I can’t believe we are still in January! How long has this month been? The month started with capitol riots (how long ago does that seem) and is ending with a riot on Hedge Funds and Wall Street. January 2021 is one of the crazier months I have lived through.
On the markets, the FTSE 100 jumped out the blocks in the early parts of the month outpacing rivals. The FTSE100 gained 6.1% to mid January. On the other hand, the DAX (Germany)and the Nikkei 225 (Japan) gained 2.5%, whilst the S&0p 500 (US) gained 1.3%
The FTSE 100 being the best performer is the early parts of the year should not come as a surprise as its constituents such as the oil majors, travel stocks and banks have the most to gain from vaccine roll-outs and opening up of the economy. Furthermore, the Brexit deal agreed at the back end of last year has also given the UK market a jolt upwards.
The FTSE100 being the best perform of the big indices is an outlier in recent years. Since the Brexit vote to the end of 2020, the FTSE100 only gained 1.9%, whilst the DAX, Nikkei225 and S&P500 posted figures of 33.8%, 69.0% and 77.7%! The FTSE has a lot of catching up to do! And if you believe the world will return to its old ways, the FTSE 100 could be decent value right now.
I on the other hand don’t invest in index funds. Instead, I invest in individual companies. Companies that are handpicked by myself and which I believe to be of above average quality. Companies that will make money regardless of what the economy is doing.
In the month of January, I bought two such companies:
- GSK – Purchased 12 shares at £13.98 each
- Sage – Purchased 28 shares at £5.70 each
Both these companies are high quality resilient stocks that I would gladly hold forever. I previously commented on both these companies during the December stock purchase post so won’t go in to that here.
Together these two purchases have added £11 to my annual dividend income which now stands at £3,981. Onwards and upwards!
The second half of January has been all about the redditors and the big Wall Street hedge funds. I have already written four articles relating to this so far (1,2,3,4) but as it hasn’t affected my January purchases I won’t comment too much here. I will probably right about the current euphoria in next months stock post so be sure to check back.
But what I will say is that due to the rise of the day trader and people looking for quick 100% returns, safe stable companies such as Unilever which could provide a return of 12% per annum are being left in the cold. I have bought a big block of Unilever shares recently and will dedicate an entire post to this purchase.
In the long run fundamentals matter. The inescapable attraction between prices and reality. Like a moth drawn to a flame. Yes, markets will go through periods where some people make lots of money very quickly with little effort. We are seeing such a market today. But, eventually, these same markets find their way back. As the legendary Benjamin Graham once said:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine”
Till then take care and stay safe!