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2020 – An Annus Horribilis

14 December 2020

A year ago we were exalting Boris’s General Election success, comforted by the fact that we would, at long last, have a government that enjoyed a considerable majority – so important as we headed into a year during which post Brexit negotiations were to take place. Did we think that fully a year on those negotiations would be continuing with little sign of agreement? Probably not but it shouldn’t really come as a surprise – Brussels doesn’t do early and decisive! It clearly does do spite and punishment, even if it results in massive self-harm.

With a near €100bn per annum trade surplus with the UK, the EU has far more to lose than we do from a “no deal” outcome. But “no deal” is, in fact, a deal in itself. It involves trading with the EU under World Trade Organisation rules, as does the vast majority of the rest of the world. Granted, the initial adjustments are likely to be a bit messy, not least because confirmation of the outcome, assuming it is no deal, is so close to the end of the transition period on the 31st December. Looking past that, however, why should it be any more difficult for us than the USA or the vast majority of other nations dealing with the EU on the same terms? Plus, lest we forget, our trade with the EU has been on a declining trend for years whilst that with the rest of the world has been growing. The irony is that this has occurred whilst we have been operating in the single market with the restrictions that has on individual member states reaching their own deals with outsiders. Freed from those restrictions those trends will accelerate.

At the time of writing negotiations continue whilst everyone reports in very negative terms. Whether a deal is reached or not we should not fear it.

The much more damaging and longer lasting problem in this annus horribilis is Covid 19. The awful illness has proven incredibly difficult to control – like some virulent game of whack-a-mole, just as it is apparently tamed in one area up it pops again in another. Hopefully the arrival of vaccines will finally allow lives to return to something like normal but it is still likely to take the best part of next year for the full vaccination programmes to be completed. The economic fallout will take much longer to overcome but, as the lyrics of the Sherman brothers song from Chitty Chitty Bang Bang remind us – from the ashes of disaster grow the roses of success. Onwards and upwards!

2020 Picks

Readers will recall that I have often questioned why share tipsters and pundits expect to measure the performance of their New Year offerings over the calendar year. Stock prices are no more likely to recognise the 365-day chronology than they are to perform for the Easter Bunny so why do we do it? Who knows but it seems the thing to do so who are we to buck the trend? Last January we each recommended a stock for the year and below we each recap on our selection. We’ll be back in January with our choices for 2021.

Hornby (Russell)

I did emphasise that this was a gamble and, as it turned out, it was one for which Covid was of benefit. They say you make your own luck and CEO Lyndon Davies had spent two years knocking Hornby into shape, refinancing it and bringing some common sense and cloth-cutting to the boardroom whilst instilling ambition into the workforce. The range of products was rationalised with cheaper snap together models for the young and expensive, complicated models targeted at the dedicated adult. Come the Covid lockdown it seems many adults became nostalgic and took up modelling again, hitting Hornby’s sweet spot.

Last month I reported that Hornby had surpassed my target of break-even in its first half of 2020/21 with a small pre-tax profit. That went down very well with the market and the shares hit 70p before slipping back to the, probably more sensible, price of 58p – still 53% ahead of the recommendation price of 38p. Where to from here? Well, Mr Davies needs to retain the interest of his new Covid customers and build on the bit of good fortune that came his way. I believe he is a man who knows his business inside out and suspect greater things are still to come. A very strong hold but would buy at 50p or less.

Integrafin (Stuart)

Integrafin (IHP) the owner of Transact, a platform for IFAs to trade a wide range of assets has had an excellent year. Currently trading at 512p the stock is up 13.7% from the recommendation price of 450p. A swifter transition to online business due to remote working has aided the cause but this has merely speeded up the inevitable. Earnings are up by 21.7% and EPS grew by 22%.

IHP is a good business and should continue to outperform in 2021 as its tax efficient ‘wrappers’ should prove highly popular if the Chancellor decides to increase our tax burden next year. Still a buy with a 580p target.

Brickability (Neil)
Like much of 2020, my tip has not gone to plan. Chosen after the strong Conservative win in the general election, housing seemed at the forefront of the government’s agenda. Fast forward a few months and the agenda had changed as they battled the COVID outbreak. Brickability, like many companies, was forced to shut during the March & April period. The company did re-open quickly after the lock down and the management has been positive on the business since. Unfortunately, the company was hit with more bad news last month when Chief Financial Officer, Stuart Overend, sadly passed away following a short illness. The shares currently stand at 53p, c. 26% lower than the recommended price of 72p. The business, I feel, is still well placed. They have done as intended and made sensible acquisitions through the year, two closing this month. The acquisition of McCann Ltd, a UK and European haulage and logistics provider will help mitigate some Brexit risk. All in all, the sector has been impacted by COVID but remains resilient and, hopefully, 2021 will be a better year for all. Still a buy.


Russell Dobbs FCSI
Chartered Wealth Manager