Aug 10, 2024 · 34 min
Volatility tests the case for disciplined UK investing
IC030 Volatile Markets – What to Do, AIM Share Buy Backs & The AIM IC Portfolio Performance
The episode connects a global market sell-off with practical questions about resilient businesses, buybacks, housing recovery and income-focused AIM portfolios.
- 1Market panic can create opportunities in smaller companies when investors focus on business resilience rather than headlines.
- 2The hosts weigh buybacks against dividends and reinvestment, highlighting how debt, incentives and liquidity shape shareholder outcomes.
- 3AIM high-yield portfolios prioritize income, concentration and disciplined selection while navigating volatility and business-relief considerations.
Don't miss
The hosts’ debate over whether share buybacks genuinely create value or merely flatter earnings per share crystallizes the episode’s wider focus on disciplined capital allocation.
The brief
Chris and Lord Lee open with the sharp Nikkei decline, crypto’s equity correlation and the limits of volatility gauges before asking how investors should respond to market fear.
Their answer is selective rather than sensational: resilient businesses matter more than dramatic headlines, while irrational selling can create opportunities in smaller shares.
The conversation then turns to Berkshire Hathaway’s Apple sale and cash reserves, Google’s antitrust ruling, and the pressure facing UK platforms and stockbrokers.
UK opportunities include a housing recovery, Property Franchise Group’s merger, and Michelmersh Brick Holdings, presented as a specialist business positioned for domestic building demand.
The episode closes with a debate over buybacks and an update on AIM high-yield portfolios, balancing income, concentration, volatility and disciplined investing.
What was said on this episode
27 statements · 18 positive · 8 negative · 1 neutral
The Nikkei fell 12% in one day during Monday’s sell-off.
“The Nikkei, Japan's Nikkei, had a crash on Monday. It absolutely tumbled. It went 12% in a day.”
Listen at 1:41
Crypto and Bitcoin are correlated with broader market sell-offs.
“All crypto and Bitcoin tanked as well. Absolute rubbish that it's uncorrelated.”
Listen at 3:17
The VIX reflects past market movements rather than predicting them.
“It doesn't predict anything. All it does is reflect what's happened.”
Listen at 3:53
Investors should often avoid acting during market sell-offs.
“The best thing to do in times like this is often nothing.”
Listen at 6:32
Market sell-offs can create opportunities to buy undervalued companies.
“it's a good time to pick up bargains.”
Listen at 6:53
Irrational selling can create attractive buying opportunities in AIM microcaps.
“It's a good time to buy often in the microcap world where people are feeling a bit fragile.”
Listen at 7:26
Berkshire Hathaway will likely buy stocks during a major sell-off.
“the Buffett brigade and Berkshire Hathaway are going to be snapping up stocks given their cash pile. They're going to be eager buyers if we have a really big sell-off.”
Listen at 8:43
Investors should avoid panic and focus on underlying companies and their outlook.
“I don't think it's good to panic and run around like a headless chicken. You just got to stick to your guns and focus on what you can control and assess properly, which is often in our respect, the underlying companies and their outlook.”
Listen at 9:43
Google’s antitrust ruling is serious because it found digital-search monopolization.
“I think it's pretty serious, this one. I mean, a judge has deemed Google to be a monopoly, monopolizing digital search, pushing out competitors.”
Listen at 10:04
Major technology companies will face increasing government scrutiny.
“these technology groups are running the world and they're bound to get closer scrutiny and growing more and more scrutiny by government.”
Listen at 12:28
Investors should buy more shares in companies whose fundamentals remain attractive.
“they look good, buy more.”
Listen at 13:00
Hargreaves Lansdown is subject to a £5.5 billion takeover.
“this is a £5.5 billion takeover.”
Listen at 13:33
Capturing interest earned on client cash is problematic and should be addressed.
“this whole area of capturing interest on client money is really bad and needs to be addressed.”
Listen at 15:11
Jarvis Securities may have underinvested in systems needed for future growth.
“The risk is with Jarvis, it wasn't making investing investment in the future to support future growth, and maybe that was a bit of a red flag.”
Listen at 17:39
Further Bank of England rate cuts could encourage the UK housing market.
“More rate cuts on the horizon from the Bank of England as well. Hopefully that might encourage the housing market a bit more.”
Listen at 19:50
Property Franchise Group could benefit substantially from lower rates and stronger housing activity.
“Property Franchise is the sort of business that will do well out of a more benign interest rate environment. And if the housing market pops up, it's the sort of business that could do really well.”
Listen at 21:30
The speaker supports holding Property Franchise Group after its merger with Belvoir.
“Oh yeah. Yeah. We like them and we've been, it's good that the merger was done. They were knocking it around a few years ago and it didn't work, but clearly the management could see the benefit and hopefully it'll go on to do greater things.”
Listen at 22:32
Micklemurch Brick Holdings appears cheaply valued, financially strong, and dividend-paying.
“Micklemurch is at the specialist end. Valuation looks cheap. The balance sheet's in great shape, offers a nice dividend. It's well invested. It's a really nice little business.”
Listen at 23:09
The speaker generally prefers special dividends to share buybacks.
“I often prefer to see a special dividend.”
Listen at 24:23
Company share buybacks can support or underpin share prices.
“Conceivably, it's propping up the share price.”
Listen at 25:20
Share buybacks can increase future earnings per share by reducing shares outstanding.
“buying back shares reduces the share count, therefore going forward it enhances the earnings per share.”
Listen at 26:37
Share buybacks support shareholder returns rather than underlying business growth.
“buying back shares isn't really supporting growth. It's only supporting shareholder returns rather than real growth and progress.”
Listen at 27:53
Next PLC has a disciplined, clearly communicated share-buyback process.
“The only company I'm aware of that really puts its case better is Next, as in Next PLC, the clothing retailer. And they have a disciplined process for share buybacks and they clearly communicate that and they can really well.”
Listen at 28:48
Fundamental’s 30-stock AIM income portfolio yields approximately 5%.
“The dividend yield on the 30-stock portfolio that Fundamental offers is about 5%, which is pretty attractive.”
Listen at 30:31
The AIM high-yield portfolio rose 12% including dividends over six months.
“in the 6 months to the end of June, if we cut off June half year, it rose 12%, including dividends.”
Listen at 31:14
The AIM high-yield portfolio returned just under 31% since October 2022.
“Since inception, it's returned just under 31% since inception in October '22.”
Listen at 31:55
AIM shares can provide relatively reliable dividend income.
“You can get some decent dividend income there, quite reliable dividend income.”
Listen at 32:37
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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