How my trading tips fared in 2020
Winning ideas included going long media group ITV and shorting electric-lorry maker Nikola
This has been an extraordinary year for markets on both sides of the Atlantic. My trading tips coped well with the volatility, with my portfolio finishing the year in a much better position than 12 months ago. I started 2020 with 12 ideas. There were seven long positions: Safestore, Bellway, Bausch Health Companies, International Consolidated Airlines Group (ICAG), Taylor Wimpey, Volkswagen and DS Smith. There were also five shorts (bitcoin, Netflix, Uber, Wayfair and Twitter).
All of these were closed, most of them in the first three months of the year. Twitter was closed out at a loss of £1,005 in issue 983. In issue 985, I recommended that you take profits of £250 and £1,320 on bitcoin and ICAG respectively, and losses of £340 on Netflix. In issue 989, Safestore and Bellway were closed at profits of £932 and £1,782 respectively.
In issue 991, I recommended that you take profits of £2,643 on Wayfair, making it my most successful short tip of the year. In issue 993, Bausch Health Companies was closed out at the break-even point. Taylor Wimpey, DS Smith and Volkswagen were also closed out at losses of £840, £840 and £800 respectively. Finally, in issue 999 I closed out Uber at a profit of £170. Overall, of the 12 closed positions from 2019, six made a profit, five made a loss and one broke even. However, the gains outweighed the losses with a net profit of £2,462.
The year’s 24 trades
In addition to the tips taken over from 2019, I made a total of 24 recommendations this year. Thirteen were closed during the course of the year, and one was never triggered. My
Philip Morris International short, which I tipped in issue 981, broke even when it was closed in issue 995. My National Express long from issue 983 was closed in issue 993 a loss of £960. I had better luck with my recommendation that you short aerospace giant Boeing in issue 985; it made a profit of £1,633 when it was closed in issue 993: global pessimism was rampant in April.
My long recommendation on United Rentals, an industrial-equipment rentals company, in issue 987 was closed in issue 993 at a loss of £900. My suggestion to short Shake Shack, an absurdly overpriced burger joint, in issue 989 was closed in issue 995 at a loss of £20. My long ICAG tip in issue 991 was closed in issue 1011 at a loss of £930. My long Shell in issue 993 was closed in issue 1019 at a loss of £750.
The year’s best idea
My decision to revisit industrial-equipment rentals firm United Rentals in issue 995, owing to hopes of an infrastructure stimulus, was more successful as it was closed in issue 995 at a profit of £3,672. This proved to be my most successful tip of the year. My short online-dating agency Match idea in issue 999 was closed in issue 1007 for a loss of £990. My long JD Wetherspoon in issue 1001 was closed ten weeks later for a loss of £214, as restrictions and mandatory closures of pubs and restaurants continued to hit profits. My suggestion that you short Chinese online tutor GSX Techedu over concerns about the accuracy of its user count and overvaluation, in issue 1007, was cancelled in 1021, never having reached the price below which it would be triggered. This was a pity because it did eventually fall.
My tip to short Peloton, because I felt that its pricy bikes and online gym classes were a fad, in issue 1009, was closed ten weeks later for a loss of £990 as its sales and stock kept rising. My long ICAG in issue 1015 was closed in 1017 for a loss of £990. My long cruise operator Carnival Corporation in issue 1017 was closed in 1027 for a loss of £300. Overall, of the 13 tips made and closed this year, two made a profit, 11 made a loss and one broke even. But the losses only outweighed the gains by £990.
Open positions in the money
The real gains have come from the ten positions that I tipped this year and still have open – five longs and five shorts. All my long tips, and two out of five of my short ones, are making money. My long tips are mostly bets on life returning to normal, and all have gained from news of the vaccine. Media group ITV, tipped in issue 997, is making £1,044. Builder Bellway (issue 1019) is making £886. Transport company National Express (issue 1021) is making £897. Pub group Mitchells & Butlers (issue 1023) is making £720. Norwegian Cruise Line (issue 1027) is making a profit of £278.
Most of my short tips are tech shares: valuations are frothy and due a fall. Online insurer eHealth, tipped in issue 1003, is making £921. Electric-truck maker Nikola (issue 1005) is making £1,066. Online furniture retailer Wayfair (issue 1011) is losing £91. Social network Twitter (issue 1025) is losing £873. Online retailer Ocado (issue 1029) is losing £75. Overall, my open long tips are making a net profit of £3,825, while my short tips are £1,896 in the black, for combined profits of £5,721 – or in other words, a pretty good year.
Trading techniques: what I learnt in 2020
Markets can be more resilient that you think
Global equities rallied quickly after the initial plunge. The S&P 500 had fully recovered by August. I should have taken profits on my shorts more quickly.
Listen to short sellers
My tips to short electric-lorry company Nikola and online insurance broker eHealth are making large profits. In both cases the initial idea came from short sellers. As they risk their own money it gives them a strong incentive to get the research right.
Dividends are crucial
In April I advised buying Shell, based on the fact that it had vowed to protect its dividend. A few weeks later it suspended the payout for the first time since World War II. I closed my position at a loss.
Avoid returning to failures
At the start of the year, I vowed that I would avoid revisiting tips that had lost money. Yet I returned to ICAG, not just once but twice, with poor results both times. Still, at least I avoided shorting Tesla, which rose sixfold.
Adjust stop losses to the situation
Ironically both Shell and ICAG are now higher than the price I tipped them at. But because I had set my stop-losses too tight, I took losses on both those positions. It might have been better to have had a looser stop-loss and a smaller stake.