In the end one has to be happy with holding stocks for the long term and I can say that about any of the above.

Hey Tom, I suspect I might have done the same with SMT, had I had the foresight to actually buy it! Mixing it with MNKS and MWY sounds like a decent balance though.

I’m fairly relaxed about inflation although admittedly I don’t spend very much time thinking about big macro issues like this and I don’t think I can offer any great insight on them.

I generally don’t adjust my portfolio based on macro forecasts as so few people get it right on a consistent basis and there are so many other factors at play. I’m a little cautious right now because valuations seem pretty high and they’ve had such a good run, not because I’m expecting inflation to be higher.

Obviously, if inflation does hit 4% and stay there for an extended period then that definitely could have a knock-on effect on valuations. Whether that will happen quickly or be more gradual is anyone’s guess. I suppose that as many of these companies are US-based, it’s likely to be the US inflation rate/interest rate that is more important here than the UK and Europe.

I’d probably be happier to invest in BG funds and trusts if any adjustment like this happened, as the underlying valuations might look more reasonable.

Not sure if that’s helpful 🙂

I haven’t check Schiehallion for a while but I see from the June 2020 it’s 56% invested, which from memory ties in with the pace of investment they outlined when they first listed. Still at a 20%+ premium as well!

“Separately, Stifel analyst Iain Scouller said there was a ‘good case’ for investors to take some profits on the trust, which has surged 94% from March lows.

Scouller pointed to the concentrated portfolio as a risk, with the trust’s 10 largest investments accounting for 58% of net assets at the end of June.

SMT had a 13.4% position in Tesla (TSLA.O) and 9.7% in Amazon (AMZN.O), its top pair of holdings, at the end of July, according to the latest factsheet. Chinese tech giants Tencent (0700.HK) and Alibaba (BABA.N) were 5.9% and 5.4% positions.

Scouller pointed out those bets had worked ‘exceptionally well in recent months’ as technology disruptors had thrived during the pandemic and Chinese companies, making up about a fifth of investment, had performed strongly after the country’s comparatively strong recovery from the virus.

‘In recent months, this concentration has worked well for shareholders given the very strong price performance of many of the trust’s largest investments. However, in a different market scenario, or if there were some negative company specific issues, the concentration could be an important risk factor, potentially impacting performance,’ said Scouller.

While the catalyst for this shift was unclear, it could include a rotation away from ‘growth’ stocks to out-of-favour ‘value’ stocks, a shift in US policy on technology companies if there is a change in administration after November’s presidential election or market sentiment weakening on technology and growth stocks.”

This has prospered in our recent world of low inflation and low interest rates, which are necessary sustain the stratospheric valuations of early stage companies such as Tesla.

I would be interested to know your views on how “growth” investing will stand up if we get inflation in the near term of the sort predicted by Russell Napier et al. See his recent piece here:

https://themarket.ch/interview/russell-napier-central-banks-have-become-irrelevant-ld.2323

If inflation rates go up and the discount rate applied to future profits also therefore increases, then it may well be that the markets will not be so kind to BG-style investing.

Where would you put your money then?

I would love to know your views on whether you feel we are looking at inflation over 4% in the next few years, and if so how BG’s house style would prosper.

Do please keep posting!

Sorry you had trouble signing up Tim. I’ve added you manually so you should be all set now.