Sell Smart Metering, buy-up-to level adjustments and some questions answered
30th August 2018 |
29 August was an important day for the Frontier Tech Investor portfolio with a significant number of shares breaking out to new highs. I think it’s a good time to share some thoughts about the portfolio because a number of buy-up-to levels need to be adjusted.
Technology is on a tear. Shares like Microsoft and Illumina are accelerating higher and 2U appears to be on the cusp of reasserting its impressive advance. US corporate profits broke out to new all-time highs in the 2nd quarter and that is a solid rationale for justifying higher stock prices. That is why so many shares are breaking out right now.
We can argue that the boost from the fiscal stimulus to US growth is a big part of this development but the reality is that it is an awfully big boost and it is not over just yet. In my opinion, the balance of probabilities is that the technology sector is heading towards a mania and that is the best time to be invested. I monitor the lead indicators for future recessions on a daily basis and none are currently flashing red. That is despite the doom and gloom we hear so regularly from the mainstream press.
First off, I am now recommending you sell Smart Metering PLC. There are an increasing number of traders disclosing rather large short positions in the share and that is weighing on the price. The market for distributed energy and role of smart meters in that process is undiminished. However, the reality is that the tide of investor sentiment has turned against the share and I think the best course of action is to step aside.
Action to take: sell Smart Metering for a loss of 16.25%
Ticker: SMS:LN
Price recommended at: 735.50p
Last close (as at 29/08/2018): 616.00p
I recommended that you buy Advanced Micro Devices a year ago and for the first six months that decision admittedly looked questionable because the share declined from the $14.76 I recommended it at to below $10.
However, things really began to turn around in April and the share rallied rather spectacularly to its recent peak near $27.30, and is currently sitting on a gain of over 70%. Following such an impressive advance I think some consolidation is warranted but the buy-up-to level of $18 no longer makes sense. I am therefore raising the buy-up-to price to $22.50 and expect subscribers will see an opportunity to initiate positions around that level over the coming weeks.
Abcam broke out to new highs on 29 August amid enthusiasm about its growth potential and I am raising the buy-up-to price to 1,550p to reflect the potential for the pace of the advance to pick up. As it stands, the share is up over 69%.
Bioquell did pull back in early August but did not fall so much that it got back to my buy-up-to level. It broke out to new highs on 29 August and with such momentum I am raising the buy-up-to price to 550p. This is because the speed with which the share is realising its upside potential is increasing – it’s currently up comfortably over 21%.
Cisco Systems also broke out to new highs on 29 August and I am raising the buy-up-to price to $50. The share has been posting a series of ranges one above another for the three years and with the breakout, we can conclude the most recent has been resolved on the upside with a gain of over 45%.
The pace of Illumina’s advance is picking up and it is trading $100 above my original buy-up-to price but I will wait for a pullback before raising it.
SAIC also broke out to new highs today, hitting gains of nearly 65%. I am raising the buy-up-to price to $96 because this is a rather important development considering how long it has been ranging for.
2U pulled back rather sharply between its May peak and its August low and is now rebounding nicely. I am raising the buy-up-to price to $100 because I believe the worst is over and the share is about to resume its impressive uptrend, which is resulting in an astounding 162% gain.
The enthusiasm for Canadian cannabis has picked up a lot since recreational use was permitted over the summer but Constellation Brands taking a position in Canopy Growth Corp has resulted in it becoming one of the favoured vehicles to play the trend. I am raising the buy-up-to price to $65 to account for the fact that the upside potential is being realised rather quickly.
There have also been a couple of emails from subscribers I think are worth addressing in a more public forum because they are of interest to all subscribers.
The first one relates to our holding in SolarWindow:
I hold SolarWindow in my pension account with Transact. They claim it is delisted and I cannot sell it now (as I am doing a transfer out to another supplier – I need to do this). Is this correct – is it delisted?
First off, the share has not been delisted but it is now traded on the pink sheets. That means it is effectively a penny stock even if the share is trading at $2.75. The share pulled back rather sharply from mid-August following the release of an interim trading status note, which suggested the company continues to have a need for fresh capital. A lot of that bad news is now in the price and it is back in the region of the lows from where demand has returned in the past.
If you need to sell, the only way to do so will be to place an order in the market for your position and wait for a bid to hit it. 15-session average daily volume is currently 60,810 shares but is more usually around 27,500 shares.
I believe this email is also of general interest:
I have just signed up to this research and on my 60-day trial I am hoping that you can provide me with further information. One option is to set up a Stocks and Shares ISA to buy and sell your recommendations. However, I am aware that not all shares are available in this product. Would the majority of your recommendations be purchasable through a Stocks and Shares Isa, (perhaps with Motley Fool Hargreaves Lansdown) or would I need to set up a regular account? I am not asking for advice, but information. All the best and hope to get a reply soon.
Welcome to the service. These are questions which a good many people ask and I’m happy to answer them as best I can with the understanding that this is not advice as to what you should do. In fact, unlike Motley Fool we do not compromise our objectivity by recommending any particular broker and have no reciprocal agreements with them.
It is possible to hold overseas shares in both a stocks and shares ISA as well as in a self-invested pension fund (SIPP). The vast majority of shares in the Frontier Tech Investor portfolio and Trigger Point Trader are reasonably large and liquid, but there are a small number of smaller cap companies that are not as liquid.
The best thing to do would be to submit the list of shares in the portfolio to your prospective broker and ask if they deal in them. I know for example that subscribers have had difficulty buying cannabis-related shares from UK brokers. They claim this is for ethical reasons, it certainly is not because of liquidity. UK brokers seem to have no issue with tobacco stocks. Perhaps it is only a matter of longevity.
Please be aware if you are preparing to buy and sell US listed shares then you will need to fill out the appropriate W-8BEN form which help you to avoid paying a withholding tax on any income you receive. Other than that, the process should be pretty straightforward.
All the best,
Eoin Treacy
Investment Director, Frontier Tech Investor
