Spending last w/e at a naval exhibition at Portsmouth dockyards (I lead a glamourous existence) commemorating the life of Nelson and in particular the £250,000 reproduction of the diamond encrusted chelengk below presented to him (the only non-Muslim ever to have received one) by a grateful Ottoman Emperor Sultan Selim 111 after the defeat of the French at the Battle of the Nile in 1798 one is reminded of the importance of the Royal Navy then…
And now…
Fast forward 200 years and an hour-long harbour tour around the Portsmouth dockyard (fascinating if you’re into big ships and engineering, not if you’re not!) counts 13 frigates, four destroyers and the shiny gleaming new aircraft carrier HMS Queen Elizabeth, all 65k tons of her readying herself for her maiden voyage. (sister ship HMS Prince of Wales arrives in 2019). The British navy is to this day the world’s fourth largest after the US, China and Russia.
As big as the houses of Parliament and as tall as Niagara Falls, and with a flight deck the size of three football fields and capacity to carry 24 F35s at $100m apiece the Queen Elizabeth emphasises what a different type of country we are from the continental nations of Europe.
Ironically given the above defence stocks have been misfiring. We had a great run last year in UK defence stocks BAE and ROLLS trading out for 25% gains each time…however defence stocks have been hit hard by rumoured or actual MOD cuts with BAE and MOD supplier ULTRA warning on profits last week.

Current themes and sectors we’re focusing on…

• Asian dividends…a link to the New Statesman article below… we believe this is a secular growth theme that is only now getting started and has miles to run. Divi payouts in Asia are about half those in Europe and the States and as second and third generation Asian families see their businesses mature, the cascade down is likely to be in the form of higher dividends. ABERDEEN ASIA INCOME and INVESCO PERPETUAL INCOME fund are two favoured ways of accessing this theme. Nathan Shor’s GALLOWAY EMERGING DEBT FUND and Rupert Kimber’s TIBURON TAIKO FUND have also been successful investments for the funds with large exposures to Asian issuers/corporates.

• Infrastructure – there is value emerging here. The combination of CARILLION’s massive profits warning last week (shares down 40% on the week) and blood-curdling warnings from the opposition bench in Her Majesty’s parliament about nationalising “builders” whatever that means along with an urgent need to address the UK’s appalling productivity makes a strong case. JOHN LAING Infrastructure yields 6% here and price has moved to a discount to NAV. We have also benefited from exploiting the consolidation of suppliers (eg building materials like paint) with 2017 winners this year like UK listed BLUE JAY and Australia listed MINERAL DEPOSITS starring.

• Disruptive technologies 1.-Electrification- the growing need to invest in electrification of transport and provide energy solutions across industry and households is opening up a plethora of investment opportunities. AMERICAN BORATE, AUSTRALIA MINES in borate and cobalt, and copper, nickel and zinc exposures via CENTRAL ASIA METALS and ERAMET have done well this year and this theme is well set as global OEM’s reorient their business models in favour of EV related investment.

• Disruptive technology 2.-healthcare. Look at how the great American and UK titans like GE and GLAXO (7% yielder) have crumbled this year while US tobacco and drinks stocks have been investing in alts like cannabinoid providers. CONSTELLATION recently bought a 9.9% stake in North America’s leading cannabis grower CANOPY GROWTH, cannabis drinks planned?

• Shipping- It’s not just naval shipping that’s seeing investment and merchant shipping is coming back as global GDP recovers. Under the cosh since the global financial crisis the moving of stuff slowed to a crawl 2009-2012 but the big players like CMA and MAERSK are seeing demand pick up…shipping is an interesting sector…difficult for years but value is huge you only need to look at the Baltic Dry to see how low the freight index has dropped to and we’ve traded Asia’s second largest container shipping group PRECIOUS SHIPPING and Asia largest oil rig builder SEMBCORP MARINE this year. A sector to watch in 2018?

That’s it.

Have a good w/e