Goodness me, let’s hope so. Two years of pandemic inspired economic dislocation and social upset is more than enough. The tail-end of 2021 marked the point, I feel, that the public’s patience was stretched to breaking point. The government, having said all along it would be led by the science appeared, when the Omicron variant broke, to be trying to second guess the science, as were even the scientists themselves. The actual science emerging from South Africa, the longest host of Omicron, suggested a complete over-reaction by Boris’s scientific and medical advisors. Three research notes all but spelling this out, fortunately hit the headlines just two days before Christmas, justifying the PM’s hesitation to lock things down further ahead of the break. Those in Scotland, Wales and Northern Ireland, where precipitate action had already been announced, were not so fortunate.
So, we enter 2022 with better news. Although Omicron infects more easily it is less potent. Who knows? Perhaps this is Covid’s last hurrah. Wouldn’t that be good? We could all live with a virus no worse than flu and, just think, tv screens devoid of Chris Whitty’s morbid physiognomy would be a bonus. Does the man ever blink? I’m beginning to think he’s a bot.
Anyway, we are going to look on the bright side. We’re plumping for 2022 to be the year a sense of normality returns. We expect economic growth to resume, albeit at a pace less pronounced than the initial recovery. Inflation will remain worryingly stubborn in the early part of the year and is likely to provoke one or two very modest interest rate rises. However, an over-heavy hand would, in all likelihood, be met with evidence of the economy’s fragility and, in any case, we expect to see inflation begin to wane in the latter half of the year.
We expect most major equity markets to enjoy a positive year but believe the two most undervalued, Japan and the UK, will be amongst the best performers. Our market will continue to be an attractive hunting ground for overseas predators, putting further cash into investors’ hands to help fund a continuing flow of new listings.
The New Year wouldn’t be the same without the three of us providing our Naps for the year. Remember, though, there is absolutely no reason why a tip should perform to meet the calendar year timescale. If it does it’s a bit of luck – no more than that. Take Neil’s selection for 2020 – Brickability. By the end of that year it looked a bit of a dog but over the two years to December 2021 it put in a very solid performance indeed. With that in mind, here we go:
Belluscura (Stuart)
Following the superb performance of Audioboom last year this selection has to be good. I have selected a ‘house’ stock in Belluscura (BELL.L). The company makes Oxygen Concentrators – simply put they take the air around us and remove the Nitrogen, thus concentrating the Oxygen to circa 98% purity.
The product is portable and is ideally suited for those that require oxygen therapy such as COPD sufferers and also those with long Covid. FDA approval was granted in the US in March 2021 and the business was floated soon afterwards. Plans on further geographical expansion are underway. Belluscura is planning 3 versions of their machine which recently won the best medical device award at one of the US’s largest MedTech shows. Once approvals are given in Europe, UK, Middle East and Far East the growth prospects of the business should accelerate.
This is not for the faint hearted as it comes with a High Risk warning and is only for those that are able to accommodate this level of risk in their portfolio. Current share price is 118p.
Kistos again (Russell)
I make no apologies for repeating last year’s selection. I believe Andrew Austin and his team have only just got started on their mission to build a balanced, long-life portfolio of energy transition assets. This will focus on assets with low-carbon intensity credentials and is likely to include high quality production and development assets, energy storage and infrastructure and energy generation projects. The first acquisition, that of the Tulip gas and oil assets offshore of the Netherlands, fell into the first category including, as it did, efficient, unmanned, naturally powered gas producing assets and further assets that are being drilled and tested, with encouraging results to date. Just before Christmas Kistos confirmed it is a participant in the bidding process being run by Total to sell certain of its West of Shetland gas assets. Total has gradually been reducing its investment over recent years and, although there can be no guarantee Kistos will be successful with its bid, the asset includes a massive pipeline network delivering product from several fields to the West Shetlands Gas Plant at Sullom Voe. Successful or not I believe we are still very early in the construction of the Kistos portfolio. Tipped this time last year at 165p the share has served me well so far. However, I believe there could be a lot further to go so I am retaining it as my nap for 2022 at the current 418p. High risk but with great potential.
Clipper Logistics (Neil)
CLG is a leading provider of value-added logistics solutions, e-fulfilment and returns management. Recent interims highlighted that group revenue increased by 33.1% for H1 FY22, e-fulfilment growing by 31.7%. Shopping habits have changed drastically since COVID-19 and Clipper has and will, in my opinion, continue to benefit from this. With strong potential for organic growth from existing clients such as John Lewis, ASOS and Wilko along with many other household names, Clipper is also looking to expand further into Europe and the latest joint venture with Farfetch will help expedite this whilst also offering geographic exposure to US & Asian markets. The shares hit an all-time high of almost £9 in September before concerns over warehouse and HGV driver shortages, an issue I can’t see persisting in 2022, provoked a period of weakness. This has created an attractive buying opportunity, in my view, with the shares at £7.24. With a market value of £743m the shares still fall into the high-risk category but for those able to shoulder such risk I believe they offer a good bet.
Avon Protection Update
We couldn’t ignore what has turned out to be our worst selection during 2021. So much potential from a company that had been so well managed for so many years came to an abrupt reversal when it became apparent that the main product developed by a company Avon bought from 3M’s, basically didn’t work. Body armour products developed for military use failed the tests upon which sizeable contracts were based. Figures were delayed and Avon undertook a review of the body armour business.
It is apparent from the figures, released shortly before Christmas, that the rest of Avon’s businesses are doing very well. Body armour has been a drain, producing no revenue whilst incurring further costs as testing and changes continued. Now Avon has decided to wind down the division, which looks a sensible move in the circumstances. Could legal redress be sought from 3M? Possibly, but a small UK company fighting a massive US business in the US courts? I suspect it would be good money after bad and we are glad to hear Avon has made no such noises to this point. Probably best to wind things down as quickly as possible and get on with the businesses that are working well. On this basis it is good to see at least one analyst now looking for an element of recovery from the current depressed 1125p with a target of 1500p.
Wishing you all a very happy, healthy and prosperous 2022.
Russell Dobbs FCSI
Chartered Wealth Manager
