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2009/2010 Trade Analysis
Once again, this been an exciting year for the ICIC. At the beginning of the academic year 2009/2010, global equities were taking a sharp turn upwards from their March nadir (mostly due to the continued support by governments worldwide). It seemed to many as though the crisis was well behind us. This bode well for the ICIC as many new members were encouraged to join our ranks as the risk of sudden downturns in the markets receded.
While the ICIC investment portfolio continued to diversify this year, we showed a clear preference for Energy and Mining stocks. This naturally followed from the strong growth that both sectors experienced in the latter half of 2009. We were particularly successful in our dealings with Senior PLC, which produces high technology components for a wide range of clients. By taking a long position with Senior PLC stocks, we were able to garner an impressive £1,124.47 profit. William Tran, then president, pitched this transaction.
In contrast to our investments into Energy and Mining, retail stocks performed poorly on our portfolio. Specifically, we saw a loss of £150.66 in our dealings with Greggs Ltd. This was very much reflective of the nature of the retail sector as poor consumer spending dragged on through the last quarter of 2009 and into 2010. This however, was reversed by February 2010 when many high street companies beat expectations in line with upbeat data on the state of the UK economy.
If we were to compare our fund to the stock market’s general performance, we see that the FTSE 100 gained 11.7% and the FTSE 250 gained 14.7% from 2nd November 2009 through to 26th March 2010. This contrasts sharply with the ICIC fund, which showed an increase of only 3.07% in the same time period. These figures are to be expected however, as the ICIC takes a relatively guarded view against risk-taking. This position is reflective of the fact that the ICIC’s primary function is not to make a profit, but to give members practical experience with the stock markets.
It should now be noted that the strong performance of global equities was far from consistent. The first shock to the post-crisis markets came in late November 2009 when Dubai World (The emirate’s investment vehicle) announced that it was seeking to restructure $59 billion in debt. The fear that this could trigger a second credit crisis caused stock markets to tumble - European markets for instance, fell by over 3% in one day. The ICIC however, was well prepared for such a situation. Our stoplosses – previously considered too tight – prevented us from suffering any significant losses as the markets dropped.
This cautious position was well calculated, as the Dubai World crisis was just the first in a series of incidents that dragged on the markets. Most notably, were the Greek economic crisis and the subsequent uncertainties surrounding the future of the Eurozone. This cast doubt on other countries with bloated balance sheets, with the UK seeing a decline in demand for gilts and a slow slipping of the GBP against the US dollar as investors sought safe-havens. In addition, the sluggish performance of the UK economy (compounded by particularly bad weather at the start of the first quarter) placed heavy pressure on the FTSE throughout early 2010.
With this said, the atmosphere of “doom and gloom” is mostly lifting. The later half of 2010 and 2011 looks generally promising, as the economic recovery seems to be sustainable. With this in mind, we are confident that we will see another successful year for the Imperial College Investment Club.
Posted by Philip on 28th June 2010
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