Last month, despite guiding for an interest rate increase, the Bank of England’s Monetary Policy Committee ultimately balked at doing so. Against an extremely fluid economic background, were they right to do so? We felt that was the correct action as, with the economy already slowing, many of the inflation drivers were already weakening. The next chance of a possible interest rate rise would be this Thursday but it seems very unlikely the MPC would announce a change on the day of the North Shropshire by-election, so the status quo will probably be maintained. That will take us to the next MPC meeting in February before another interest rate decision is made.
The current Omicron worries will have an impact or, rather, the government’s resultant policy changes will. Whether or not one agrees with them the economy is stuck with them – at least for the moment. The result of those changes is likely to be less consumer money spent on hospitality and if it is not spent in pubs and clubs it will probably be spent on goods. Many goods have already seen sizeable price rises due to delivery pipeline bottlenecks and this is likely to be exacerbated, giving the MPC further food for thought.
In truth, they do not have an easy decision. There are many inflationary pressures of varying strengths in the economy but that economy is at a very vulnerable point in its recovery. Neither the Bank of England, nor the government, will want to see a heavy hand kill off the recovery from Covid that was so well won by the early vaccination successes. We mentioned last month that some of those inflation drivers were likely to negate as the economy weakens but some of this will now be countered by the above. Assuming the government’s Plan B is as harsh as it gets, then it seems extremely likely the MPC will raise interest rates in February, albeit very modestly. The populace appears to have had enough of its freedoms being restricted, and many on the Tory backbenches agree with them. Boris won’t want an all-out mutiny on his hands – he has enough enemies already.
2021 Naps Reviewed
Kistos (Russell) has enjoyed a strong performance throughout the year, currently 377p versus the tip price of 165p – a gain of 128%. Should one cash out or run the winner? Personally, I would stay with it. As mentioned in January, Andrew Austin’s last vehicle, Rockrose Energy, multiplied original investors money 37 times over the course of its 5-year listed life, and you can add almost another 4 times purely from dividend receipts. He now has virtually his entire Rockrose team with him at Kistos and, although it is probably a bit much to expect a complete replication of the Rockrose returns, Team Austin clearly knows what it is doing. The acquisition of Tulip, a Dutch North Sea gas producer from an unmanned platform powered by solar and wind, couldn’t have been better timed ahead of the explosion in the gas price this year. They have probably the lowest carbon footprint of any North Sea production assets. The deal also included other fields at various stages of exploration and appraisal from which results to date have been extremely encouraging.
I feel sure Tulip will be the first of a number of acquisitions as Kistos builds its portfolio of energy transition assets. I believe 2022 will see further strong progress. With a market value of £315m it is in the HIGH – RISK category but I feel holders will be well rewarded. There is further to go in my opinion.
Audioboom (Stuart) tipped at 258p, this company is currently trading at 1040p – a gain of 303%. It has developed into a ‘Top 5’ generator of podcasts worldwide and I am delighted to see the dramatic price increase over the year.
Boom received a take-over approach from AAA Capital in August which didn’t amount to anything. However, another bid would come as no surprise. Directors have bought recently and a major investor has added to his holding (N Candy). It is a brave investor who buys now but I believe that a take-out price is ultimately likely to be nearer £15.00.
Only for clients with a HIGH – RISK appetite.
Pinterest (Neil) has had an up and down year, unfortunately ending at the latter at $36, a 45% decline from the $66 tip price. Revenue continues to grow both in the US (their main market) and internationally. Monetisation has been the focus for the company, which they are achieving. The market though seems more interested in the monthly active users (MAU) number which, unsurprisingly, waned slightly as the economy began re-opening, particularly in the US. Pinterest in my opinion, is unfairly being compared to social media platforms. During 2021 Pinterest has been linked to suitors, Microsoft in February and more recently PayPal in October. Nothing has materialised, due in part to the current spotlight on big US tech and its monopoly positions. I believe Pinterest will in time, lose its social media label or be acquired. Their market capitalisation is miniscule in US terms at $23.5 billion. A firm hold.
We will present our 2022 selections in January. In the meantime we would like to wish all readers a very Merry Christmas and a Happy, Healthy and Prosperous New Year.
Russell Dobbs FCSI
Chartered Wealth Manager
