S Britain Is Back

Today Britain is back at work and we have 3 or 5 company news items from the Mother Country. It is buoyant because England is going to reopen earlier than expected thanks to the speedy rollout of Covid-19 inoculation.

But consider macro-effects of the Biden Administration's spending spree. It used to be said that when America sneezes Britain catches a cold. But now there is a reverse process at work. The US stimulus package benefits British investors two ways, writes George Trefgarne of Boscobel and Partners in a post published by UK brokerage Hargreaves Lansdown:

“First, by lifting demand for goods and services across the world. The Paris-based OECD (Organisation for Economic Co-operation and Development) last week upgraded its estimate for world GDP growth in 2021 by 1% to 5.6%. It said: 'Vaccine rollout, although uneven, is gaining momentum and government stimulus, particularly in the United States, is likely to provide a major boost to economic activity.' 'The OECD’s analysis raised its forecast for UK growth to 5.1% for this year and 4.7% in 2022 – up from its December estimates of 4.2% and 4.1% respectively.'

“The Bank of England joined in. Alongside its decision to hold interest rates at 0.1%, it said that since February, 'developments in global GDP growth have been a little stronger than anticipated, and the substantial new US fiscal stimulus package should provide significant additional support to the outlook.' 'Chancellor Rishi Sunak was too downbeat about the outlook for the British economy in the Budget. He based his tax numbers on the forecasts for the economy from the Office of Budget Responsibility which completed its work in February before the US stimulus was approved. It said it is predicting only 4% growth in the UK this year, though an acceleration next year.” (The OBR has now restated estimates for the 2020-21 fiscal year ending in April saying its forecast 'looks set to undershoot our latest estimate').

“The second benefit investors could see from the US stimulus package will likely be through the stock market. A poll of more than 400 citizens with brokerage accounts by Deutsche Bank found that the growing number of American retail investors plan to invest substantial amounts of the stimulus cash. Investors in the 25-34 age group plan to invest 50% of their payments. It’s also been estimated that retail investors are likely to buy up to $3 bn worth of equities on the stock market once the stimulus cheques land.”

“If the outlook for the world economy is so positive, how come stock markets, especially in the US, have been so volatile in the last month? The answer could be that investors are starting to worry that a rapid recovery could bring inflation. The Federal Reserve raised its inflation forecast from 1.8% to 2.4%. These worries have found their way into the bond market. The 10-year yield on US Treasuries have hit 1.75%, their highest since before the pandemic. However, a prolonged rise in inflation is unlikely. Unlike in the 1970s, there is no shortage of commodities like oil, natural gas, metals, or foodstuffs. Additionally, technological advances in, say, retail distribution, continue to bear down on prices. Another source of inflation can be employees demanding pay rises. But with unemployment on the rise in the wake of the pandemic, that is not likely to gather steam any time soon.”

Note that the pound sterling fell against the dollar today after the long weekend ended.

British Stocks Gaining

*BP plc, the UK-based oil company, rose 4.33% in London and 3.54% at the US opening. It revealed that it had divested assets worth $4.7 bn, hitting its target nearly a year in advance during Q1. It expects it will end the year with sales proceeds at the top end of its planned $4-6 bn range. BP has completed $14.7 bn in transactions already and received about $10 bn.

BP earlier set its debt target for Q4 2021 to Q1 2022, but now is ahead of plan as it will lower its debt by $35 bn in the first quarter. It also will move more quickly with buybacks, speeding up its target for $2-2.5 bn purchases of its own shares starting later this year rather than in 2022.

*Atlantica Sustainable Infrastructure plc is a UK fund part-owned by Canada's Algonquin which Harry Geisel wrote up for our readers as a way to gain tax-free income. It is listed on Q as AY. It distributes earnings tax-free to its owners on condition that they keep their stock. It missed estimates of eps of 48¢/sh by 38¢ for Q1 but the numbers are behind a firewall along with CEO Santiago Seage's comments. It joined the geothermal revolution by buying the 3rd largest US power plant using it, Coso of Californian. Thanks to the Biden plan spending on infrastructure, AY rose 4.2% today. Its earnings are irrelevant because it distributes funds generated by its holdings whether or not they have been distributed. More fund news below.

*BAE Systems plc says it won an indefinite-delivery and quantity order from the US Air Force for its F-16 aircraft support equipment worth $600 mn over 10 years. It covers not just equipment but also training, engineering, specialized testing equipment, and support in over 25 countries. Elbit Systems of Israel acquired BAESY's Rolar International of Jerusalem for $31 mn. It makes and supports high-end GPS receivers and guidance systems for advanced defense applications. Its chief scientist, Jeffrey Dodson, was named to the US Defense Dept's CMMC Accreditation Body for cybersecurity.

*While only theoretically British, Antofagasta of Chile has its primary listing in London for historic reasons. The mining firm is the no. 2 top choice for stockcube (investorsintelligence.com) as of today. We have owned it for while because Dr. Copper is the herald of recovery. Stockcube has a target price for ANFGF (its US ticker) of £21.5 vs £17.8 today. It also covers Hargreaves but no other share we hold. ANFGF is up 2.7% here today.

*Reckitt Benckiser Group plc came off its 5.782 pence low today after rising 2.822%. RBGLY is worth watching but not buying now. RBGLY.

*As Deliveroo stock crumbled at their IPO, Goldman Sachs bought £75 mn of the shares, about 25% of the offering. It managed to avoid losses on Archegos but not on new listings.

Drug dealers

*Astra-Zeneca's covid-19 jab was determined by the European Medicines Authority to have some link to serious blood clots but the mechanism is not understood, according to an interview which its head of vaccines Marco Cavalieri game to Il Messaggero, published today. AZN stock opened down but the rescue team intervened to hold it to Monday's close in London. It fell 0.23% here. AZN.

*Halma plc, supplier of drugs to the Arab world but listed in London as HLMAF, was rated buy by momentum-tracking investorsintelligence.com today at £24.38 near its YTD high.

*Compugen will present data on its phase 1 trail of COM701 at the AZCO convention on April 28. CGEN.

*Teva will present Q1 data on April 28 at 8 am NY time. TEVA stock fell 0.9% on the news but recovered some of that.

*Dr. Reddy's of India gained 1.12% today as the covid-19 levels soared and now is up 1.34%. RDY.

*Spanish Grifols, GRFS, rose in Madrid but then fell here. It develops treatments for diseases from blood plasma.

*Bristol Myers, a stock I own and inherited for its cancer portfolio, lost 1.42% on revelations that it used offshore havens to book profits in to avoid US taxes. It will become a target for Janet Yellen and Pres. Biden who want to craft a minimum tax deal among IMF member countries to stop this. BMY.

*Zymeworks recuperated from its drop yesterday, rising 1% to $31.54. ZYME is Canadian.

*Novocure of Israel and the Channel Islands reports April 29 at 8 am. I am selling rather than rise that early. NVCR uses electric fields to disrupt the cell division of cancer cells. I need losses for 2021 taxes.

Funds

*Canadian General Investments reported on YTD and 12 mo returns as of March 31. So far in 2021, its net asset value gained 4.8% and its 12-mo NAV gained 94.3%, a near double. Its benchmark, the S&P/TSX composite, rose 8.1% in the quarter (a miss) but only 44.2% in the 12 months. The main factor which hur CGRIF (as it trades here) was use of leverage, which was 16.1% in Q1, down from 16.8% at the end of 2020 and down 30.8% from March 2020. It closed the March quarter this year with a share price of $35.99 (Can.) giving YTD shareholders a return with dividends reinvested of 4% for Q1 and 89.9% for the year. By sector, its positions as of the end of March were: Information Tech 26.6%; industrials 22.7%; materials 16.4%; consumer discretionary 11.8%; financials 10.3%; energy 4.7%; real estate 3.6%; communication services 2%; and healthcare 1.3%. Its top holdings were Shopify, 6.9%; Canadian Pacific 4.4%; West Fraser Timber and Franco Nevada both at 3.6%; First Quantum Minerals 3.4%; Nvidia 3.3%; Amazon 3.1%; Lightspeed POS 2.9%; Mastercard 2.8%; and Square 2.7%. The fund run by Morgan Meighen & Associates since its foundation in 1929, now in the 3rd generation of Morgans. I have a substatial holding and do not invest in any of their positions. CGRIF is up 0.51% in US$s.

*New Ireland Fund is off 0.25% today. Ireland is the biggest site for offshore tax evasion by US firms. IRL.

Miscellaneous

*Solar panels maker Canadian Solar recouped most of its loss yesterday over bad relations with China where the panels are made. CSIQ is a pick from green energy guru Max Deml of Vienna. Its 12-mo high was US$67.39. It is now $47.97, well down.

*Royal Dutch Shell B shares rose 0.25%, not matching BP. RDS-B.

*South Korean Coupang recovered another 1.5% at the opening here and now is up 1.6%. CPNG.

*Mercado Libre, which is a similar outfit in Latin America, gained 3% today on no news. MELI.

*Tomra Systems is still bipolar. Its TMRAF US share is up 5.9% and its TMRAY ADR is up 3.1%. Where are arbritrageurs when we need them? It makes bottle return and sorting machines in Norway sold worldwide to, among others, my local Whole Foods Market.

*NIO is up 2.3% because it sells cars well in China. NEO sells motorized bicycles.

Finance

*I was wrong writing yesterday that the Japanese banks did not lose money on the Archegos collapse. Today's Financial Times saw Leo Lewis, no relation, their Tokyo correspondent peg the loss at Mitsubishi UFJ (MSBHF) at $270 mn and that of Sumitomo Mitsui (SMFG) at a similar amount. We stand to lose alongside Warren Buffett who bought into them after I did. SMFG is down 2.4% and MSBHF 0.32% reflecting their size.

*Our best performer in finance is Scottish Standard Life Aberdeen which is exiting fund management in the USA. It gained 5.52%. SLFPY.

Commodities

*Gold funds including our SPDR Gold saw $221 bn of inflows in Q1 of this year but failed to keep up with the 0.9% rise in the price of physical gold on Comex. GLD.

*Trans-Siberian Gold, despite being founded by some Harvard grads (how I got into it) is now under offer from Horvik Limited, a bidder for all shares outstanding, starting with 51.2% from its major holders and will bid for the rest for £1.18/sh or better. TSG mines gold in the Russian Far East. I own shares held in a UK bank account by my British husband (the account was created when he was born by his grandpa and I became a co-signatory in 1964 on marriage to him). Under the Obama rules I am not allowed to have a personal account with a UK bank but my husband is allowed to. I wrote about the stock before the Obama-ban. I intend to get the money and pay US taxes on my gains when this happens.

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William K. 1 year ago Member's comment

Always interesting and always informative, V.L! Thanks.