8 Most Read Stories This Year

Nick Train's quest for 100-baggers, Warren Buffett's Berkshire Hathaway and the closure of the Woodford Equity Income fund were just some of your favourite stories this year

Holly Black 19 December, 2019 | 11:21AM

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Morningstar readers haven’t been short of exciting stories to get stuck into this year. Here we round up some of your favourite articles from 2019:

Nick Train: I Want 100-Baggers

Many investors would be over the moon to double their money, but fund manager Nick Train has set his sights slightly higher. The manager of the Gold-Rated Finsbury Growth & Income trust (FGT) is looking for 100-baggers – stocks that return £100 for every £1 you invest.

The fund manager is known for his long-term buy-and-hold approach to investing and only backs companies he has a strong conviction in, which is why there are only 20 or so names in his portfolio. These include Marmite-maker Unilever (ULVR), whose shares have more than doubled over the past decade from £19.94 to £46.29, and Guinness-maker Diageo (DGE), whose shares have tripled from £10.84 at the start of 2010 to £31.27 today – they aren’t quite 100-baggers but the growth has helped the trust deliver whopping annualised returns of 16.8% over the past 10 years. 

Is Warren Buffett’s Berkshire Hathaway a Buy?

The Sage of Omaha is considered by many people to be one of the greatest investors of all time, but does that make his Berkshire Hathaway (BRK.B) a buy? One of the main confusions about BH is how investors should view it – is it an active fund or a stock? Morningstar analysts argue it’s the latter.  

Despite its size – it’s one of the biggest companies on the S&P 500 – and track record, it’s important that investors recognise that individual company risk remains.

“When investing in a single stock, you’re placing your entire investment in one company’s success,” says Morningstar’s data journalist for investor education, Michael Schramm. “This exposes investors to unsystematic risk – in other words, company-specific risk that a diversified portfolio can reduce.”

Should You Park Cash in a Money Market Fund?

With bonds yielding virtually nothing – or actually nothing in many cases – and so much uncertainty across the globe, it’s no wonder that investors have been considering where to stash their cash. Many have wanted to take some risk off the table in 2019 and keep some powder dry while Brexit and trade wars played out.

Money market funds have been a major beneficiary of the trend, seeing heavy inflows for investors looking for a safer place to put their money in the short-term. But is it ever a good option to choose a money market fund? We looked at the pros and cons. Elsewhere we considered defensive funds which could help weather market volatility.

Woodford Equity Income Fund Suspends Trading

The demise of Britain’s best-known fund manager was, unsurprisingly, one of the most-followed stories of the year. Neil Woodford’s flagship Equity Income fund was forced to suspend trading in June as it struggled to cope with mounting investor redemptions. The unprecedented move put the manager’s entire investment strategy in the spotlight, casting major doubts about his shift away from the undervalued British businesses he was known for investing in, into unlisted and illiquid start-up and biotech companies.

Investors were further disappointed in October when the manager revealed he would stand down from running Equity Income and his Patient Capital investment trust and wind up his eponymous business, which had launched to so much fanfare just five years earlier.

It will not be until January 2020 that investors will start to receive some of their money back, as the fund’s holdings are liquidated, and it could be many more months until the illiquid assets in the portfolio are sold and investors find out just how much they have lost.

In November, the manager’s protégé Mark Barnett saw his funds downgraded by Morningstar analysts amid liquidity concerns. And just weeks later, Barnett was removed as the manager of Edinburgh Investment Trust by its board after three years of underperformance. 

5 Most Shorted Stocks 

A short attack on litigation finance firm Burford Capital (BUR) and the collapse of tour operator Thomas Cook, which was one of the most shorted stocks on the FTSE, got many investors thinking about how they might make money from betting against companies, rather than backing them to succeed.

We looked at what exactly short-selling is and found out which stocks the market was betting against. These short-sellers were quickly proved right in betting against Thomas Cook but Kier Group, the AA, IQE and Anglo American have so far proved the sceptics wrong. 

Stocks for the Electric Car Revolution

Electric cars are expected to account for a fifth of cars sold by 2030 – and our Electric Car Revolution series looked at how investor could harness the trend and put it to work in their portfolios. Tesla is probably the brand most closely associated with the rise of the electric vehicle (EV) but there are plenty of other stocks to choose from for investors looking for something slightly more under the radar, from lithium producers to battery makers and the companies building the charging points infrastructure needed to fuel this beast of a trend.

Peer-to-Peer Provider Lendy Collapses

While many investors enjoyed bumper gains in the 2019, others saw their choices go very wrong indeed. At the start of the year, mini-bond firm London Capital & Finance collapsed into administration leaving thousands of investors out of pocket to the tune of £234 million. It would not be the only mini-bond firm to fail before the end of the year.

Elsewhere, the peer-to-peer loan sector came under pressure and Lendy was among the first providers to buckle. The P2P provider, which made loans used by borrowers to purchase and redevelop properties, had promised investors returns of up to 12%. But default rates started to soar as a growing number of its borrowers failed to make their repayments, and Lendy fell into administration with an estimated £160 million in outstanding loans owed to investors.

Pension Drawdown Unsustainably High 

The number of people saving into pensions has rocketed since the advent of auto-enrolment, and pension wealth has almost doubled in the past two years alone, but just as important as how much we save for retirement is the issue of how we manage our money once we stop working. 

Figures from HM Revenue & Customs found that many retirees were drawing money out of their pension at an unsustainable rate, leaving them at risk of outlasting their money. One of the biggest problems is that people tend to underestimate how long they will live, and therefore how many years their money needs to last. But many financial advisers say that underspending in retirement is just as big a problem, and many retirees are too worried about running out of cash to enjoy their hard-earned savings. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Diageo PLC3,240.00 GBX0.71
Finsbury Growth & Income Ord893.00 GBX0.90
Unilever PLC4,474.00 GBX2.42

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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