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I have just read the Herald Investment Trust 2023 Accounts.


I was alerted to the following text in the manager’s report:

"There is no doubt that the UK public market is in a more fragile state than during any previous downturn in living memory. The question is whether this is cyclical or whether the damage is more structural. The UK public market is currently a fairly difficult environment for entrepreneurs to raise capital and I am saddened by how much management teams have been diluted by fund raisings at distressed levels. I believe that value in our portfolio will be realised through takeovers but that the costs incurred by listed companies in the UK, with the recent added burden of ESG and auditing requirements, has become too high to attract new companies. Similarly, the costs for managing small investments have increased considerably, with additional ESG and regulatory costs. Unfortunately, active investment management does not scale, and it is conspicuous that larger players have withdrawn and funds have shrunk. There are now too few players in the UK to have an efficient market, and too few co-investors. It is a pity because public markets have provided long-term risk capital for the benefit of the wider economy, but the skillset is disappearing rapidly. It seems the UK will inevitably shrink as a percentage of the Company’s assets."

It is a rather depressing message about the UK market. There are plenty of good UK stocks at bargain prices, but while there is a net outflow of funds investing in the UK, they are struggling to go anywhere – it feels like a bit of a zero-sum game.  


It also means that liquidity in stocks is tight, putting investors off building a position. Yesterday I looked at Wilmington, one of my recent purchases; the bid/offer spread was 342p – 372p, an 8% spread. Today it is a little better at 368p – 380p. I’m happy to see Niox up 8% today but the volume is pitiful at 220,000 shares traded.


It was nice to see Me Group up 20% yesterday following its results. Hopefully there will be more “squeezes” among my positions in the coming months. Takeovers by private equity or industry buyers (often from overseas) are prevalent and will continue while UK companies present such good value, and UK investors are happy to give them away. Wincanton is not untypical in that the bid it has succumbed to is below its high of the last few years.



The Funds’ Portfolio has only c.20% exposure to the UK. Maybe I should follow Katie Potts and slowly increase my exposure to overseas markets in the JIC Portfolio.



Other news:



Harbour Energy (currently 248p). On Tuesday, Berenberg raised its price target on Harbour Energy to 280p from 250p. Goldman also raised its target to 280p on 2nd February, having cut it to 260p on 31st January!

In the meantime, over the last few weeks, Mexican investor Control Empresarial de Capitales has increased its stake in Harbour from 5.0% to 7.1%.  Maybe they are stupid, but they happily pick up stock as UK investors sell.



Yesterday, Jefferies cut Glencore's (currently 376p) target price to 450p (from 560p), and Goldman cut to 490p from 510p.



Hargreaves Lansdown-currently 748p. Quite a split. JP Morgan stays at 646p, Jefferies cuts from 1050p to 1035p, and Barclays maintains overweight with a target of 1210p. It makes a market.  


Serica Energy continues to be sold off (currently 171.3p). I see there is a two-page buy note on it in today’s copy of the Investor’s Chronicle. It is one of the magazine’s “Ideas of the Week”. I can’t say that I disagree with it but selling pressure continues. My mistake is having too much in it and not paying enough attention to “technical” factors. However, as we have witnessed, selling good value stocks at the wrong time can be costly. MeGroup and Bloomsbury are recent examples. Even if I were to reduce the size of my position, I would not be keen to do it when the Relative Strength Index is, barring the 20th March 2020 (COVID market panic), as oversold as ever.  See chart below:


Sylvania Platinum – Nice to see a non-executive buying 60,000 shares on the drop in the share price yesterday.



Along with all the other sites I subscribe to, such as Stockopedia, ShareScope, and, yesterday, I was recommended I’m giving it a try and am, so far, impressed.


The table below shows the “technical” view of the positions in the Funds’ Portfolio. I will study it over the coming weeks. Perhaps it might be helpful regarding the timing of trades. If one purely followed the technicals and nothing else, I’m not sure the two BlackRock commodity trusts would be in the Portfolio; they might be on a watch list but not actually part of the portfolio.  

Weekend Roundup tomorrow . Have a good evening.



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