Good morning!

There's literally nothing on the RNS today, in terms of results or trading updates for my universe of stocks. However, I'm in the mood to write an article, so thought I'd do something on my investing themes for 2017. This has been partly stimulated by me reading Gervais Williams' latest book, "The Retreat of Globalisation" over the holidays - which is an interesting macro overview of how Gervais sees things developing.

My approach with stock-picking is based on trying to find value & GARP (growth at reasonable price) shares. I look for shares with at least 50% upside, which are either;

  • Fundamentally under-priced as things stand now. Good examples last year were Lavendon, and Avesco, both of which just seemed the wrong price to me, as highlighted in these reports. They both attracted takeover bids, which was terrific.
  • Or, companies which may not look particularly cheap right now, but which have the potential to significantly out-perform against unreasonably pessimistic broker forecasts (a good example was Gear4Music, in which I hold a long position). And/or companies which are growing strongly, but this has not yet been fully reflected in the rating.

However, for me personally, I will flex my approach somewhat to suit market conditions. This has involved a notable shift in 2016 from value shares, more towards growth stocks. I've done that partly because my value shares kept attracting takeover bids, hence left the market, and giving me fresh (and increased) funds to invest. Also because it was increasingly obvious as 2016 progressed that it was the growth stocks which the market was getting excited about, and were rising in price. So if you spot a clear trend, then it makes sense to follow it - providing valuations don't get too bonkers.

Anyway, it worked well in 2016. Although I don't know whether the same trends will continue in 2017 - anything could happen. That uncertainty is why I don't tend to think too much in top-down terms. I can't possibly forecast what the world, or UK economies will do in 2017 and beyond, I haven't got a clue - and nor has anyone else!

However, there are some clear themes which are guiding my thinking for 2017. So I thought it would help clarify my thinking, and maybe you might find it interesting. So here goes.

My investing themes for 2017

Higher inflation - caused by the sharp fall in sterling against the dollar.…

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