Drax, Bank of Ireland and Promethean

By Clem Chambers

PUBLISHED: 28 Feb 2012 @ 10:17 | Comments (0) | More info about Clem Chambers

I suppose I’m thinking about the end of the double dip.

I’m torn between feeling unhappy with the market and imagining the long recession has turned.

If it is the end of this bust cycle, then prices will rally immensely in the next 2-3 years.

This is far from certain.

I am just starting to read “When money Dies” a book written in the super-inflation 1970’s about the Hyperinflation 1920’s. It has so many uncanny parallels, that in a way, it is frightening.

I’m not easily scared but I’m sobered.

It merely agrees with my mental model of the structure of what is going on so it’s a dangerous read. Agreeing with someone that shares your views doesn’t help protect you from mistakes. We will get strong inflation but not 1000’s of per cent a year. Even so, 5-10 % per annum is enough to have to make concerted plans to avoid being financially levelled.

Anyway the upshot is, inflation inflates stock markets. That seems a very likely scenario to me – thus stock markets will be a good place to hide.

Meanwhile, I have some boring stodge in my portfolio and I have added Drax to it. It is a cheap stock with a good dividend. It is also a black sheep as its business is destroying the globe with CO2, sorry I mean, burning coal to make energy. This of course has made it unpopular but it strikes me that environmentalism is cyclical and that cycle has long since peaked and is on the wane. Co2 stocks like Drax should therefore benefit.

In mad crazy punt-land, not the one in Africa, but the one in the London stock market, I bought Bank of Ireland.

An economic recovery to anything approaching normality in the next few years will catapult banks that are currently on the brink into orbit. Bank of Ireland is like an out of the money option, currently with no expiry date. I perhaps shouldn’t have bought one unit of it and instead I should have bought half, but in the end, I decided to use BKIR as leverage for this recovery that I feel is upon us.

Portfolio member Promethean came in with good results and popped 10%. I’m up 35% on it. PRW could easily double in the next 18 months if the selling that cut it down 75% from its 2010 IPO listing price has run its course. A return to the IPO level for what is a high tech firm with profits, a huge potential market and a board of luminaries would see it triple from here.

That is my wishful summary.

Time will tell.

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