It’s easy to be contrarian, it’s harder to be right

This morning, I was adjusting an old model of one of our portfolios here at Southbank Investment Research.

In some services, our editors and investment directors recommend stocks to their subscribers, but we never actually hold the investments ourselves.

So any portfolio returns have to be calculated “by hand” so to speak.

This morning, I was catching up on an old one and updating it with one thing in mind.

It’s been mentioned here and on some other platforms that renewable energy stocks are doing particularly well.

And James Allen has picked up some of the best ones for his subscribers, including ITM Power for 34p (sold for 306p just over a year on) and Nikola Motor for $11.5, which he sold for around $76 only a few months later.

And there are plenty of others, and I monitor the companies daily so I’m acutely aware of just how well they’re doing.

So yesterday, when I saw an article on “the best funds of 2020”, an idea came into my head.

Can they really have done any better than James?

Well I dug through the data, filled in the numbers and set up a few simple excel formulae…

And the results are in.

Here’s the table from AJ Bell of this year’s best performing funds of 2020.

Source: This is Money

It’s not surprising to note gold and US/growth among the winners, nor to see energy (we’re talking oil and gas) on the right-hand side, with the other losers.

The funds that sit on their own at lunch (in their 42nd floor canteens).

If someone had gone as far as making a Latin American Energy Fund, it would have been the king of the losers, by the look of things.

But what may come as a surprise then, is this.

After crunching the numbers on James’ portfolio, rebasing all stocks to 1 January prices and averaging the positions based on an equal weighting in the portfolio, something remarkable came out.

Initially, as I went through on alphabetical order, I was thinking to myself this was silly Kit, of course James hasn’t outperformed the best funds UK investors can buy. That’s crazy talk.

But then I got into what you might call the alphabet’s strong “middle order”.

We’re talking Root, Stokes, Morgan, Buttler. Hundred after hundred came through in the YTD gains.

In fact, in the portfolio there are five positions with over 100% gains, and one each over 200%, 300%, 400% and 500%, all based only since 1 January.

Which left the Exponential Energy Fortunes portfolio with an overall gain of 104%. This year.

Now the transmission of recommendations isn’t perfect; not every subscriber will get in or out of every position at the same price, so there probably aren’t many who got exactly that return.

But in a year which saw the fastest ever bear market, in which most global indices are still down 20% or more from their peaks in February, and in which the traditional energy sector has taken a beating for the ages, this is a remarkable feat.

And yes – it can’t go on forever.

Lots of people are starting to catch up, and the oil price has recovered so traditional energy stocks might not underperform so badly from here on out (in fact, diligent readers will remember I was rather keen on them back in March and April once they’d been knocked down).

Mean reversion, a shift in focus to value, a bursting of the tech bubble – these gains are certainly under threat, and past performance as we know does not guarantee any future returns. I want to be clear about that. Straight lines don’t stay straight for long.

But the point is this.

James’ service delivered potentially the best returns of any publicly available equity fund worldwide in 2020.

It’s quite something to have been involved with!

The service is only for paying-up subscribers though.

And as we think this is only the first big leg-up in a multi-decade transition, we have put together something which will be completely free, so everyone can start learning more about the transition, and how to invest in it.

It’s a follow-up to the Beyond Oil summit we put on back in April.

Why so soon, you ask?

In my view there is one fundamental shift which has driven us to come back with another online summit already.

Coronavirus is changing the world, we know that.

But in February and March, everyone you asked – wise sage or random person on the street – was saying that the crash in oil prices and markets was terrible news for renewables and the energy transition.

They had good reason to think so: tumult in markets makes accessing capital for “speculative” or “futuristic” projects harder, and so makes life difficult for a nascent, cash-hungry sector.

The oil price crashing over 60% (it even went negative at one point!) made it cheaper for companies and vehicle owners, and so people thought it was less important to seek alternative forms of energy.

But James himself disagreed. Before March was out, just as markets were bottoming (though of course we had no idea it was the bottom at the time), he wrote to his subscribers saying the opposite.

He pointed to low interest rates helping fund renewable projects with high early costs and steady long-term returns. That’s good for pension and income funds.

He also both advocated and predicted a surge of government support for the transition, as leaders focused on being prepared for the next crisis, as the current one showed how woefully unprepared we were.

A green recovery would be good for jobs, skills, infrastructure, international standing, better air for citizens, less burden on healthcare from related respiratory issues, meeting Paris climate targets and national net-zero targets…

Governments needed to step up to the plate and dedicate themselves to a “green” recovery, because it is no longer a cost, but an economic boost in everyone’s interest.

And that is exactly what has happened.

Instead of being a hindrance to the energy transition, we’ve seen more investment, policy and fiscal support and more excitement about moving towards cleaner technologies and more renewable forms of electricity.

That fundamental change to the accepted view is why we feel that we need to get the message out to people as soon as possible. The world is changing, and the energy system is at the beating heart of it all.

And that’s why James organised a range of fantastic guests to come in to speak to me (which was exciting on a personal level, I might add! These were some big names…). CEOs, founders, ministers and titans of the transition, the energy industry and the ethical investment world spoke to me, on Zoom of course, about their approach to it all.

They were all fascinating to speak to, and had very eclectic and sometimes opposing views. That was exactly what we were hoping for, as it’s boring to hear everyone reading from the same hymn sheet.

The one thing they all agreed on though, was what I’ve been saying here since I first started writing to you all.

The energy system as we know it is changing – fast.

To keep up, and to get ahead, you need to hear from these amazing experts.

It kicks off soon – next week in fact – so click the link below to sign up.

Sign up here.

You’ll get a bunch of special reports from James himself on the transition, and then every day next week you’ll get a fresh interview delivered to your inbox, to enjoy each day of the week.

It’s like the best energy conference you went to, and you don’t even have to leave your house.

Again, it’s totally free, so if you’ve got the time there’s nothing stopping you!

Click this link now to get your name on the list.

No time to waste!

I’ll see you there,
Best wishes

Kit Winder
Editor, UK Uncensored

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