JEFF PRESTRIDGE: Market may be past peak despair

Legendary investor Warren Buffett is known for his wise advice. The great investment guru came to mind again a few days ago when I spoke with Richard Penny, a fund manager at Crux Asset Management.

Penny, who has been close to the investment bloc a few times with L&G, M&G and Scottish Amicable, has just launched the Crux UK Smaller Companies fund, believing there is a great opportunity to make money for investors with a vision from three to five years.

He believes that the smaller companies’ share of the UK stock market now represents a ‘buyer’s opportunity’, especially as share prices have fallen sharply in response to the deteriorating economic environment. Too far in Penny’s eyes — many companies, he says, are now chronically undervalued, despite business models being well-suited for their purpose.

In the past year, the FTSE SmallCap Index has fallen more than 20 percent. This compares to a four percent drop in the FTSE All-Share and a small increase in the FTSE100.

Echoing one of Buffett’s famous sayings – ‘the best chance to put in capital is when things are going downhill’ – Penny is confident he can replicate the kind of returns he generated for investors when shares in smaller British companies between March 2009 and July 2011 (post-financial crisis) and March 2020 and January this year (post-lockdowns) bounced back. The funds he managed during these two periods – L&G UK Alpha and Crux UK Special Situations – delivered returns of 168 and per cent respectively, compared to average returns for smaller company funds in the UK of 119 and 113 per cent.

Of course, history doesn’t always repeat itself and global geopolitical events can put a kibosh on anything. But Penny could be right when he says the UK stock market is ‘past the peak of despair and pessimism’. As Buffett says, “Be afraid when others are greedy. Be greedy when others are afraid.’

Will fortune be brave in Vietnam?

Warren Buffett’s words about the smart use of capital can also be applied to Vietnam, until recently one of the best performing regions in the emerging markets universe.

Despite an economy set to grow eight percent this year thanks to a mix of large foreign investment and a growing middle class with money to spend, the stock market has reversed.

According to the managers of investment fund VinaCapital – listed on the London Stock Exchange – there are two reasons for the 31 percent decline in the Ho Chi Minh Index this year. First, stunned by the global recession, international investors have withdrawn their money from risky emerging markets such as Vietnam. The stock market has also been hit by a regulatory crackdown on wealthy people who manipulate stock prices for their own gain.

In a conference call last week, VinaCapital told me that the Vietnamese stock market “needs time to heal.” Provided there are no more scandals, it believes the market will move forward as corporate profits rise and the economy remains in growth mode.

Despite losses of 14.1 percent in the past year, the trust’s five-year yield is still a healthy 61 percent. The manager’s forensic approach to the companies he invests in is admirable. If the stock market turns the corner, this confidence could do well.

Luck favors the brave — and no, this isn’t another of Buffett’s famous quotes. It comes from the Latin proverb: ‘Fortes fortuna adiuvat.’

Believe in miracles

So permacrisis — a prolonged period of instability and uncertainty — is the word of 2022, according to the compilers of Collins Dictionary.

Let’s hope it’s not in the publisher’s antennas around this time next year.

Hopefully by then inflation will be tamed, Putin will be gone, China will be too focused on solving its faltering economy to think of an invasion of Taiwan – and the magic dust that will be created by Rishi Sunak in the near future. and his fixer Jeremy Hunt is distributed The budget will start to turn the economy.

To quote the late great Errol Brown of Hot Chocolate fame, “I believe in miracles.”

We need to get back on track NOW

Commuting by train becomes more of an ordeal than a pleasure. Staff shortages, work to govern and union action (one minute, the next) make it impossible for many commuters to get the service they paid for.

For the past few weeks, I’ve been on a train that stopped halfway to its intended destination due to staffing issues, leading to widespread discontent among travelers hoping to head to Manchester rather than get dumped in Birmingham.

I also had to forgo a planned weekend trip to a music concert in South West London because part of the trip involved a replacement bus service. The result? I would have only come home via Uber.

Over the past few days, I have turned up at my station on numerous occasions to find that the train I intended to board had been canceled or delayed. Frustratingly, yes, although I haven’t been fobbed off with the excuse given to a dear friend last week when she was traveling from Chichester to London on business: that the delay to her train was the result of a trampoline the line.

We have enough to contend with dysfunctional rail transport. Friday’s news that railway union RMT has suspended planned strikes for this week is a step towards getting our trains back on track.

Hats off to Coventry

Hats off to Coventry Building Society for supporting those under pressure in his mighty beautiful city. Last week it announced it is making £1m available to support residents struggling to cope with the terrifying cost of living crisis. The money, it says, will ensure that children in local schools do not go hungry and prevent the elderly in the city from getting cold due to unaffordable energy bills.

Recognizing its national reach, the mutual fund is also providing £1,000 to each of its 65 branches so they can donate the money to local food banks – from Sheffield in the north to Somerset in the west.

Well done Coventry. More financial service providers should take a leaf out of this construction company’s book. There is a time for booming profits, but not now. It is compassion that is needed.