The Kilminster Practice Newsletter 2021 – 4

2121 can be a great year

Despite Covid, we believe 2021 can be a great year

The Two main reasons to be optimistic…

  1. Firstly the vaccination programme. This proceeds at pace in the UK. Whatever criticism might be levelled by observers of the process (who, by the way, have no role to play except criticise the government’s every move) the vaccination programme, like the building of hospitals “overnight”, illustrates the ingenuity and determination of the government to protect us as best they can.
  2. Secondly, the opportunities to innovate and create new value in new diverse and adaptable businesses. Our research shows that with a few exceptions the best investments in the past three years have been equities or shares despite the Pandemic. We believe this will continue to be the case for at least two more years. This is because where companies innovate in response to the crisis, (and any crisis for that matter) they are either creating value in new businesses or adding value to an existing business, as they adapt to the new way we are having to live.

So it does seem that in adversity there is usually the seed of an equal or greater benefit.

Investment Results in 2020

A review of 2020 reveals that the majority of our clients experienced a gain in investment values of between plus 7.5%, and plus 35%, yes 35%, despite the catastrophic fall in share prices during March and April of 2020.

2121 can be a great yearThese results stem from investing in “innovator” companies who are engaged in what has become known as the process of “creative destruction”.

A good example right now of a company that was condemned in 2007/8 when the financial crisis struck it is General Motors. However, now it is embracing the electric car revolution and in doing so is reinventing itself, and as a result, the value of its share is likely to rise.

Thus “creative destruction” provides us with new investment opportunities



Examples of this can be found throughout the 20th Century and now the 21st Century. For example in the 20th Century the transition of

  • Railways to Airlines
  • Combustion Engines to Jet Engines
  • Larders to Refrigerators

And now in the 21st century

  • From Petrol/Diesel cars to Electric to Hydrogen-powered cars
  • From working in offices to working at home
  • From face to face meetings to TEAMS or ZOOM virtual meetings

A New World of Work

Around the year 2000, I can recall being told that 80% of the jobs our children would be doing hadn’t been invented yet. That was 21 years ago and is still the case.

And each new business opportunity, if successful, is ultimately expressed in the value of the shares of that company that has employed the seeds of the crisis to create a great “new” business in response to changing demands.

But it doesn’t end there…

Opportunities are also linked to trading blocs responding to new opportunities following the pandemic.

Countries to invest in now.

  • The USA (Reason? Biden)
  • The UK (Reason? Brexit)
  • Emerging Markets (Reason? Earlier recovery from Covid)
  • Asia Pacific (Reason? Earlier recovery from Covid)

So sectors to invest in now

  • Technology
  • Artificial Intelligence
  • Financial Technology
  • Biotechnology
  • Clean Energy/Environmental
  • Global Responsible funds
  • Global Change/Innovator funds
  • Global Quality Brands
  • Japanese Smaller Companies
  • US Smaller Companies
  • UK Smaller Companies
  • Emerging Markets
  • Asia Pacific

Oh, and some new terminology to grasp!…

  • Fintech – Financial Technology
  • Clean Energy – New forms of power generation
  • ESG – Environmental Social Governance

What of the new leadership in the USA

Biden will ensure the USA re-joins the major groups of influence to tackle climate change, future sources of renewable energy and a greater sense of responsibility to the whole world.

Internally he will also renew much of the USA’s infrastructure and concentrate on creating jobs inside America first. That bodes well for US stock markets.

Given Trump’s disruptive nature and Obama’s “soundbite oratory” approach that consisted largely of posturing (in fairness, the Senate was Republican so he couldn’t get a lot past them). George Bush’s fixation on being “Commander in Chief” and Bill Clinton’s distractions, its about time, as Tom Brokaw writes so eloquently in his book “The Greatest Generation” that we found a new generation of leadership in the USA to match Brokaw’s view of the leaders that emerged in the USA post-WWII

Brexit – Obstacle or Opportunity?

Early costs but long term gains. The liberation of the UK from Europe is already evident, for example, in the relative speed of the vaccine rollout. (Being argued about as I write)

Meantime new border procedures are slowing down commercial transactions but they will be overcome.

New tax concessions in the UK will fuel growth across the country and will create new jobs.

Global transactions will gradually marginalise the need to trade solely with Europe. The UK is making real progress with renewed and reinvigorated trading relationships around the world (67 at the last count)

We have a liberal-conservative leadership that recognises that having received votes from across the whole of the UK, they must invest in every corner of the UK and that will be done.

So, our prospects for 2021?

We have researched four portfolios targeted to return

Adventurous Up to 20%
Dynamic Up to 15%
Balanced Up to 10%
Cautious Up to 7.5%

So we remain optimistic and, as ever, are here to help.

Wishing you a happy, healthy new year and stay safe

PS: And what about investing in China?

China. It will grow well having been first to recover from Covid (or has it really?). But at what cost to humanity? Like Russia, I believe it lies about its actions, denies its wrongdoings and ploughs on regardless. So we are not backing China, there are plenty of other choices for us.