I am honestly trying not to keep going on about the referendum vote until enough time has elapsed to form a sensible view of economic developments but this week’s GDP, retail sales and car manufacturing figures cannot be ignored. Just as the vote itself defied expectations, so has the performance of the UK.
Two full months have passed with companies in various fields reporting no immediate adverse impact and some economic data now includes a full month or more after the vote.
Car manufacturing is back to levels last seen at the start of the millennium and will be helped further by the fall in the pound; retail sales rebounded in August after a sharp fall in July; now we hear that GDP rose a healthy 0.6% in the second quarter, not 0.4% as originally estimated.
My modest portfolio is up 13% since the close of trading on the day of the referendum result. I remain fully invested.
Brave Investors Rewarded for Courage
Well done if you ignored my advice to avoid mining group Glencore (GLEN) and have seen your investment triple in value since it hit the bottom below 100p. You deserve your reward for your courage.
Yet the basic problems of Glencore are in my eyes still there, not least the unmanageable debt. Many assets have been sold and, yes, debt has been reduced heavily from nearly $30 billion but I cannot share the joy with which Glencore revealed that it might get below the $17.5 billion target for the end of 2016.
That figure is still too large to comprehend. Glencore must be praying that interest rates do not rise any time soon.
Each business that is sold reduces Glencore's ability to create profits and, ultimately, to restore the dividend. For the second year running, Glencore posted a first half loss of $369 million, down from last year but still $1 million a day. It did its best to bury the cost of a disastrous attempt to hedge against a fall in the price of coal – in the event the price moved up but the hedging means Glencore cannot take advantage.
Glencore's figures were taken badly by investors, who suddenly realised that the share price recovery had run well ahead of the company's prospects. The shares fell heavily for two consecutive days but not, in my opinion, anywhere far enough for long term investors to think of buying in.
Those who speculated near the bottom were probably in for the short term. If that includes you, then you have already missed the best chance to cash in your profits but it is not too late to do so. It will be a long hard road ahead and you will not see the shares triple again over the next 12 months. You will be lucky if they rise at all in that time.
Will Shareholder Patience Be Rewarded?
I’m still showing an unexpected loss on my investment in retailer WH Smith (SMWH) but I am not worried, even less so now that the shares have recovered a little from a much undeserved sell-off that took them down to 1462p at the end of June.
While there was nothing to get excited about in this week’s trading update I was perfectly happy with the reassurance that trading in the financial year ending on August 31 is in line with expectations. The travels side continues to drive the business but everything is under control in the High Street.
Word that the new outlet at Alicante airport in Spain has been well received is also helpful. Overseas expansion has often been disastrous for UK retailers.
I have bought a number of shares, most spectacularly Barratt Developments (BDEV) some years ago, at what I thought was the bottom only to see them fall further but I hold my nerve and most bounce back. I confidently expect WH Smith to justify my judgement before the year is out.
