Focus On The Winning Fundamentals

I was riding high last week. Dumb luck or skill; who cares when you’re in the money. I was position number 327 on the iShares Fund Frenzy competition, the dream football team of exchange traded funds, and had my eyes on the £20,000 charity prize.

This week, I logged in to check scores and was shocked to find I had slipped to position 483.

But I want to start this blog on a positive note. Some people are investment professionals and tend to do a little better. And they may also be into football so can provide the lingo.

Here’s one of them: Andrew Whiteley, director of Provisio and stalwart of team “Assetfirst XI”, has 74.96 points and is looking down from the lofty heights of position number 183. He gave me his portfolio lowdown across Russia, Mexico, Taiwan, the UK and the US, who was subbed for Latin America.

“Some solid work from the Russian up front despite some off the field trouble was ably supported by my midfield combination of Mexico and Taiwan who have both put in some strong runs in support of the Russian Flyer.

“Solid performance at the back from the UK captain spurred on by the added impetus of the captain’s armband was also good to see. But unfortunately the veteran USA goalkeeper has let in a couple at the near post which he should have saved - I’ve had to replace him with a young and inexperienced Latin American who, after a dip in form during the early part of the year, has impressed in training recently."

“Provided my Russian striker can stay out of trouble and the young Latin American keeper doesn’t drop the ball I think the team is set fair for another good result this week," Whiteley added.

Now it’s my turn to try out this football talk. 69.18 points.

I’ve swapped my Italian right mid-fielder (is that what you call it?) with the iShares FTSE 100 UCITS ETF. Italy just couldn’t get the ball in the net after a volatile week.

Instead, I reckon the UK will make a solid, if steady, attack, even if the supporters can’t get rid of the pungent whiff of an upcoming housing crisis. As house prices rise tens of thousands of pounds every month, this could prove to be a disastrous home goal.

But solid GDP growth is also on the cards for the UK – the country is almost back to pre-crisis levels in terms of economic activity, according to a research house called NIESR. Economists predict 3 percent GDP growth in 2014 as a whole.

The Bank of England has once again voted unanimously this week to keep the base rate at 0.5 percent and outstanding purchases at £375 billion, but the elephant in the room is the turning sentiment towards tightening monetary policy. We all know interest rates will go up, the question is when and how much. Not this month anyway, so a safe player for this competition.

My sturdy China large cap captain got double points, boosting its score to 16.92. Up front next to China is best pal Russian equities. Both are striking ahead. These two have been in close talks this week as Russian President Vladimir Putin landed in China on Tuesday to sign a 30 year, multi-billion dollar gas deal amid rising tensions in the west over the Ukraine crisis. The two have also started military exercises in the East China Sea against their common foe, Japan.

Russian equities are now up more than 11 percent over the last month.

ETF.com analyst Spencer Bogart was not convinced with my choice as the country is still “rife with tensions” that have more downside risk than upside potential.

“I mean they were test-firing ballistic nuclear missiles earlier this week - the tension has not diminished significantly,” he said.

Meanwhile, the 10-year Spanish government bond yield has crept back up to 3.21 percent at the time of writing, from below 3 percent earlier this month. The iShares Government Bond UCITS ETF has had a rough week and was one of my lowest scorers at 4.08 points – I mean, in football speak – Spain hovered around the net and didn’t do very much.

Bogart said: “SESP lost a bit of ground over the past week already-- it would have been better if it had continued to rally and if I was ready to get out last week, I'm really ready this week.”

But I didn’t get out – partly because I missed the deadline to sub in my second player. That’s another important lesson: be organised with reviewing your investments.

Ah, now – my trustee goalkeeper. This guy has not let many past him. It has recovered from its low on the 15^th of May and is up 2.07 percent over the past month. This week we’ve seen some poor earnings reports from retailers, as well as an increase in mortgage applications, probably as a result of falling 10-year bond yields to a six month low last week, but they are now ticking up again.

The US has to be the best goalkeeper in town, and is up over 7 percent year to date.

I was disorganised with reviewing my portfolio. I also sought advice from an analyst and didn’t take it.

We are half way through the competition now, and I should know better. But I’m still confident that (some of) my team has winning fundamentals.