So if you were to fill your sack with shares this Christmas, what stocks would you pick?
For me I think I would go with the following:
BIDStack - the in game advertising company, but I am waiting for the expected trading update mid December as already have a position. The negatives are a poor track record from management and a high proportion of impatient retail investors holding the SP back, however with all the progress made in the last 2 years, I believe we may be about to see an inflection point.
CWR Ceres Power - think a clean energy hydrogen version of ARM. They design electrolysers and allow others to user their designs for a small royalty fee. The efficiency of their designs is dependent on the material used in the build, and it works both ways. Electricity can be used to produce hydrogen, or in reverse hydrogen can be used to produce heat and electricity. The share price has taken a beating this past year like most technology stocks and could once again be a good long term entry point.
Then for a little more diversity, I might go for some investment trusts:
Chrysalis is one of my favourite, sadly I’ve been in this for a while, and have hit my private equity limit so will not be topping up. FCIT and UKW are two others I have held, but sold out of recently.
Haven’t looked at this one before. Given it’s AUM, an OCF of 2.33% seems quite high. It seems the performance fees bumping it up, but to me they should be based on the lower of the NAV or market price. I might query that with them, how they can justify the performance fee vs investor return.
That said its discount is appealing vs its track record. We do need to see it crystallising some of its profit which should help support sentiment in the market. Similarly the share but backs are a good path as well. I need to do some digging into the underlying holdings. Initial view is the complex structure doesn’t help investors understand the product, but the statement of investments/distributions is impressive at first glance.
Trade volume is low as well, but as a long term investor I would be tempted to make this 2% of my portfolio for diversity.
Ok so for me is almost always about valuation, and so yes NAV discounts are a significant part of why I am currently/recently adding. However here are my thoughts on both:
Tritax are my favourite warehouse REIT, and I dont want housing, office or other REITs. Warehouses are here to stay and yes may get bumpy but there will be demand for them. But as an investment in this sub 150p range why do I think Tritax Big Box is a no brainer for me? Well they have high quality assets (locations), are run well financially, and I see significant upside after short/med term capex plays out. In the meantime You can collect about a 4.5% yield that is fairly safe and med term will keep rising due to nature of REIT rules.
Pershing Square Holdings is a bit more complicated, or perhaps just a bit more unusual. Yes the NAV discount is massive, hence this year they have been buying back lots of stock as essentially buying your equities back at large discount. They are also looking to domicile in the US which should help close some of the NAV gap, also through this they likely need to acquire a larger stake in a US business with assets which is believed to be HHC (Howard Hughes Cop) which through tender PSH now own 30% although they wanted and need more I believe 40%.
I also believe Bill Ackman is a world class investor over time, albeit slightly more volatile with his results historically, and I see PSH as the best way to invest along with him as he is heavily in PSH. It does have high fees, but this is a unique proposition with high upside, also they use some debt but its not one that can be margin called etc so little fear of blowing up.
I wouldn’t recommend anyone going into PSH lightly, but Tritax is easier to understand and have conviction I expect, just be aware it could be a volatile year or three in anything property focused.
I need to do some digging first but if they’ve consistently hit a 6% yield and it’s currently trading at a 35% discount, now could be a good time to buy and diversify a little.
That said - its 4th biggest rental holding is to Arrival, which is really struggling with its cash flows at the moment. Might be worth drilling down into the underlying businesses first before buying this I think.