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It’s been quite a day in financial markets to say the least. The process of exiting the EU will be protracted and very difficult. Many other countries could be tempted to follow the UK and it’s likely that the EU will do anything in its power to survive. Clear and strong leadership will be required and required very soon. Both the ruling party and the main opposition party are presently engaged in civil war. They need to pull themselves towards themselves soon.
What we do know, however, is that disentangling Britain’s 43 years of EU membership will not be an easy process. The UK will remain part of the EU until it invokes Article 50 of the Lisbon Treaty, which has a two-year deadline to work out an exit.
Although the impact of Britain leaving the EU will create huge short-term uncertainty across global markets, this is not the start of an Armageddon-style scenario. The world as we know it will not stop. There will be key buying opportunities for investors who will use this volatility created by markets overreacting as a time to go bargain-hunting
Present and mindful investors will be seeking high quality equities, amongst other assets, that have become cheaper so that they might top up their portfolios and/or take advantage of lower entry points, which means greater potential returns. These shares will probably be found within defensive sectors and can be easily found using the conservative trading searches which are a part of the VectorVest program.
At VectorVest we have been running a workshop called “Worry Free Investing”.
In this brand-new workshop I show the delegates that the key to long-term success in the Share Market is to hold shares with outstanding financial performance, shares with consistent and predictable earnings growth.
I then help the delegates take the first and most important step to worry-free investing by showing how to find those safe, high quality shares to create a worry-free portfolio.
At the workshop the delegates will also learn how to set up, run and protect a portfolio able to withstand the worst of bear markets and make the most of bull markets.
[Join David for a live 60 minute webinar at 6.30pm BST today 27th June – click here]
Each day VectorVest calculates a value for every share on the LSE and AIM. Just putting this one measurement to work works wonders for your portfolio. In Unisearch I tested for shares that are trading below their value and sorted those shares by VST. VST is the VectorVest master indicator which combines Value, Safety of earnings and Trend. I started the search on the 1st January 2015 and that’s around 18 months ago. The overall market was flat over that period while the top 10 shares in the search are up over 35% to the close just before the vote. That’s why I only invest in shares that are trading below their respective VectorVest valuations. I sleep much easier. Even with Friday’s selloff this search has greatly outperformed the overall market.
As well as calculating the value of a share, VectorVest assigns a number, on a scale between 0 and 2 which summarizes the safety and predictability of the financial performance. Above 1 means the share has a Relative Safety (RS) which is above average for the market. Above a figure of 1.3 the RS is described as excellent.
If I add a line, RS greater than 1, to the above Unisearch, I can eliminate all of the shares where the financial position has been hit and miss. This reduces the performance a little but still the portfolio has outperformed the market by miles over the past 18 months.
I have discussed these scans with Zak Mir on Tip TV and the recording is in the previous article on this blog.
On Thursday prior to the results of the Euro vote my Copper position reached the target from the falling wedge that I described a few weeks ago. There is also a video of the setup on the blog, again with Zak Mir. Although the falling wedge has made its target I am still optimistic that we are close to a major turning point in the commodity cycle. In the carnage of Friday the copper market found strong support at a trendline which defined the tops of the falling wedge pattern that I have been discussing here for the last month.
Last weekend I pointed out “Lost Motion” trades in BATS, Reckitt Bench, Admiral Group and Imperial Brands. All of the trades moved upwards during the week with BATS and Admiral closing well up for the week. I took profits in BATS and Admiral at the last old high. I enjoy the “Lost Motion” swing trades as if they work the move is fast and strong. I will detail this trade in the webcast on Monday 27th June as the setup I feel will be very applicable to the volatility which is certainly ahead of us. The chart of BATS and the Lost Motion setup is shown below.
As the market rallied last week, prior to the referendum result, I was rather glum because I had been stopped out of many of the shares in my unleveraged account during the downturn of the previous week. That emotion changed quickly during the early hours of Friday morning. I have the four positions that I spoke about last week. These are JD Sports, Keller, Trifast and Gleeson. Keller remains on a buy recommendation.
The open on Monday will be critical in the light of the rating agencies statement.
Please protect capital at all costs.
David Paul
June 25th 2016
[Join David for a live 60 minute webinar at 6.30pm BST today 27th June – click here]
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