It seems prudent to point out that Morningstar’s analyst ratings are not a buy list. These ratings are awarded based on how likely a fund is to outperform (after fees) its peers, while also taking into account factors such as its parent company, managers and the stability of its team.
When the rating system was enhanced last year, one of the things I found most exciting was that different share classes of the same fund could be awarded different Medal ratings to each other. That’s important because fees vary across share classes, and how much you pay to invest in a fund directly impacts the returns you can achieve. Anything that helps ensure people don’t overpay for their investment has got my vote.
Under the new system, many funds have seen their ratings change. This week we saw the Scottish Mortgage investment trust lose its top rating of Gold as it was downgraded to a Silver analyst rating. The move was largely prompted by costs. The trust uses gearing – or borrowing – and this can be expensive to finance, adding to the standard annual charge. In this case more than doubling it, in fact.
Should you be concerned about that? That’s something to decide for yourself. There are a million and one things to weigh up when you select investments for your portfolio: cost, track record and risks are just some of them. A rating system can help but, to repeat myself, it is not a buy list. And a single-rung downgrade isn’t a sell signal either.
Let's Look Beyond Tech
There are 500 stocks in the S&P500 – the clue’s in the name. Actually, there were 505 according to the last factsheet, if you want to be pedantic. There are more than 3,000 on the Nasdaq.
And yet it feels like we only ever hear about the same handful of names that dominate any chatter about the US. This week, Apple (APPL) became the first publicly listed company to reach a valuation of $2 trillion. Founded in 1976 by the inimitable Steve Jobs, the firm floated on the stock exchange in 1980 at $22 a share. Forty years and four share splits later, its market cap has so many zeroes, it makes my head spin.
Its FANG stock peers are worth almost as much: Amazon’s (AMZN) market cap is $1.64 trillion, Google (GOOGL) (now Alphabet) $1.04 trillion, and Facebook (FB) a comparatively meagre $752 billion.
I suppose, then, it’s understandable that talk of the US stock market has become synonymous with these few tech mega-stocks. Yet doing this does a disservice to this vast and vibrant market, which is jam-packed with exciting stories. It was great to hear from fund managers this week who are casting their net wider than the technology industry when investing in the US; to hear about opportunities in healthcare, banks and even retail.
Forget social media, what about JM Smucker (SJM)? An Ohio-based peanut butter-maker founded in 1897. Not only have its shares delivered annualised returns of 9% over the past decade, they’re up 10% year to date – it would appear people still need delicious savoury snacks in a pandemic; a mouth-watering investment opportunity if I ever heard one.
Is Eat Out Helping Out?
Is anyone else struggling to get a midweek restaurant reservation at the moment? It comes to something when you can't get a booking at a local eatery for a Monday evening.
Rishi Sunak is no doubt congratulating himself on a very successful policy in the form of his Eat Out to Help Out Scheme, which is designed to get us all out at our local restaurants again post-lockdown. But I have concerns. These restaurants might be fully booked, but few seem to actually be full when you walk past.
Local businessowners I've spoken to say that no-shows are a real problem. Tables are booked weeks in advance but when the night comes, the room remains empty. We'll have to wait for the next batch of company results before we find out whether the scheme was more Help Out or hindrance.
