Yesterday I nipped up to London for the Master Investor Show in Islington and had a really enjoyable day meeting up with loads of people I know from Twitter and some new people and a bunch of old mates - so it was well worth the trip and I always find such events a real shot in the arm to keep my enthusiasm for the Markets ticking along.
I would say that the attendance at the Show was down quite a bit on last year but it was by no means ‘dead’ and like it was at the trough of the Credit Crunch when all the Exhibitors were fighting to find a punter to talk to !! Some old mates and I always joke that when the London Shows are really busy it is the Top of the Market and when they are dead quiet it is the Bottom of the Market - this was neither really and a bit ‘in between’. Having said that, there weren’t many proper Companies there - and what I mean by that is that normally there are countless AIM Miners and Biotechs and Start-up Investment Company sort of things (mostly garbage !!) yet this year there was only Avation AVAP (more later) and maybe a couple of Miners which I didn’t bother with obviously.
There were also the usual Financial Services ‘Provider’ type Companies like Spreadbetters, Book Sellers, FOREX Platforms, Fund Managers blah blah but I seriously doubt many people come for these (it was notable also that neither Stockopedia or SharePad were there either). So with such a line-up I would guess that many People simply didn’t see much point in coming along - it is obvious that Master Investor needs to get better Companies for Investors to consider buying if they are serious about even maintaining the attendance. It shows yet again that Mello Events are by far the best and punters should be spending a bit of cash to get access to some proper Quality Companies where they can actually make some Money.
Royal Mail RMG ShareSoc Event - SHORT NOTICE I only found out about this yesterday and it takes place at 3.30pm on Monday (8th April) in London. Here is a Link which explains it and in essence ShareSoc have arranged a Meeting with RMG Management in order to discuss the high levels of Director Pay and it could be a very interesting thing to attend if you are about. Details about how to get a place are in the Link and it is likely you can attend it if you turn up on Monday afternoon and beg to be let in: https://www.sharesoc.org/blog/remuneration/invitation-to-meet-with-royal-mail-april-8th-15-30pm/ ShareSoc I have known Mark Bentley (@marben100) and several of the other guys who run ShareSoc for many years and they are all highly successful Investors that are always great for discussing ideas with etc. and they do an excellent job in running ShareSoc which is a Non-Profit Organisation which represents Private Shareholders on various matters concerning Listed Companies etc. Anyway, they finally talked me into signing up with them and to be honest I am mainly doing it because I think they are doing a very important job and I want to support them more in their efforts. In addition to that, it gives Members the chance to attend loads of Events they arrange and there are various Discounts that they have organised that Members can take advantage of. I doubt I will take advantage of the Events because most are in London and awkward for me to get to but a big benefit is access to their Library of material that has been generated from Company Meetings and stuff. Anyway, it is well worth signing up to and not expensive at all and I think there is a low level ‘FREE Membership’ thing as well: https://www.sharesoc.org/ Last Week/Strategy My Portfolio got hit 1.3% Last Week which is a bit irritating. As usual the culprit was mainly my FTSE100 Short Position and a little bit of drag from the Small Short I have on the S&P500. Most of the damage happened on Friday with the very unsatisfactory outcome that the FTSE100 shot up but my Shares really didn’t do much so of course there was little or no ‘offset’ on my Hedges. Anyway, with Brexit potentially going bonkers next Week because the Legal Position is still that the UK is due to leave the EU on Friday 12th which is just 5 working days away and although Theresa May is going to the EU Summit on Wednesday to request yet another Extension, there is absolutely no guarantee she will be granted one as the EU are getting as fed up with this as everyone else and it is very possible that they decide to ‘cut their losses’ and just bluntly tell the UK that it is the Withdrawal Agreement or nothing. I think that is unlikely and a Long Extension like the ‘Flextension’ that Donnie Tusky came up with is probably what will happen where the UK has 1 or 2 more Years to sort the mess out and the UK can ‘Leave’ whenever a Deal gets sorted in that period. Of course, the EU said at the last Summit that the UK could only get a Long Extension if T May could present a ‘credible’ reason for such an Extension and as yet there is little sign that T May has anything she can tell Brussels. The Tories and Labour are so say in ‘Negotiations’ but it all seems a bit farcical with both sides accusing the other of not being willing to compromise whilst of course doing no compromise themselves which is the whole story of how Brexit has been handled by Parliament. If a Long Extension (or any Extension for that matter) is granted then it could cause uproar in the Tory Party which in the main just wants to get on with leaving the EU and there is talk that some of the Cabinet could resign next Week - if that happens we must be nearer T May finally being forced out. One big problem is that the Government is simply not in power - the EU are dictating terms to us and Parliament has demonstrated that Backbenchers can take control and we are likely to see more of that sort of behaviour. It is a joke really and now how a Country should be ‘run’. With such an unclear situation I want to keep my Shorts in place and although this is uncomfortable I need the protection. However, I will need to remove the Shorts at some point and I think it would be a huge error to just close them and take a big hit - because I have done this in the recent past only to see the Markets fall off a cliff which of course would have given me an ideal opportunity to close them. There are no simple answers to such a conundrum but it is clear to me that with the Markets having moved up so much since I put the Hedges on, I will need to ‘Average Up’ on the Shorts by Shorting a bit more when the time is right and that is the way to reduce the hit quicker. However, that is a dangerous game and I need to use strict Stoplosses on any new Spreadbets I place and a few mates have suggested to me to try some shorter term Trades to reduce the hit - I might do that but only if the opportunity arises. Of course, if the Markets tank after Brexit then I don’t have a problem !!! Needless to say my overall Strategy is staying the same with the Hedges in place and with a view to Selling some Shares rather than buying any. This is amplified by the fact that April is something like the 2nd Strongest Month usually and that May is the 2nd Weakest - so the weaker Summer Month period is coming into view quickly and that is likely to give plenty of opportunities for the Markets to get soggy. And of course the Autumn can be ropey as well. It is not ideal to run Shorts for so long but I don’t see a need to crystallise a huge Loss and I am sure I can manage my way out of it. Avation AVAP I’ve been in AVAP for several years now and it has done really well so I am very happy. It is still in a strong Uptrend (see my Chart below) and the Business seems to be developing in a decent way with increasing Fleet size of the Planes it Leases out and with more and more Customers increasing the diversification and therefore lowering the overall Risk. On top it pays a bit of a Dividend and this has been steadily rising which is lovely. I did a Blog about AVAP ages ago which you can read here - it is worthwhile because it gives a lot of simple background on how the Airplane Leasing Model works: http://wheeliedealer.weebly.com/educational-blogs/avation-avap-buy-rationale Anyway, at the Master Investor Show yesterday I had a good chat with a new ‘Marketing/Sales’ chap they have got there who has considerable experience in the Industry (he used to work for an Irish bunch called CIT or something like that and they got sold to Avalon who are a huge Airplane Leasing business) and looks like a very useful addition to the Sales operation which previously had 2 people who were struggling to cover the Globe. This new guy is based in the UK and has something like 25 years in the Airplane Leasing industry (if you are reading this - sorry I can’t remember your name !!). I also managed a long chat with Richard Wolanski the Finance Director and had some specific questions about the Lease Model which I wanted some clarity on. Anyway, Richard emphasised the same point he was making last year whereby the growth of the Plane Fleet that AVAP has drives the increase in Monthly Lease Receipts and this drives up the Share Price - he fully expects the Shares to keep rising and I think he is right unless we get a meaty Recession or something and that hits all Shares (even if the AVAP business manages to weather any storms ok). We had to talk about the Boeing 737 MAX and the problems it has had and how this affected Airlines and the Leasing Companies that back the financing. This was one of my 2 specific questions and the answer is that the Contracts with Leasing Companies like AVAP have with their ‘Customer’ Airlines is that the Airlines must keep paying the Lease every Month and if the Plane has Manufacturing Problems like in the case of the 737 MAX, then the Airline has to seek redress from Boeing or whoever built the Planes. I recall the new Sales guy calling it something like a ‘Hell or High Water’ Clause in their Contracts. So the upshot is that when you see pictures on the TV News of those Planes all parked up on the concrete, the Leasing Company that is linked to them suffers no penalty and the pain is borne by the Airline which then has to go back to Boeing and claim Compensation from them (Damages I guess). However, there is a useful side-effect from the awful 737 MAX tragedies - it turns out that with the 737 being such a popular and efficient plane, the value of older 737s has now gone up and Richard reckons AVAP have made at least £1m on a 737 they have recently bought on a ‘Sale and Leaseback’ Deal. The other issue around Leasing was something a group of us had discussed in the Business Design Centre ‘Canteen’ area. We wanted to know the impact on the Airline Leasing Model of the new Accounting Rules that came along with IFRS16 or whatever it is called, whereby all Companies must show Leases clearly on their Balance Sheets whereas in the past they could ‘hide’ the Leases off the headline Accounts. Our query was how this would impact the approach Airlines take to Leasing and also if this would consequently hurt Airline Leasing Businesses like AVAP. Anyway, it looks like AVAP and the others are ok because the reasons for Leasing are not simply so the Airlines can hide the Leases. It is party a Capex issue because it means lower Capital Expenditure is needed if part of the Fleet is Leased but it also gives a lot more Capital Flexibility. It looks like the bringing of the Leases onto the Balance Sheets of the Airlines has not hit their Share Prices (this has been due to other factors like Brexit and over-capacity I suspect) as everyone involved in Investment in such Companies knows that Leasing is a key element of how they operate. Richard explained that the typical Airline has a Capital Structure whereby they own a third of their Airplane Fleet and then they have Lease Agreements on the remaining two-thirds. I didn’t ask this question but I am guessing that these Leases would have various time periods (Durations). There are a few advantages to this for the Airline - firstly it means that there is less demand upon Capital - if they buy a Plane outright themselves (they can do a straight Bank Loan type arrangement or pay by Cash if they have it etc.), then they have the full Cost of the Plane to stump up and another problem is that once it has got to the end of its life as far as the Airline is concerned (for example, the Plane might have a working life of 25 years but a Western Airline might only want it for 10 years), then the Airline has the problem/hassle of selling the Plane on to another Airline (the jargon seems to be ‘Remarketing’). I presume in practice the Airlines do not do this remarketing themselves but outsource this skill and perhaps even a business like AVAP could do this work but I don’t recall them acting this way and it is obviously not their ‘core’ business so could be a distraction. I suspect many older Planes get ‘remarketed’ into Africa and poorer parts of Asia. But probably the bigger advantage is that by Leasing most of its Fleet, an Airline has a much more ‘flexible’ model and this is because when they Lease a Plane it is likely to be on a Lease of perhaps 8 to 12 Years or so and once the Lease is up, they can just hand the Plane back to the Leasing Company and wash their hands of it. This is ideal if the Market takes a nosedive (oops, bad choice of words !!) and means that the Airline can reduce its Fleet Size more easily and of course they can even pay to shorten Leases if need be and if the Leasing Company allows such a change (they normally do but of course the Leasing Company needs to place the Plane with another Operator). There is also the flexibility to extend a Lease for a few Years if required. Something the new Sales Guy mentioned was that AVAP are very busy responding to Requests for Tenders that Airlines are putting out and they are selective about what they respond to. He said the Lease Market for ATRs is very competitive and quite often AVAP won’t be the cheapest but he said the situation is getting easier. The problem was because there was a bit of a glut of ATRs for a while - I can’t remember the reason but I think an Airline in Asia had cancelled their requirement for Planes or something. I also asked Richard about the future for AVAP - I was really thinking what would AVAP look like in 2025? He sees AVAP continuing to grow and of course compared to other Lease Companies it is still very small. It is pretty obvious that the Industry is very ‘small’ and that people like Jeff Chatfield and Rod Mahoney who looks after the Sales operation know the people who run the Airlines well and AVAP clearly are very experienced in their small team of employees (by the way, the new Sales Geezer used to work with Rod). I asked about Jeff Chatfield’s future plans and although Richard didn’t say anything specific, he did confirm that AVAP runs itself largely and that if Jeff was to take his £millions and head off to the sunset, then it is not overly dependent on Jeff by any means (sorry if that gets you sacked tomorrow, Richard !!). Jeff Chatfield controls something like 45% of the Shares I think. The new Sales Chap emphasised to me just how useful the ‘Sale & Leaseback’ type deals are for AVAP. When they get a new Plane from the Factory like the ATRs they have lined up, it is crucial that AVAP get a Customer Airline to place that Plane with - and if they were unable to find one, then they might have to cancel the Order or something which would be a costly pain. However, with a Sale & Leaseback, the Plane is already placed with the Airline because they are currently flying it - so for AVAP it is simply a case of sorting the Finance side and buying the Plane from the Airline and also sorting out the Lease Agreement with the Airline - it is a lot easier. Anyway, I think that pretty much outlines what we discussed. Blog Slate Sorry everyone, I got lazy last Week and took advantage of the Interview that I did with @vilage_idoit as an excuse to not put out an ‘Educational Blog’ during the Week. I know the Interview is a really good piece and it has had some excellent feedback on Twitter and I recommend you read it - there is a link on the Homepage of my Main Website under the ‘WheelieDealer’s Latest News’ bit but you can also find it here: https://www.shiftingshares.com/interview-with-pete-wheeliedealer/ I did complete the ‘Weekly Performance’ page for March and I have amended the text so it reflects my current thinking - that is worth a read and I also added some Stocks to the ‘Little Black Book’ which is worth peering through. I made good progress on Part 3 of the ‘What I look for when reading Results in the morning’ Blogs although it is not quite finished. Anyway, my current thinking is that later this Week I will publish the first of these and I am sure Readers will find them very useful. On top of that I have quite a few things in Draft form now so the Pipeline looks good and I have some interesting Ideas that have yet to make their way onto Electronic Paper but maybe I will get a chance to start on one of these later in the Week - unless of course the Sun miraculously appears but that looks doubtful at the moment !! Memory Lane Remember, if you go to the ‘Blog Index List’ which sits on WD2 there is a full List with Links to all of the Blogs I have ever scribbled - make use of it because there is some decent stuff hidden away in this Archive now. The one below is a 3-parter which has some psychology stuff in it as well as lots on Portfolio Management I think (there are Links to the first 2 bits at the start): http://wheeliedealer.weebly.com/educational-blogs/maybe-were-not-in-control-after-all-part-3-of-3 Better do some Charts then. AVAP As always, the Charts I show are screen-grabs from SharePad which I subscribe to and if you click on them they should grow bigger so you can see more detail. By the way, the Forecast Dividend for AVAP is 2.1% rising to 2.4% the following year. As the Chart shows, this is a lush Long-Term Uptrend.
S&P500
For time reasons I haven’t bothered with the ‘Big Picture’ here because it is a strong Uptrend anyway so not much point. The Chart below goes back just over a year and the key thing to note is how we are right up near All Time Highs now at 2941 and a Breakout over this must be possible and such an occurrence would be very Bullish. However, such a Level is obviously a psychological point as much as anything else and it is highly likely that it needs a few attempts to cement such a Breakout - it might go up towards it and then drop back before rising again. My Red Arrow shows where we are now at 2879 and my Black Ellipse is capturing the previous Candles around the All Time High (ATH). My Blue Arrow is pointing to a steep Blue Support Line - this shows how rapid and sharp the move up has been - it looks dubious really - too far, too fast. My Pink sort of Arrow is pointing to a Bullish Golden Cross between the Darker Blue 50 Day Moving Average Wavy Line and the Lighter Blue 200 Day MA - this is a ‘slow’ signal but can imply gains for months ahead.
In the bottom window on the Screen below we have the RSI (Relative Strength Indicator) for the S&P500 Daily - on a Reading of RSI 68 this is very high and could easily turn down.
On the Chart below I have zoomed in a fair bit on the first Chart and this time please ignore the Arrows and stuff but just look at my Red Ellipse in the Top Right Hand Corner. The point I am making here is that we have had around 5 small Doji Candlesticks - this shows a lack of real oomph to the upside and shows the Bulls are not totally in command.
On the Chart below I have the Weekly Candles going back a couple of Years. My Red Arrow is pointing to a Big White Up Candle and this is Bullish.
My Chart below has the Daily Candles with the Pink Zone marking the Upper and Lower Bollinger Bands. My Black Arrow is pointing to where the S&P500 is now and it is just off the Upper Band but not above it or anything - it could rise a bit more on the evidence here.
FTSE100
This is where my Big Short is so I am mostly interested in this one but obviously anything that happens regarding Brexit could impact it and this might be as a consequence of moves in the Pound as well. A stronger Pound if some sort of resolution is found could hurt the FTSE100 but a weaker Pound might help the FTSE100 - it is quite uncertain though really. My Chart below is a bit messy so please focus on the Arrows as I point them out to you. First off look at my Blue Arrow which shows the big move up on Friday and note this broke above the Black Resistance Line which is marked by my Black Arrow. This might be an overshoot from which it could fall back but a proper Breakout is Bullish. My Red Arrow is showing a Bearish ‘Death Cross’ between the Dark Blue Wavy Line 50 Day MA and the Lighter Blue 200 Day MA. Note that we are now very near a Bullish ‘Golden Cross’ on these MAs - such Crosses are ‘slow’ and easily overturned but they can suggest months of gains ahead. My Ellipse in the Top Left Hand Corner shows a Zone of Resistance that the Price needs to fight against now.
In the bottom window below we have the RSI for the FTSE100 Daily. On a Reading of RSI 68 this is very high and it could easily turn down soon.
My next Chart has a Big Bullish Up Candle on the Weekly - pointed at by my Red Arrow.
Finally we have the Daily Candles with the Pink Upper and Lower Bollinger Bands. Where my Black Arrow is we are up near the Top Band but it is not outside it or anything - it could climb a bit more from here.
OK, that’s it for now, Good Luck in the coming Week. Regards, WD.
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