Regular readers will know that I do not invest in gold or in bonds, although I accept the argument that diversifying a portfolio into different asset classes is a sound idea. Just remember that gold and bonds are not always the safe havens they are often touted to be.
Like shares, gold has provided a decent hedge against the fall in the value of the pound since the Brexit vote
Of the two, gold is looking increasingly the better bet, and it really goes against the grain for me to say that. At least bonds offer you some income.
However, as I warned last week, bonds prices have fallen back since the election of Donald Trump as the next US President. If he gets his way on spending and taxation, which is likely given that he is a forceful man, then US rates will rise sharply and bond prices will fall further. Any flight from bonds is likely to gather momentum.
For once, though, I take a comparatively more benign view of gold. The price in dollars surged after the US election, and although it has eased back a little this week it looks to be underpinned by political factors. Like shares, gold has provided a decent hedge against the fall in the value of the pound since the Brexit vote.
I would still rather buy equities, but if you are holding gold in one form or another, I would not rush to cash in at this stage.
Construction Stock in Speedy Hike
The tide really does seem to have turned for the better at Speedy Hire (SDY). I bought a modest stake back in 2009 as construction related stocks hit the bottom and the shares have stayed ahead of my buy price of 31p, although it has been a rocky ride.
The equipment and tool hire group now reports that earnings were up 13.4% in the six months to the end of September and underlying profits more than tripled. This was a welcome improvement on the series of profit warnings issued the previous year, which culminated in a first half loss after exceptional items were taken into account.
The interim dividend, which I feared might get scrapped this time last year, edges up from 0.3p to 0.33p. Tiny, but a huge vote of confidence. Full year results are set to beat the board’s previous expectations, a remark tacked on to the trading update almost as an afterthought.
Perhaps memories of the profit warnings cautioned chief executive Russell Down against boastfulness. Or perhaps he did not want to draw attention to the fact that so much progress has coincided with the appointment of a nominee from Toscafund, the largest shareholder, to the board.
I don’t normally like to see activist shareholders getting special treatment and it is certainly possible to argue that Speedy Hire was already turning the corner before Toscafund picked a divisive fight in which it attempted to replace the chairman. In this case, however, I’m inclined to make an exception and say that a good shake-up has worked wonders.
“I am Worried About Housebuilders”
In contrast, I have started to worry a little about housebuilders, where I have stakes in three companies including Barratt Developments (BDEV), which this week lopped 5-10% off asking prices at its most expensive homes in London.
There is no cause to panic yet. There are whole swathes of the UK waiting for the ripple of higher prices to reach them but it will be increasingly important for builders to have a good geographic spread as the ramping up of stamp duty and measures to discourage buy-to-let dampen demand in the capital.
Berkeley Group (BKG) is most at risk, as it concentrates on building expensive London homes, a policy that has been spot on for the past few years. The shares are already down from a peak of £37.50 last December to around £25 now.
I don’t want to add to my sector holdings, as housebuilding is already overweight in my portfolio, but if I was looking for a purchase I would be inclined to pick anyone other than Berkeley at this stage.
