James Carthew: This selloff has gone too far
Looking at my portfolio, the past few months have felt a bit frustrating. Investment companies that I am convinced are sound have been derated, sometimes aggressively. Investors seem irrational, perhaps even panicky. Fundamentals are being ignored and sentiment rules all.
Fortunately, the bulk of my investments are in my pension and there’s no pressure to sell at distressed values. If anything, I’m frustrated that I don’t have more money to snap up some of the bargains available now, but I am conscious that not everyone will be as sanguine.
There are good reasons to be cautious. Interest rates are back to more normal levels and companies that failed to factor in the chance of higher rates have had to scramble to refinance. A good example of this in our sector was Hipgnosis Songs Fund (SONG) which refinanced its debt last year and then fixed the cost at around 5.7%. A good job too as, had it not, it would now be paying about 6.8%.
Fears of recession have faded but growth remains anaemic, and inflation is putting strains on many business models. The collapse of Silicon Valley Bank (SVB) has hit many businesses that used to be its customers, though it was interesting that funds in the technology and technology innovation sector and other funds with similar exposure such as Manchester & London (MNL) had a relatively good March. Investors seem to believe that… read more here