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David Kempton's AIM portfolio takes off

David Kempton's AIM portfolio takes off

by David Kempton Jun 27, 2017 at 14:19

 

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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Comments  (11)

  • RBNF: 

    Perhaps stating the obvious but Aim shares tend to feature a wider buy/sell spread than that for the large and giant companies.

    In determining the 20% stop loss it is sensible to figure the 20% stop loss on the sell price at the time of purchase

    18:01 on 27 June 2017

  • Robert Ray: 

    So what I wonder is wrong with IQE in Mr Kempton's eyes?

    They have done very well so far...

    Any insights would be appreciated

    18:17 on 27 June 2017

  • Robert Ray: 

    I found the whole tone of the article full of woe and doom

    Sh** happens, but it's a new day every morning, we cope

    The UK always does, too many bright sparks to not make a success of Brexit or even re-join down the road, change happens just as much as the stuff that flies towards fans

    hurrumph

    18:27 on 27 June 2017

  • Beagle: 

    Another doom and gloom monger. It's about time that Mr Kempson puts all his negative thoughts behind him and got behind the Country. The balance of trade is clearly in our favour and there is no way that German and French car manufacturers, not to mention French and Spanish food suppliers will allow their Governments to sell us short.

    Also massive spread on some of Mr Kempson's Aim companies which must be a positive disincentive.

    21:23 on 27 June 2017

  • David 111: 

    Bit rich to talk about a mountainous money tree with reference to Labour when the Conservatives appear to have found one of their own and are shaking its branches over northern Ireland.

    22:27 on 27 June 2017

  • Gonk: 

    Two quick points:

    1. Any money is worth spending to save us from Stalinism. The gullible middle classes + their attendant snowflake offspring have fallen for the sweeties proposed by Labour. In amazing contrast, the working man has moved to vote for the Conservatives. I side with the sense of the latter over the former.

    2.Totally agree with David Kempton on the Hinckley Point C disaster. What no one recalls or is willing to recall is that the assorted blue rinse brigade (of both genders) campaigned to the death to prevent the Severn Barrage from progressing: these include worthies such as The National Trust, The RSPB and The Friends of the Earth (in reality the Enemies of...). The last named fought for coal mining and against nuclear power when all informed people at that time had realised that coal was the deadlier. Then they campaigned against The Severn Barrage in favour of nuclear power. Utter madness, especially as a nuke station has a life of just 60 years and then needs decommissioning (if indeed it can be done). The proposed barrage would have lasted for 200 years and given the power of 3 nukes.

    08:24 on 28 June 2017

  • lp: 

    I feel the need to point out that the renewables will not be generating much energy when the suns not shining and/or the winds not blowing, Mr Kempton.

    UK energy policy leaves much to be desired, I agree. But with the demise of coal, the political risk of relying on foreign gas, we need certainty of a back up to renewables which still provide only a small % of our overall energy needs.

    Glad that Mr Kempton highlights the importance and the potential of backing AIM shares. If you are backing small, domestically focussed stocks, you surely have to believe in the future opportunities for the UK economy, don't you? I wouldn't waste too much time listening to a German ex-politician, no doubt despatched to 'soften up' the British comentariat before the EU chips away at our negotiating position, and pushes us to accept a poor deal.

    Note to Davis and May: "Be prepared (and have the backbone) to walk away"

    11:44 on 28 June 2017

  • Jaymak: 

    I am ambivalent about Brexit but the continuous doom and gloom forecasts from "remainers" irks me. I read that 18000 jobs in German car industry are at risk if there is a "hard" Brexit. Additionally Germany has a massive surplus in it's balance of trade with UK which must be at risk of EU insists on a punitive outcome to ensure other EU members don't leave. It would also seem that only Germany will have the ability to pick up the tab to cover shortfall in funding after UK leaves.

    16:51 on 28 June 2017

  • RBNF: 

    I would say round 1 last week went to the European corner. It wouldn't be the last.

    UK is not going to dictate the agenda for Brexit .

    A country that pulled off a reunification post Berlin wall, absorbed several 100s of thousands of refugees last year and won 3 world cups is not going to cave in to a British Agenda for Brexit because of a perceived imperative to sell increasing numbers of German cars!!

    This is divorce settlement is going to be a some way short of the political promises of last summer.

    17:12 on 28 June 2017

  • Gonk: 

    Ip : so long as the moon keeps loping around good old Earth then tides will flow, and to the minute each day, so a barrage is a great option.

    RBNF : I have owned Mercedes cars for many years and will never (similarly to many owners I have spoken to) buy another one or indeed any EU made car in the future if the Germans go for a punishment kicking of the UK.

    Hard Brexit/Soft Brexit - it is solely the choice of the Germans and French not us.

    17:24 on 28 June 2017

  • martin cragg: 

    According to the Barclay Stockbroker website the current p/e of IND is 39.1 so DKs statement that the p/e to growth ratio is 0.1 suggests growth of 390% this year. The AGM statement suggested possible modest growth this year and most certainly nothing approaching his forecast. I also note that director buying totals £22k so far this year, hardly a ringing endorsement of company prospects.

    22:52 on 28 June 2017

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