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David Kempton's AIM portfolio takes off

David Kempton's AIM portfolio takes off

After the Grenfell Tower disaster the Queen said in her Birthday message it was ‘difficult to escape a very sombre national mood’ but that Britain was ‘resolute in the face of adversity’.

How right she is. It’s a year since the unnecessary EU referendum that cost Cameron his job, caused sterling to fall out of bed and will lead to years of unsettled conditions. And just three weeks since another unnecessary poll, with Theresa May leading one of the most misjudged campaigns in living memory to deliver a minority government propped up by the Democratic Unionist Party, now unsurprisingly holding us taxpayers to ransom with demands for massive spending in their patch.

We’ve been stunned by a series of terrorist attacks and the tragic loss of life in the Grenfell Tower disaster. Even Hinckley Point C depresses me: we know it will be built late with massive over runs to produce extortionately priced electricity.

Meanwhile consider the wonderful surge of the renewable energy sector, contributing 50% of the UK power requirement on a blustery sunny day in early June, still lagging the 85% on one day in early May achieved by Germany.

I have always been hesitant mentioning Impax Asset Management (IPX) here in this connection since I sit on the board of one of their funds, but now managing £6.5 billion in the environmental sector their growth potential looks exceptional, with significant overseas revenue, sitting on cash, yielding 3.1% with a market cap of about 1.8% of funds under management, they look very undervalued being, in effect, a quasi warrant on the environmental sector.

Then there’s Brexit to depress us further, where negotiations will run for years.  I attended a talk to a small group, by Joschka Fischer, former German foreign secretary and much respected political commentator, where he gave us the view from the other side. I was struck by how difficult they will make it for us to break away, in order to discourage another country, inspired by the UK initiative, joining us on the outside. Most European countries have 45% to 50% exit voters, so an easy Brexit could swing several to follow our lead.

Meanwhile I keep my head down and bat on with my existing stocks and some recent buys, even though British institutions sold £15 billion of equities in the first quarter with UK economic growth of only 0.2%, the lowest in the EU, whilst Macron’s France shines with optimism. Three weeks of FTSE 100 losses, the longest losing run for a year, is unsettling too.

It’s nine months since I wrote about my Alternative Investment Market (AIM) picks to mitigate inheritance and capital gains tax. They have performed well enough and are summarised here, excluding those sold and reviewed in my April piece.

Stock Nine-month performance (%) Rating
Biotechnology developer Bioventix (BXVP) 67 Hold
Legal financing fund Burford Capital (BURF) 78 Buy
Billing software supplier Cerillion (CER) Level Hold
Wholesale and retail food and drink supplier Conviviality (CVR) 48 Buy
Healthcare diagnostic company EKF Diagnostics (EKF) 40 Buy
Technology hardware and equipment firm IQE (IQE) 192 Hold/sell
Self storage and related services provider Lok’n Store (LOK) 19 Hold
European and Afircan oil and gas explorer Serica Energy (SQZ) 93 Buy
Beauty and personal care product firm Swallowfield (SWL) 47 Hold
Student accommodation company Watkin Jones (WJG) 76 Buy
Digital publisher, marketing and online gambling operator XLMedia (XLM) 48 Hold

That’s a nine-month average of 64% and I’m pretty happy with that, albeit in a strong market.

In my April piece, I changed my portfolio slightly and bought the following:

Stock Two-month performance Rating
Oil and gas explorer production company Amerisur (AMER) Level Buy
Mexican lithium carbonate miner Bacanora (BCN) -15% Hold
Chinese biotech firm Hutchison China Meditech (HCM) 36% Buy
Indonesian palm oil grower MP Evans Group (MPE) -7% Buy
Yorkshire nutrient potash miner (SXX) 83% Buy

That represents an average performance of 16% which pretty meaningless for only two months, but decent enough.

I try and focus mostly on stocks with significant overseas trade, just in case sterling falls out of bed (again) and by some awful, not impossible, disaster we get the most left wing government in Europe, elected on a mythical manifesto of universal hand outs and nationalisation, funded by a mountainous money tree based on increased taxation everywhere.

I have discretionary money with Hargreave Hale, which bought IndigoVision (IND), a small company recovering from a long cyclical downturn but now looking very cheap.  Makers of the most advanced CCTV camera, complete with their new anti-hacking wall, they are much in demand in strong markets influenced by terrorism threats. It has cash of £5 million, a market cap £21 million, a price earnings to growth ratio of 0.1 and directors buying the stock.

I have bought more and also added to Bango (BGO), which Hargreave Hale bought for me a year ago and has since trebled.

It seems mad to buy more of a company already trebled in a year with, as yet, no sign of profits. However as an enabler for mobile phone users to make payments on connected devices, they’re on the cusp of massive market potential, having signed up for five years in Japan with Amazon, whose local annual $10bn billing is mostly paid by mobile phone, very much the Japanese (and African) method of choice and part of the culture. Amongst others Google, Microsoft and Samsung also plug into the Bango payments platform.

As ever, run the 20% stop loss and don’t bet the farm, these are risky investments.  Keep some core cautiously managed money with a solid proven manager. I use Hawksmoor, but as a director I would – there are many other high quality houses.

David Kempton is non-executive chairman of Hawksmoor Investment Management and a non-executive director of Impax Funds Ireland. He is an experienced investor, proprietor of Kempton Holdings and a non-executive director of a number of quoted and private companies. He may have an interest in any of the investments which he writes about.

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