For completion, I shall take a brief look at the final three companies on the Sunday Telegraph's share tips list for 2014. They are Barratt Developments, RSA Group and Firstgroup. Please note that my thoughts are based on a fairly cursory glance at the figures, and I'm not saying the Telegraph is right or wrong to tip these companies. As mentioned before, it is rare that tipsters make any reference to the fundamentals of the companies they recommend, and I'm simply adding a few figures. As always stock pickers should carry out their own informed research.
Before I assess Barratt Developments, I should mention that I never buy housebuilders. Rightly or wrongly I class them as a trader's share as opposed to a long term buy and hold. It's a very cyclical industry, and I'd find timing when to buy and sell very difficult.
The chart shows that Barratt is in a clear uptrend, and although the share price has risen substantially from its lows, it is nowhere near it's 2007 high of over £12. The shares are trading above Net Tangible Asset Value (£2.21) which I don't find particularly attractive, and they currently sit on an historic p/e of 45 with last reported EPS of 7.7p. They haven't paid dividends since 2008 (interim of 12.23p). However, prior to that it appears that they had a progressive dividend policy, and in 2007 they paid a whopping dividend of 35.68p which would be a 10.2% dividend compared to the current share price. Maybe they will be able to re-instate the progressive dividend policy in future years. On the face of it, it doesn't look attractive to me, but as I said I'm not a fan of housebuilders and they are subject to the vagaries of both the British economy and the government.
RSA Insurance looks potentially interesting. Clearly the recent profit warnings have taken a toll on the share price which is now at 12 month lows and appears to be falling towards a possible 10 year low (we shall see)? I find it difficult to value insurers, but for income investors the larger cap. insurers usually pay handsome dividends. According to ADVFN's figures, the p/e ratio is currently below 10 and the yield is around 8%, although I suspect this will fall substantially this year given the interim payment and subsequent profit warnings. This is the sort of company I would put on my monitor as having recovery potential, I might wait to see if it falls further before serious consideration though. Aviva is a good example of how these insurance company recovery plays with a record of generous dividend payments can be good investments.
Finally, Firstgroup also looks like a very interesting recovery play. The share price sits at a 10 year low. It's an easy business to understand, and until recently it boasted a record of being able to increase dividends each year. Following a discounted rights issue it is unlikely to go bust in the foreseeable future. Has it already hit it's share price nadir? Always difficult to know, but I'd bet it's somewhere near, and if it's not going bust then the share price has only one way to go in the longer term. I'd classify this company in the same bracket as RSA, in other words, potentially very rewarding if management can get their act together. If not, then shareholders may benefit from a activist Hedge Fund shareholder (Sandell) pushing for asset sales.
As ever, no advice intended or given. It will be very interesting to re-visit the Telegraph's tips at the end of the year.
Wednesday, 1 January 2014
Tuesday, 31 December 2013
The Aim market set to become even more attractive in April 2014
An interesting article in the Telegraph yesterday. See link below. Essentially it is about Britain's best performing fund manager, and some of his stock picks for 2014. Not surprisingly he is backing a number of Aim listed shares. I say not surprisingly because not only can Aim listed companies be held in ISA's now, but in April trading on the Aim market will be exempt from Stamp Duty. For frequent traders this could potentially save them a not inconsiderable amount of money. There is quite a bit of rubbish listed on Aim, but with all stock picking it's a matter of choosing judiciously. Here's the article and some of his stock picks for 2014:-
http://www.telegraph.co.uk/finance/personalfinance/investing/shares/10542145/Britains-best-performing-fund-manager-picks-his-favourite-shares-for-2014.html
A happy, healthy and prosperous New Year to all.
http://www.telegraph.co.uk/finance/personalfinance/investing/shares/10542145/Britains-best-performing-fund-manager-picks-his-favourite-shares-for-2014.html
A happy, healthy and prosperous New Year to all.
Astrazeneca, Barclays, Drax and Debenhams (trading statement)
Continuing with my look at the Telegraph's 2014 share tips, I thought I'd have a look at AstraZeneca, Barclays and Drax.
In truth, I'm not that interested in delving into the figures of larger companies, there are plenty of analysts out there who are paid handsomely to do that job. However, it is worth a quick look to see whether or not these companies are near there highs or lows, what the p/e ratios are and what sort of dividends they are paying, if any?
Starting with AstraZeneca. With the briefest analysis, I would say that AZN is a very solid buy for income. The dividend has steadily grown from 70 cents in 1999 to 280 cents presently. Whilst the dividend hasn't grown every year, neither does it appear to have been cut. The current dividend represents a near 5% yield. The p/e ratio is around 12 which is probably about right. I notice that this is one where the tipster refers to it being cheap against sector peers. I mentioned this in yesterday's blog, it may just mean that Glaxo and Shire are expensive? I would personally never use relative performance as any guide. How happy would you be if you invested in a fund that told you that they had done well relative to their sector peers because they had only lost 90% of your money whilst the others would have lost all of it? In conclusion, AZN looks like a relatively safe haven to park your money for a reasonable income stream, but I personally wouldn't expect fireworks this year.
I can't see anything particularly attractive about Barclays from a quick glance, although the financials appear to indicate plenty of cash and a tangible asset value somewhere around the current share price. The dividend is a miserly 2.4%. However, I usually steer well clear of the financial sector, particularly the larger companies. I once parked quite a large amount of money in Lloyd's Bank when it was paying a 7% dividend. I only left it there a while to collect the dividend and then sold for a modest profit. This was around 2003, it never for one moment crossed my mind that this was such a risky move. How foolish and how lucky I was in retrospect. You tend to hear a familiar mantra about very small companies being far more risky than the mega-caps. I tend to disagree, it's the nature of the business, the management and most of all (imo) the financials which dictate the risk.
Finally Drax. I can't see the appeal here, although for momentum traders the chart is in a clear uptrend. The valuation is not particularly attractive for me with a p/e of 18, and a dividend yield of just over 3%. Again I can't see any justification for substantial rises in it's share price this year since broker forecasts suggest EPS of 29p and 35p in 2013 and 2014 respectively putting the shares on forward p/e ratios of 27 and 23. In fairness, a recent trading update said that EBITDA would come in materially ahead of expectations for 2013.
In other news I notice that Debenhams have issued a poor trading statement today. Is this a portent of further disappointing news from some of the well known high street retailers? Perversely, it may be a company I'll add to the monitor since it states an intent to keep paying a dividend (currently getting towards 5%), although they are abandoning their share buyback programme which isn't such a good sign. I do wonder what the future holds for our high streets? The success of ASOS and others suggests that over the longer term, companies like Debenhams, M&S etc might be fighting a losing battle unless they can successfully execute substantial online operations whilst reducing their high street presence. This of course will be a costly process.
As ever, no advice is intended or given.
In truth, I'm not that interested in delving into the figures of larger companies, there are plenty of analysts out there who are paid handsomely to do that job. However, it is worth a quick look to see whether or not these companies are near there highs or lows, what the p/e ratios are and what sort of dividends they are paying, if any?
Starting with AstraZeneca. With the briefest analysis, I would say that AZN is a very solid buy for income. The dividend has steadily grown from 70 cents in 1999 to 280 cents presently. Whilst the dividend hasn't grown every year, neither does it appear to have been cut. The current dividend represents a near 5% yield. The p/e ratio is around 12 which is probably about right. I notice that this is one where the tipster refers to it being cheap against sector peers. I mentioned this in yesterday's blog, it may just mean that Glaxo and Shire are expensive? I would personally never use relative performance as any guide. How happy would you be if you invested in a fund that told you that they had done well relative to their sector peers because they had only lost 90% of your money whilst the others would have lost all of it? In conclusion, AZN looks like a relatively safe haven to park your money for a reasonable income stream, but I personally wouldn't expect fireworks this year.
I can't see anything particularly attractive about Barclays from a quick glance, although the financials appear to indicate plenty of cash and a tangible asset value somewhere around the current share price. The dividend is a miserly 2.4%. However, I usually steer well clear of the financial sector, particularly the larger companies. I once parked quite a large amount of money in Lloyd's Bank when it was paying a 7% dividend. I only left it there a while to collect the dividend and then sold for a modest profit. This was around 2003, it never for one moment crossed my mind that this was such a risky move. How foolish and how lucky I was in retrospect. You tend to hear a familiar mantra about very small companies being far more risky than the mega-caps. I tend to disagree, it's the nature of the business, the management and most of all (imo) the financials which dictate the risk.
Finally Drax. I can't see the appeal here, although for momentum traders the chart is in a clear uptrend. The valuation is not particularly attractive for me with a p/e of 18, and a dividend yield of just over 3%. Again I can't see any justification for substantial rises in it's share price this year since broker forecasts suggest EPS of 29p and 35p in 2013 and 2014 respectively putting the shares on forward p/e ratios of 27 and 23. In fairness, a recent trading update said that EBITDA would come in materially ahead of expectations for 2013.
In other news I notice that Debenhams have issued a poor trading statement today. Is this a portent of further disappointing news from some of the well known high street retailers? Perversely, it may be a company I'll add to the monitor since it states an intent to keep paying a dividend (currently getting towards 5%), although they are abandoning their share buyback programme which isn't such a good sign. I do wonder what the future holds for our high streets? The success of ASOS and others suggests that over the longer term, companies like Debenhams, M&S etc might be fighting a losing battle unless they can successfully execute substantial online operations whilst reducing their high street presence. This of course will be a costly process.
As ever, no advice is intended or given.
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