Overall my portfolio was down 8%. There were very few bright spots in what was a sea of red. The only really significant positive is that I started the month rebasing some of my holdings, in MPAC and AEO so I had some cash out at prices that were, compared to month end, quite good.
Whilst I have for some time been saying there is little obvious value in the market the Coronavirus shake down has reset this. Except that at the moment the true size of the issue is not known and so any company could be very open to significant, in fact potentially terminal disruption.
In the mega scenario we as a first stage get the initial supply side issues, which have been explicitly stated by Apple and some of the car manufacturers. This may or may not get worse. China being aware of the issue has already ordered most of its provinces to reopen production.
As a second stage we get demand reduction as people either reduce consumption through fears of ongoing supply, ie I have the last few and will only use them when I have too, or because issues over demand have caused them to need to maintain liquidity (I have lost my job, or fear I may lose my job), or as in the case of the Coronavirus are reducing demand as they interact with others less.
The stockmarket success, and indeed the generally rising economic prosperity worldwide of the last few years has been driven by demand. Should this be genuinely affected going forward then the economic consequences will be significant and quite probably many overleveraged businesses will cease to trade.
Significant Gainers
Markel Started the month with very positive results. Broadly speaking the Insurance business had another steady period, and Markel’s insurance business is more profitable than most, with Markel Ventures the investment and business operational side having a great report. The share price went over the next few weeks from $1169 at the start of the month to $1339 at its peak, before Coronavirus crashed the party and we finished at $1186.
Sylvania Platinum Sylvania is possibly at something of a crossroads. There is huge demand for some of its products but its host mine produces Chrome and is currently in a 90 day discussion with unions about redundancies and possible closures. As an added area of uncertainty the CEO retired, though he has been replaced with a long serving team member. This is all on top of the difficulties of running a mine in South Africa with both water and electrical supply issues. The market had decided to give Sylvania the benefit of the doubt and the share price had been rising fast. But like all the market Coronavirus put a dent in the valuation. In fact this went down much more than most only to begin to rise up almost as fast. For the moment I have no firm view on direction.
Significant fallers in the month;
I did not see anything specific for any of my positions that led to a fall in Febuary, but most of them got hit by fears of the Coronavirus. The list is long and disappointing. Aeorema, Alphabet, Apple, Avation, Bed, Bath and Beyond, Billington, BP Marsh, Disney, Electra, MPAC, PPHE, Shell, Treatt, Visa, Vistry
Significant Sales
Aeorema. I sold a portion as I felt that given the company is an events business it was too large a position with the Coronavirus threat. I however kept most of my position as I expect the company to weather the issue.
MPAC. I sold a small portion of my position at the start of the month as the holding was above my 10% threshold. With results out on the 4th March I think there is a good chance of a rerate so only sold a few.
Significant buys
Brand Architekts Group; I took a small position in this business that is under something of a transformation having sold its manufacturing operation to concentrate on its brands. The money from the sale is the bulk of the company’s current valuation and even a moderate valuation of the brand operation gives a very easy to meet valuation. I don’t think the market has fully recognised the new business with its pile of cash. And hopefully the management team will be properly focussed on the brands rather than the larger manufacturing business. The position is only small but the cash gives it a backstop.
Cenkos; At the start of the month I added to my position in Cenkos. I prefer positions to be at least 1% of my portfolio and with greater certainty over the business model and clear indications of support from certain large shareholders I was feeling positive about the business. This was of course before Coronavirus panic struck.
MPAC. Having sold at the start of the month I felt that the collapse in MPAC’s share price in the month was overdone so I bought back in, and added a few more. I expect the results to be good and whilst Coronavirus may delay a bounce back this seems to me to be one of the companies in my portfolio best placed to advance from here.
Overall I remain broadly positive. I do not think the Coronavirus and its implications are as yet understood but whilst I will be happy to add to my gold position I am not yet stocking up on baked beans and bullets. As such over time I expect the equities graph to be right and up, though as so many have described the last few years as the least liked move up in history, I think it quite possible that we will in the short term see some big corrections on any negative news. Hopefully this will become more specific rather than I am just selling everything.