Dear Investors,
February finished again slightly down. There are still a number of fears in the UK economy in terms of inflation, high interest rates and an upcoming election, not to mention the economy dipping into a technical recession. I still feel we are very well positioned once the economy turns the corner.
New Positions during this month included $AMZN (Amazon.com Inc) , $GOOG (Alphabet) M&G, $OSB.L (OSB Group PLC) , Nat West and Rio Tinto. We have grown our yield to 4.6% as we are trying to grow our dividend % whilst maintaining some high growth stocks.
February Summary
February –2.80%
YTD -5.49%
2 Yr Return + 1.21%
Yield 4.6%
Risk Level 4
February Total Trades 4
February Profitable Trades 100%
Top Gainers
$BTC +46.36%
$SE (Sea Ltd-ADR) +22.81%
$DLG.L (Direct Line Group) +18.42%
$LLOY.L (Lloyd's Banking Group PLC) +11.03%
$BARC.L (Barclays) +10.27%
$RDW.L +8.92%
Although the market was generally depressed as the UK dipped into a technical recession, we did see some rebound in the banking sector where stocks were trading at some extremely low PE’s. In addition Direct Line jumped on possible take over news, whereas elsewhere Bitcoins surge has begun again in earnest.
Worst Losers
Close Brothers – 37.84%
Maersk – 24.43%
Upstart - 21.66%
Paramount - 19.50%
Bumble - 18.87%
UK Economy
Official data shows that the UK economy has entered a recession, meaning it's shrinking. The country's gross domestic product, which measures the value of goods and services produced, fell by 0.3 percent in the last three months of 2023. This follows a 0.1 percent contraction in the previous quarter.
A technical recession happens when there are two consecutive quarters of negative economic growth. The UK's economy has been struggling for almost two years. The Bank of England predicts an improvement in 2024, and the finance minister, Jeremy Hunt, believes the economy is starting to recover but emphasizes the importance of sticking to the plan, which includes tax cuts to stimulate economic growth.
$GOLD
The price of gold reached a new all-time high, hitting $2,141 per troy ounce on 5th March. This surge is fueled by several factors, including expectations of US interest rate cuts, investors seeking safe assets, and significant buying by BRICS central banks and Chinese investors. While the price slightly dipped to $2,131 later on, it still represents an increase of 0.8 percent for the day.
Investors are particularly optimistic about gold due to the possibility of a Federal Reserve rate cut in June following recent weak economic data. Gold, known for not providing any yield, tends to perform well when interest rates are lower, as investors prefer it over bonds. This recent rally in gold prices has been ongoing for 16 months, with the precious metal surging by 30 percent since late 2022, primarily driven by central banks in emerging markets purchasing record amounts of gold in response to US sanctions against Russia.
UK Housing Market
The housing shortage in England remains a critical issue, with experts asserting that targets of 300,000 new homes per year fall short of the actual demand. A Financial Times analysis suggests that England requires up to half a million new homes annually to accommodate its growing population adequately. Factors such as record levels of migration, domestic demand, and historical undersupply contribute to this pressing need, prompting calls for more ambitious housing targets from housing experts and economists.
Challenges such as greenbelt restrictions, planning bottlenecks, and a backlog of unbuilt homes further compound the issue. Despite the established target, it remains to be seen whether the UK can hit this number. Either way it will be the housebuilders who are looked at to meet the demand. In any business increased demand is a good thing and although there are numerous questions and factors still in the air in terms of interest rates and house prices the fact that the demand is strong will be a welcome relief for the industry with a light at the end of the high interest rates tunnel.
Dividend Stocks
Dividend payments in February included Vodafone and Britvic. Going ex this month we have quite a selection of our stocks including Rio Tinto, HSBC, M&G, Nat West, Abdn, Phoenix and Taylor Wimpey. These are all UK Dividend stocks as UK doesn’t need to pay withholding tax which means you will get the full dividend. You still have to pay tax if you are from a country that requires this, but it is down to you to pay this. Luckily for me in Malaysia there is no tax on dividends in the country which helps improve the yield considerably, and allows me to reinvest this into new stocks.
I will detail all the ex dividend dates and yields of our shares up coming shortly in another post so that you could potentially buy in more of the stock if you feel the need. This month I will be looking to sell a few stocks if the opportunity arises.
Take Care and have a great month
Gavin
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