Movies about high finance and investing are rarely enormous box office hits. So too with 2011’s Margin Call, one of my all-time favourites of the genre. With a star-studded cast, it attracted very favourable critical reviews, but undeniably (and sadly) did better on DVD and in the video-on-demand market.
In a difficult-to-film genre, it’s nevertheless a stand-out: watch it if you can.
At the movie’s climactic height, the investment bank chief executive played by Jeremy Irons stares down from the 42nd floor of the bank’s skyscraper, and remarks gloomily that while he is fabulously paid to guess the market’s direction, tonight his senses are telling him nothing. He is blind, like everyone else in the late-night crisis meeting.
And I know how he feels — and so do you, most probably. As investing environments go, conditions today seem just as opaque as in 2008, when Margin Call is set.
Sane economics, yes. Silver bullet, no
Granted, markets have perked up a little in recent days. My portfolio is looking cheerier, and so too is yours, I’m guessing.
Nor is it difficult to see why. A column in The Economist put it best, I thought.
“After three years of dishevelled bombast and a six-week spasm of revolutionary fervour, a period of wonkish orthodoxy beckons,” it observed. “After the fiscal recklessness of Liz Truss, whose disastrous tenure ended on October 25th, the country is now led by a former chancellor with a liking for sound money.”
Well, yes. But there’s still a huge fiscal black hole, global recession still beckons, interest rates are rocketing upwards, energy and food prices are still sky-high, and Russia is still messily engaged in a seemingly unwinnable war with Ukraine.
Markets might not need to worry so much about so-called kamikwasi economics, but there are plenty of other things for them to fret about.
For stock pickers, there are bargains aplenty
But should you — and I — be fretting?
I don’t think so. We’re not — say — index tracker investors, where market movements directly impact portfolio values, in lockstep. And we’re not gilt or bond investors, where macroeconomics impacts portfolio values.
Critically, too, we’re not traders — think Jeremy Irons’ character in Margin Call — who profit from sensing, or guessing, the market’s direction.
We’re pretty much stock pickers, sieving the market for unloved and unregarded bargains, and looking for opportunities to bag businesses with decent growth or income prospects, at a decent price.
And — in case you hadn’t noticed — market conditions for bargain-hunters are fairly propitious right now. In plain English, markets are nervous, and share prices are down.
Some shares are up — but most are down
There’s a simple screen that I run, several times a year, against the FTSE 100. It’s a simple thing: provide it with two dates, and it shows the percentage movement in share prices, share by share.
Right now, I’ve got it set to show a start date of 22 February — in other words, just before the Ukraine invasion — and 11 November.
To be sure, it’s showing some blue. In other words, some share prices have risen.
Imperial Brands is up 14%, for instance. Maybe people are smoking more? I jest: I think that it’s just successfully executing its turnround. That’s also the likely explanation for the 50% rise at education publisher Pearson.
BP and Shell are also nicely up, with rises of 24% and 21% respectively. No prizes for guessing why. Weapons manufacturer BAE Systems has also done well, up 20%. Again, no prizes for guessing.
But such positive gains are distinctly in the minority.
Solid fundamentals; nervous investors
Simply put, around two-thirds of the Footsie is down — sometimes well down.
There’s just cause in quite a few cases: the economic and trading headwinds are undeniable.
But in plenty of other cases, it’s market nerves, pure and simple.
Like Jeremy Irons’ character in Margin Call, professional investors — pension funds, investment funds, and so on — can’t sense the market’s direction, and are consequently playing safe.
Where to start? Try here
Warren Buffett put it best: you pay a high price for a cheery consensus. Yet now, the consensus is anything but cheery.
Research is required, of course. You’ll need to correctly identify those bargains. And I can’t do it for you. But I can — and will, most happily — throw out a few names of shares where I’d start my own research.
Made easier, in my case, by already holding stakes in some of the businesses in question. So here you go — five shares to start your research with: Associated British Foods, down 20%; Aviva, down 23%; GSK, down 16%; Prudential, down 14%; and Tate & Lyle; down 21%.
