The biggest stock market story so far this year is without a doubt the GameStop saga, which saw a struggling US video game retailer’s share price rocket by almost 1,600 per cent.
A battle ensued between short-selling hedge fund managers and a community of traders on Reddit, which drove GameStop shares up from $20 in early January to as much as $350.
And what was dubbed ‘weaponised trading’ in GameStop was also very good news for a relatively unknown boutique UK fund focussed on the US: Tyndall North American fund rocketed to the top of the fund performance tables for the month due to its holding – and some very lucky timing.
Manager Felix Wintle only bought the stock in December as a value play, hoping to make returns from a turnaround within three years. In the end, he told This is Money that he sold up with a big profit after watching GameStop get seized on by speculators.
A battle ensued between short selling hedge fund managers and a community of traders on Reddit which drove shares up in GameStop from $20 in December to $350
Fund | Return (%) |
---|---|
Tyndall North American | 14.36 |
GAM Multi Stock China Evolution | 11.49 |
Nikko AM ARK Disruptive Innovation | 10.06 |
Premier Miton US Smaller Companies | 9.72 |
TT Emerging Markets Unconstrained | 9.54 |
Invesco China Equity | 9.28 |
Guinness Best of Asia | 8.91 |
Baillie Gifford China | 8.88 |
Guinness Best of China | 8.66 |
GAM Multi Stock Asia Focus Equity | 8.55 |
Source: FE fundinfo |
What Felix wasn’t anticipating when he took the position was a Reddit community blowing up its stock price within just a month of taking the position.
The fund, which has an ongoing charges figure of 1.02 per cent, was up 14.36 per cent in January.
The fund manager explained to This is Money he bought GameStop in December as he felt it represented a good value investment but then exited soon after.
He said: ‘When it became clear that the stock was in the hands of the speculators, we exited the stock, as it was trading with no regard to the fundamentals.’
GameStop’s share price is still riding high with small traders on the Wallstreetbets Reddit thread being advised to ‘hold the line’ but many fund managers are likely to shun the stock while it remains heavily overvalued and volatile.
He bought GameStop as a three-year turnaround story and sold it after achieving his price target and more, without any need for the business to turn around
Ben Yearsley, investment director at Shore Financial Planning, said: ‘The extraordinary performance saw the fund beat the S&P by 15 per cent in a single month.
‘Now luck as well as judgment often plays its part in fund management; the luck is often down to timing, which was definitely in Felix’s favour in January.
‘He bought GameStop in December as a three-year turnaround story and sold it last week after achieving his price target and more, without any need for the business to turn around.’
Gaming share anomalies aside, it was Chinese, Asian and Emerging Market funds that performed best in January, filling three of top five positions in the open-ended fund world.
China was one of the few economies to grow in 2020, and is predicted to grow by more than 8 per cent this year.
Yearsley added: ‘Many Asian countries, both developed and emerging have had a ‘good’ Covid response and markets are possibly benefitting now.
‘The start of the year won’t necessarily set the market trend; however, I do think Asian markets are well set for a prolonged period of outperformance.
‘Obviously, the path won’t be smooth, but after a a long period of dominance by the US and their tech leaders, is it time for a market shift?’
Sector | Return (%) |
---|---|
China/Greater China | + 6.2 |
Asia Pacific ex Japan | + 3.4 |
North American Smaller Companies | + 3.39 |
Global Emerging Markets | + 2.95 |
Technology & Telecommunications | + 2.12 |
Source: FE fundinfo |
Asia’s decade?
Darius McDermott, of Chelsea Financial, agreed the Asian economies of China, Korea and Taiwan, which make up the bulk of the investible universe in Asia, have been more successful in containing the pandemic and so their economies have reopened a lot earlier than developed markets.
‘This gives them a head start going in to 2021, as both the US and Europe are still fighting to contain second and third waves,’ he said.
‘The Asian consumer and sentiment are also stronger and growth prospects stronger, while valuations were also more reasonable. So it’s perhaps not a surprise their stock markets have started well.
‘Longer term, the rising Asian consumer and middle classes will give the continent a structural boost and the new regional free trade agreement should gain legs. It all bodes well for this area of the world and some have said this could be Asia’s decade.’
Top performing funds from these regions include the TT Emerging Markets Unconstrained fund (OCF: 1.20%) which was up 9.54 per cent, Invesco China Equity (OCF: 1.69%) up 9.28 per cent and Baillie Gifford China (OCF:0.78%), up 8.88 per cent.
The only other non-Asian fund to be in the top ten, aside from Tyndall North American, was the Premier Miton US Smaller Companies fund (OCF: 0.86%), which delivered a 9.72 per cent return for investors in January.
Francis Gill, an independent financial adviser at Humboldt Financial, says smaller companies often lead the way out of a slump
The £370million fund, managed by Hugh Grieves and Nick Ford, has benefited from the rise and rise of US tech, with holdings in brands such as online personal styling service Stitch Fix and freelancer platform Upwork.
Francis Gill, director at boutique financial service consultancy Humboldt Financial, has already done well from the smaller companies ‘boom’ he anticipated for 2021 when he spoke to This is Money earlier last year.
He said: ‘They are traditionally the two asset classes that drive an economy out of a recession and that will be the main reason for the growth in the small cap space, in particular.
‘The tech growth is supercharged by people using their computers and software to work from home, purchasing goods online and others also treating themselves to something a bit special like an iPhone, with extra cash from not commuting and other costs.’
But now he feels smaller companies and tech are now overpriced so has been exiting his holdings in these spaces.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.