Beckett Asset Management Archives - Beckett Asset Management

10.02.2025 – Donald Trump’s In Office, Your Exports Are Tariffied

Philip.James@beckettinvest.com10 February 2025

Donald Trump has returned to office and has already put pen to paper on over 20 executive orders, more than any previous president signed on their inauguration day. From the protectionist policies we expected to see such as “Protecting The American People Against Invasion” to the slightly bizarre “Putting People Over Fish”. Trump is making his mark but so far, the imposition of widespread tariffs seems to have been avoided – it seems someone has tapped him on the shoulder and reminded him that he can’t have lower inflation and widespread tariffs.

25% tariffs were briefly imposed upon Colombia’s imports and 10% tariffs on Chinese goods are likely to be longer lasting but elsewhere Trump is throwing America’s economic weight around to get his way. We have already seen this with Canada and Mexico where the threat of tariffs very swiftly brought government officials to the negotiating table, leading to the imposition of the tariffs being delayed. I suspect that this may initially be how tariffs are utilised and that at times Trump’s bark may well be more intimidating than his bite. However, as with what we’ve already seen, it’s not to say he won’t use them to get his way.

It’s clear Trump sees China as the nation’s main international trade competitor. Elon Musk becoming his new best friend and a plethora of tech CEOs lining the front row of his inauguration appears to be a clear sign that he believes technology companies have a key part to play in future growth, a view reinforced by the subsequent signing of an executive order titled “Removing Barriers To American Leadership In Artificial Intelligence”. Unfortunately for him, as at the time of writing, at the top of the Apple App Store charts is a Chinese AI app called DeepSeek which has caused Nvidia to DeepSink, falling in value by $589bn, the largest ever single day fall. The reason not necessarily being that the technology is superior in performance, all AI software remains far from polished, but the reported massive difference in development cost, power requirements and number of chips needed to function, brings into question the future level of demand for Nvidia chips.

Accusations of intellectual property theft are now flying around and I doubt this will be the last we hear on the matter. Any competition is positive and the real winner will be the end user. All BAM portfolios have exposure to a number of companies involved in AI, but this is likely to be less than our peers due to the big players in the sector being US tech giants that we feel are currently overpriced. As for Donald and the wider US, we remain underweight, primarily on valuation grounds but we must also consider the unwanted potential for political surprises.

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23.01.2025 – Who Drank All The Guinness?

Jabu_admin23 January 2025

Introduction

Gone are the days of ultra formal, unrelatable marketing distributions and so we at BAM have taken the decision to give our newsletter a refresh. The BAMalyst newsletter will seek to provide clients with the investment team’s latest thoughts in a light-hearted and easy to digest, conversational tone. Most importantly, you will receive the newsletter on a fortnightly basis and so you’ll never be more than two weeks away from our reaction to the latest major events if there are any, or more trivial yet relevant thinking such as in this edition.

Who drank all the Guinness?

Our world has a finite amount of a number of commodities – fossil fuels might come to mind, but we now face a new crisis in the form of a shortage of Guinness. The stout drought is due to the drink becoming more popular with Generation Z (people currently aged between 12 and 27, although I hope the Guinness consumed by age is skewed to the upper end of that range).

Diageo, the brewer of Guinness declared the shortage on the 4th of December and in the following week the share price rose by nearly 10%. Why?

Supply-demand imbalances can create powerful investment opportunities. In this instance Diageo could either charge a higher price, improving profit margins whilst potentially stifling demand or brew greater quantities, increasing supply to meet the increasing demand. Fear not, they’ve chosen the latter.

In the majority of developed countries, populations are ageing. This only elevates demand for healthcare services at a time when you could argue demand already dwarfs supply, *insert disappointing NHS statistic*. This presents a clear opportunity for businesses offering some form of healthcare solution. Another consequence of an ageing population is a shrinking workforce, which arguably increases the requirement for technological developments to compensate. No politician will ever say it, but it’s very difficult to accommodate an ageing population without either significant immigration or computers ‘taking’ jobs.

Whilst the core BAM portfolios have exposure to Diageo, due to it being one of the largest companies in the UK, there are greater and arguably more important supply-demand imbalances where we can invest.

Whilst I may be more immediately concerned about my local being unable to stock my preferred beverage, we as a collective, face longer term challenges, where investment into companies offering goods and services in expanding sectors are likely to benefit.

On a different note, we wanted to acknowledge that bond yields, representative of the cost of borrowing, are rising again, particularly in the UK. This appears to be primarily due to political missteps and the outlook not being one of high growth. Another contributing factor may simply be Mr Market being fed too much government debt and suffering with ‘issuance indigestion’. There is the potential that this could lead to faster interest rate cuts than is currently anticipated but given the development is in its infancy, it’s much too early to take a high conviction view. At present this isn’t a major concern but something the team are keeping a keen eye on and potentially a future BAMalyst topic should there be further notable developments.