure ex­actly by how much I had un­der­per­formed the FTSE 100 in­dex this year but – at the worst mo­ment – it was prob­a­bly not far short of 20pc. But I kept on buy­ing more “Re­ally Bri­tish” shares ev­ery work­ing day for more than two weeks after the ref­er­en­dum.

I held on to the be­lief that the vote to leave the EU would not in fact be bad for Bri­tish com­pa­nies.

As a re­sult of the big rally, I have seen some re­mark­able gains on some of the pur­chases I made. On July 6 I bought a few shares in Al­der­more, a small bank, at 105p, which have since gained more than 50pc. I am now in profit on vir­tu­ally all the pur­chases I made after the ref­er­en­dum.

It’s a re­lief and a plea­sure. I am glad I stuck to my guns. But, as with Lloyds, most of the shares I owned be­fore the vote are still lower than they were be­fore it, de­spite the rally. So I have still un­der­per­formed the FTSE 100 this year, but I have been catch­ing up fast and the short­fall has more than halved.

What now? Well, you will not be sur­prised to hear that I be­lieve that “Re­ally Bri­tish” shares will con­tinue to out­per­form as con­fi­dence con­tin­ues to build. I think the Bank of Eng­land’s re­duc­tion in Bank Rate a month ago was pan­icky and pre­ma­ture.

Ac­cord­ing to Prof Tim Cong­don, the econ­o­mist, one mea­sure of the money sup­ply rose by 5.8pc in the year to June – the fastest rate of growth since 2008. There was no need for the mone­tary stim­u­lus.

In view of this and the good eco­nomic sta­tis­tics, it seems highly un­likely that any fur­ther mone­tary boost will be de­liv­ered this year. It is more likely that the next move in in­ter­est rates will be up. If so, it will be par­tic­u­larly ben­e­fi­cial for banks, which will then be able to earn some in­ter­est on the money they hold.

I am hop­ing and ex­pect­ing that Lloyds shares will head back to­wards the 72p level whence they came. I am also ex­pect­ing the pound, which has stead­ied after its ini­tial post-ref­er­en­dum fall, to be­gin a re­cov­ery. That is why I am 90pc in Bri­tish shares – a higher per­cent­age of my port­fo­lio than for a decade or more.

Amid all the re­cent drama on the big stage, there has been one more mod­est, prac­ti­cal change to deal with: for many years I have sub­scribed to the Morn­ingstar pre­mium share in­for­ma­tion ser­vice, which has in­cluded profit fore­casts made by in­di­vid­ual stock­bro­kers.

These have been an im­por­tant piece of in­for­ma­tion to help me de­cide whether to buy a share. Sud­denly, with­out an­nounce­ment, the ser­vice stopped. I asked Morn­ingstar why and was told it was down to “EU reg­u­la­tion”. Whether that’s true or not, it is a change that makes the life of a pri­vate in­vestor a bit more dif­fi­cult.

It is all right for the big in­sti­tu­tions, but for the rest of us it has be­come in­creas­ingly hard to get good anal­y­sis and in­formed opin­ions. In­ter­net chat rooms are no sub­sti­tute.

‘I took heavy losses in late June and early July’

James bought heav­ily into Lloyds, whose shares have gained 24pc since their post- Brexit low

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