‘Every day brings new choices’ – Martha Beck

A couple of months or so into the life of the Dynamic Opportunities Fund I realise we have done something rather unusual by top-slicing four (and counting) of our investments to crystalise some profits. The conventional wisdom is that a new Fund should have carefully worked out all its top thoughts and positions and that it is investment sacrilege to start to change them for a few months because surely that smacks of an approach which is not sufficiently long-term.

The famous economist – and stock market investor – John Maynard Keynes once pithily observed that ‘in the long run we are all dead’ which has the attraction of being both factually correct and quite funny. Keynes was certainly a supporter of active investing attracted by both the intellectual and psychological aspects of investing, both of which we have talked about frequently in this regular write-up with the latter being really influential over time frames of a few months.

If you look at the global stock markets today a few aspects are immediately noteworthy, most strikingly the simultaneous occurrence in a recent survey of fund manager opinion of fear about the future and yet still a desire to keep on investing the money of their clients in more cyclical or growth-oriented companies. That is certainly a funny combination as they are unlikely bedfellows for any sustained period of time and to us it is reflective of a backdrop which is not impossible but not easy. And this is one of the reasons why we take profits when there are some on offer because the current uneasy alliances in global stock markets after over eight years of pretty decent gains makes us worried.

If you look at the four names – Air Liquide, Greencore, Walt Disney and Kingfisher – that we have taken profits on so far the common characteristics are that all are sensible businesses which we bought at moments of relative individual price weakness. Subsequently – in the ever evolving and changing stock market – we had an opportunity to sell some of our holding allowing us to introduce new and different names to the Fund such as recent acquisition Randgold Resources in the gold mining sector. And you can expect us to continue to do this in respond to share price moves and new information and opportunities.

Looking ahead to the rest of the week the two events that capture our attention the most are Wednesday’s upcoming UK Budget and the spending fest in the United States (and increasingly elsewhere) after Thanksgiving dubbed ‘Black Friday’ – so called because the sheer volume of trade from the post-holiday crowds pushed many retailers into the black/profit. It is possible there will be some microeconomic fiddling which benefits selected UK companies and sectors but experience tells us that it is rare that our preferred investing area of larger cap equities are materially impacted and we expect that to again be the case. Meanwhile the enthusiasm of the early pre-Christmas spending (as the global ‘Black Friday’ events have effectively become) is a good early test of whether the significant pessimism embedded in many European retail names is warranted or not. Certainly at a time of consumer spending pressure there will be winners and losers but we would observe the significant pessimism on even names with strong market shares, sensible balance sheets and a product or service that still is attracting a growing range of customers is throwing up opportunities.

(New) Funds can after all both buy and sell shares in their chosen investments – and long may that continue!