“Oil traders may have seen President Trump’s decision to withdraw the US from the 2015 nuclear sanctions coming from some distance away but confirmation of the move and American plans to exclude OPEC’s third-biggest producer* from global markets is still giving a fresh lift to the price of crude,” says Russ Mould, AJ Bell Investment Director.
“The hit TV series Billions, which follows the fortunes of a New York hedge fund manager, has recently witnessed the death of a visionary entrepreneur when his new space rocket crashed to earth with him on board and you can’t help but wonder if the canny writers were having a gentle dig at Tesla’s Elon Musk,” says Russ Mould, AJ Bell Investment Director.
“Apple beat analysts’ forecasts for its second quarter, reassured on iPhone growth and upped its already massive cash returns to investors, by increasing its dividend and launching a new $100 billion share buyback scheme – but the fact that its shares rose only 2% after hours, shedding some of their initial gains, suggests that the tech firm has yet to convince everyone that it remains a growth stock rather than a more mature cash machine,” says Russ Mould, AJ Bell Investment Director.
“BP’s best operating profit since 2014 leaves the oil major’s shares trading at a five-year high as investors welcome the support the first-quarter earnings figures show for the company’s tempting dividend yield, even if there are still a few issues regarding cash flow, which still does not technically cover the quarterly shareholders payout,” says Russ Mould, AJ Bell Investment Director.
“Assuming the Competition and Markets Authority lets the deal pass relatively unhindered – and the manner in which it waived through the Tesco-Booker deal suggests it might – then the next decision that will follow the proposed Sainsbury-Asda merger is Morrisons’ competitive response,” says Russ Mould, AJ Bell Investment Director.
“Tuesday’s second-quarter figures from Apple have huge implications for both the company’s own shares, the wider technology sector and even the whole US stock market, as they may leave investors having to decide whether they are happy to swap state-of-the-art technological engineering for financial engineering,” says Russ Mould, AJ Bell Investment Director.
“One of the underperforming (and unloved) UK stock market’s redeeming virtues is its juicy dividend yield, some 4.2% on the FTSE 100, and income-seekers will be pleased to see a solid set of first-quarters results from oil major Royal Dutch Shell – not least as the company is the single-biggest dividend payer in the UK, with its forecast distribution representing around 13% of estimated payments from the FTSE 100’s members in 2018,” says Russ Mould, AJ Bell Investment Director.
“A small increase in margin debt in the USA suggests that investors may be finding their nerve again after a rocky spring, marked by fears over rising interest rates, inflation, trade wars and a wobble in tech stocks, but with the levels of borrowing against portfolios at near record-high levels some may see this as a danger sign rather than a good reason to plough back into American stocks,” says Russ Mould, AJ Bell Investment Director.
“Since the death of its legendary (and eponymous) founder in 1971, bookmaking giant William Hill has six different owners, including its current shareholders, and the acquisition of Sky Bet for £3.4 billion by Canada’s Stars Group, could again put the Hills name in the merger and acquisitions frame,” says AJ Bell Investment Director, Russ Mould.
“At first glance Unilever’s first-quarter update reads well with underlying sales growth of 3.4% and the launch of a new €6 billion share buy back scheme,” says Russ Mould, AJ Bell Investment Director.
“One year after launching his Debenhams Redesigned strategy, Sergio Bucher, the company’s boss, must be wondering what he has let himself in for by taking the job, as today’s first-half interims show falling profits, rising debt and a slashed dividend, while the departure of his chief financial office for Selfridges is hardly a vote of confidence either,” says Russ Mould, AJ Bell Investment Director.
“The rapid unravelling of the Klepierre-Hammerson-Intu love triangle deals a blow to those investors who feel the unloved UK real estate investment trusts (REITs) sector offers a nugget of value at a time when the FTSE indices trade within 10% of their all-time highs,” says Russ Mould, AJ Bell Investment Director.
“The big five banks all report first quarter figures over the next two weeks, starting with Lloyds on 25 April. This will be a telling period for the FTSE 100 overall because the index’s earnings progress in 2018 remains heavily reliant upon financials (notably banks), with a consensus forecast of a 30% increase in aggregate pre-tax profit underpinned by a 40% surge (or £10.6 billion) increase from the Big Five banks,” says Russ Mould, AJ Bell Investment Director.
“An acceleration in wage growth for British workers may put the Bank of England on a state of alert when it comes to the next interest rate increase but the nation’s retailers may be pleased to see it after a very difficult start to the year,” says Russ Mould, AJ Bell Investment Director.
Over a quarter of the FTSE 100 benchmark’s constituents are due to release figures or host their annual general meetings in the next two weeks and this could go a long way to shaping how UK equities perform in the coming weeks and months,” says Russ Mould, AJ Bell Investment Director.
What would have happened if investors had bought the world’s biggest companies at previous stock market peaks? (WARNING: It’s not pretty)
“There can be no clearer demonstration of how stock markets work – and how confusing they can seem – than today’s share price moves at online retailer ASOS and grocery giant Tesco. ASOS’ interim sales rose by 27% and the shares fell sharply. Tesco’s sales rose by barely 3% and the shares leapt to the top of the FTSE 100 leaderboard,” says Russ Mould, AJ Bell Investment Director.
“Spotify shares are trading some 17% above their $132 initial reference price after their first week on the public markets but even that gain pales compared to the 51% average leap over the same time frame at Twitter, Snap and fellow recent float Dropbox,” says Russ Mould, AJ Bell Investment Director.
“Investment legend Warren Buffett never tires of reminding investors that they cannot buy what is popular and do well, so by implication the best opportunities may lie with what is currently unpopular – and few if any sectors will be less popular than retail right now,” says Russ Mould, AJ Bell Investment Director.
The FCA has issued a Policy Statement detailing a number of changes being implemented as part of its Asset Management Market Study.
“As GVC’s acquisition of Ladbrokes Coral becomes effective leading to the cancellation of the target’s shares by no later than 08:00 on Thursday 29th, a 52nd founding member of the original FTSE 100 in January 1984 will disappear from view. Two more, GKN and Hammerson, are also both facing questions over their independence, after the bids from Melrose and France’s Klepierre respectively,” says Russ Mould, AJ Bell Investment Director.
“Next’s 54-page-long results release is a whopper but it is what is missing from the statement that matters more than what is in it – there is no profit warning, there is no dividend cut and there is no sense of panic,” says Russ Mould, AJ Bell Investment Director.
“Weak UK sales growth, disappointing cash flow and ongoing product availability problems mean that Kingfisher’s boss Veronique Laury has yet to fully beat the DIY expert back into shape,” says Russ Mould, AJ Bell Investment Director.
“Sherborne has built a formidable reputation for squeezing improved financial and operational performance from the companies in which it invests and Edward Bramson clearly feels that Barclays shares are going cheap, given the prevailing discount to the book, or net asset value. The question now is what the activist investor thinks Barclays should be doing differently and how he intends to get those views across to the bank’s boss, Jes Staley,” says Russ Mould, AJ Bell Investment Director.
“It was not for nothing that Micro Focus used to be nicknamed ‘Hocus Pocus Micro Focus’ by analysts in the 1990s, as a result of its volatile earnings and reputation for dishing out profit warnings,” says Russ Mould, AJ Bell Investment Director.
“It seems as if the preferred narrative of the new chair of the US Federal Reserve, Jay Powell, is that the US economy is getting stronger and that tighter monetary policy is required, via interest rate increases and further reductions in the size of the central bank’s balance sheet,” says Russ Mould, AJ Bell Investment Director.
“The combination of rising sales, a healthy jump in pre-tax profits, lower debt, an increased ordinary dividend and even a special dividend of 4p sounds very appealing but investors are still declining to stock up on shares in Morrison,” says AJ Bell Investment Director Russ Mould.
Investors have exactly three weeks today to make the most of this year’s £20,000 ISA allowance before the end of the tax year.
Ryan Hughes, head of active portfolios at AJ Bell, analyses the funds that could be considered by ISA investors with three different attitudes to risk and one for income seekers:
As the Lifetime ISA (LISA) approaches its one year anniversary, analysis from AJ Bell shows that many LISA investors are responding to rising inflation and seeking value in funds. Cash holdings, which accounted for 46% of all LISA holdings in September 2017, have fallen by 13% in the past 5 months whilst fund holdings have enjoyed a 10% rise over the same period.
“The FTSE 100 looks to be stabilising in the wake of February’s sudden sell-off but the index is still trading some 7% below the all-time closing high of 7,779 reached two months ago. It is being helped by a slight retreat in Government bond yields, where an increase had threatened to suck some cash away from stocks, and especially sterling, whose gains in late 2017 had threatened to unpick the simple, post-Brexit-referendum narrative of pound down/FTSE 100 up,” says Russ Mould, AJ Bell Investment Director.
Analysis of investment trends via AJ Bell Youinvest (www.youinvest.co.uk) so far this ISA season shows:
“Although Chancellor Philip Hammond failed to stick to the planned 15-minute script, he stayed ‘on message’ otherwise, reaffirming the Government’s commitment to reducing the annual budget deficit and the £41 billion annual interest bill on the overall national debt,” says Russ Mould, AJ Bell Investment Director.
“Kinshasa is famous for hosting 1974’s heavyweight boxing match between George Foreman and Muhammad Ali but the Democratic Republic of Congo’s capital is now hosting a more delicate form of negotiation between President Joseph Kabila’s Government and the miners who work in the country. Randgold Resources has met with the President this week and discussions are set to continue as the DR Congo prepares to sign a new mining code into law,” says Russ Mould, AJ Bell Investment Director.
“The old saying about ‘profit is a matter of opinion but cash is a matter of fact’ is one that investors should always bear in mind, as it can help them avoid potential portfolio losers and find possible winners.
“A 14% increase in the total dividend to 71.3p a share means Intertek remains a member of the select band of 26 current FTSE 100 firms that has increased its shareholder payout every year for the last ten,” says Russ Mould, AJ Bell Investment Director.
“The most recent GfK survey on UK consumer confidence showed a reading of -10 for February, only just above the four-year lows reached by the indicator late last year, and this may help to explain the woes of retailers such as Toys R Us and Maplins (not to mention quoted companies such as Debenhams and Mothercare, whose shares are grinding relentlessly lower,” says Russ Mould, AJ Bell Investment Director.
“The absence of a special dividend for the first time since 2011, the appearance of further exceptional costs and an increase in the programming budget are all weighing on ITV’s shares today, “ says Russ Mould, AJ Bell Investment Director.
“Questions will be asked about the structure of 2012’s long-term incentive plan, the riches it bestowed upon management and how shareholders let it through on the nod, but Persimmon has gone a long way to calming at least one unhappy party by showering investors in the stock with a cash windfall of their own,” says Russ Mould, AJ Bell Investment Director.
“Hammerson’s full-year results show that not all real estate investment trusts (REITs) are equal, as the increase in its net asset value per share compares with the drop at Capital & Counties, outpaces the growth at Intu but lags the latest advance at Segro,” says Russ Mould, AJ Bell Investment Director.
“Willie Walsh and his fellow executives at International Consolidated Airlines are likely to be perplexed, if not downright irritated, by the bumpy reception given to the firm’s fourth-quarter figures and launch of a €500 million share buyback, but to many experienced investors the cash return may be as much of a red flag as it is good news,” says Russ Mould, AJ Bell Investment Director.
“The latest quarterly reshuffle of the FTSE 100 index is due to be calculated on the basis of closing market valuations on Tuesday 27 February and at the moment Royal Mail is set to make a return at the expense of real estate investment trust Hammerson,” says Russ Mould, AJ Bell Investment Director.
With just over a month until the tax year end, AJ Bell senior analyst Tom Selby outlines his top ten tips to help consumers keep a step ahead of the taxman and turbo-charge their savings.
“HSBC has just shown its best growth in customer deposits and loans since early 2014 and shown its first increase in risk-weighted assets for four years, but the shares are down, as if investors are politely telling the new management team of chair Mark Tucker and chief executive John Flint not to get too aggressive when it comes to future expansion plans or even acquisitions,” says Russ Mould, AJ Bell Investment Director.
“America’s leading stock indices have yet to fully recover all of the ground they lost in early February but they are still in positive territory for the year, to suggest that a big freeze is not about to engulf the markets just yet,” says AJ Bell Investment Director Russ Mould.
“A return to sales growth in the fourth quarter, increased cost-saving targets and a higher dividend are not proving enough for shareholders in Reckitt Benckiser, whose shares are the worst performers in the FTSE 100 in early trading” says Russ Mould, AJ Bell Investment Director.
“America’s Senate may have reached a deal to increase the national Government’s debt ceiling from its (already surpassed) limit of $19.8 trillion but the need to increase federal borrowing suggests that the foundations of the US economic recovery may be more precarious than they seem – especially as corporate and consumer debt is rising sharply too,” says Russ Mould, AJ Bell Investment Director.
“With Western market slang in mind it may be a bit unfortunate that on 16 February China will welcome the Year of the Dog, especially as the Shanghai Composite index has been caught up in the turbulence caused by concerns over US interest rates and the gradual withdrawal of Quantitative Easing by the US Federal Reserve,” says Russ Mould, AJ Bell Investment Director.
“Since the latest stumble in UK stocks appears to have taken its lead from overseas events, namely US wage inflation and the possibility of American interest rates rising more quickly than previously thought, it might be worth investors taking a global perspective,” comments Russ Mould, investment director at AJ Bell.
“For the last two years, Shell has been dogged by concerns that its annual dividend was at risk of a cut owing to the plunge in oil and natural gas prices but today’s full-year figures for 2017 should help to put such worries to rest, thanks to an extensive self-help programme and also a rebound in crude,” says Russ Mould, AJ Bell Investment Director.
“Retailers, restaurateurs and housebuilders (and their shareholders) will all be relieved to see an increase in both in the GfK headline consumer confidence figure and the major purchase sub-index for January,” says Russ Mould, AJ Bell Investment Director.
“The rise in the yield available from Government bonds has not happened overnight but it has finally started to draw investors’ attention in a classic case of ‘boiling frog’ syndrome: the water has been getting slowly hotter (bond yields going slowly higher), with the frog (or in this case investors) barely noticing at first, but the heat is now reaching a level whereby the first signs of discomfort are perhaps becoming evident,” says Russ Mould, AJ Bell Investment Director.
“This is a big fortnight for big oil. Royal Dutch Shell is due to report its full-year results for 2017 on Thursday, quickly followed by fellow majors Chevron and ExxonMobil on Friday and BP next week and each company will be delighted to see Brent crude trading around $70 a barrel and West Texas Intermediate around $65,” says Russ Mould, AJ Bell Investment Director.
The FTSE 350 stocks with the highest percentage of US revenues.
“Since the UK’s vote to leave the EU in June 2016 one straightforward trade has been ‘pound down, FTSE 100 up’ as a result of the high proportion of stocks with a big percentage of their earnings overseas. But the pound’s sudden surge could force a rethink and lead investors to focus on neglected plays on the domestic economy,” says AJ Bell Investment Director Russ Mould.
“Having been carried out by online grocer Ocado yesterday short sellers are being bitten by Pets at Home today, as the specialist retailer and provider of veterinary and grooming services reveals stronger-than-expected trading for the third quarter,” says AJ Bell investment director, Russ Mould.
“The stock market is currently taking a relatively relaxed view of the fifth major US Government shutdown since 1990 for three reasons,” says AJ Bell Investment Director Russ Mould. “None of the prior shutdowns lasted for more than 21 days, none of them derailed the major share indices in any way and there is clearly a belief that the Democrats and Republicans will reach agreement quickly to prevent any lasting harm being done to the services or to the economy.”
Research under Mifid II spotlight underperformed the market last year.
“All four leading US stock market indices – Dow Jones Industrials, S&P 500, Nasdaq Composite and Russell 2000 – continue to rack up a string of record closing highs. One common explanation for this is the potential benefits of President Trump’s Tax Cuts and Jobs Act and with the US corporate reporting season about to hit top gear we will find out whether investors’ lofty expectations are realistic are not,” says Russ Mould, AJ Bell Investment Director.
“If the Dow Jones Industrials rises by a further 1.3% to 26,450 by the close on Friday the headline US index will have generated its best return ever in the first year of any post-war President, something which Donald Trump may well be keen to crow about on Twitter,” says Russ Mould, AJ Bell Investment Director.
“Yield-hungry fixed-income investors will be concerned by gathering speculation about the supposedly imminent demise of the 30-odd-year bull run in bonds but today’s UK inflation figures will at least offer little new to frighten them or the Bank of England,” says AJ Bell Investment Director Russ Mould.
“While the recriminations are only just beginning, investors can immediately draw six lessons from the Carillion debacle which they will be able to apply to stocks from all geographies and sectors,” says Russ Mould, AJ Bell Investment Director.
“Brent crude oil broke through the $70 a barrel mark yesterday for the first time in over three years and it would be no surprise if private investors and professional money managers were to start revisiting the industry and its leading stocks if this price strength persists,” says Russ Mould, AJ Bell Investment Director.
“Today’s trading statement, which sees housing completions come in at the top end of management’s expectations and no repeat of 2016’s quality and customer relations problems, shows that Bovis is firmly on the way back under chief executive Greg Fitzgerald,” says Russ Mould, AJ Bell Investment Director.
“Investors are showing disappointment with M&S’ Christmas update, as Food sales fell for the fourth straight quarter and the decline at Clothing and Home reaccelerated, to leave the firm lagging the big supermarkets and leading specialist retailers in both categories,” says Russ Mould, AJ Bell Investment Director.
“A second straight drop in Sainsbury’s general merchandise sales will have knees knocking at investors in Marks and Spencer ahead of its festive update tomorrow but investors in the grocery giant will still be pleased to see an increase in overall like-for-like sales growth, good progress at Argos and a small upgrade to profit forecasts for the full year to March,” says Russ Mould, investment director at AJ Bell.
“The battle between the bulls and the bears continues at Morrisons but it is the shareholders rather than the short-sellers who are raising a glass to the grocer’s Christmas trading statement,” says Russ Mould, AJ Bell Investment Director.
A powerful year-end rally leaves the FTSE 100 trading above 7,700 for the first time ever, buoyed by a perceived acceleration in global activity, increases in commodity prices and the ongoing search for yield in a world where interest rates remain low and are rising only slowly.
“Some investors may be feeling a little groggy today after a sharp pullback in two cannabis tracker funds which are traded in America, following comments from US Attorney General Jeff Sessions that he may rescind the Obama administration’s ‘Cole Memo,’ which loosened federal rules on medical or recreational use of marijuana,” says Russ Mould, AJ Bell Investment Director.
“America created fewer jobs than economists expected in December, with the addition of 148,000 non-farm jobs undershooting the consensus forecast of 190,000,” says AJ Bell Investment Director Russ Mould. “However, this is unlikely to shake the Fed from its planned course of three more interest rate hikes in 2018, especially as job cuts in 2017 reached their lowest level since 1990* and wage inflated inched higher to 2.5%.”
Gold may have been put in the shade by a barnstorming performance from global equities (and Bitcoin) but it rose by a perfectly respectable 13% in dollar terms in 2017 and it has started the new year with rattle, going back above $1,300 an ounce.
“Eight months after launching his Debenhams Redesigned strategy, Sergio Bucher, the company’s boss, must be wondering what he has let himself in for by taking the job, as today’s huge profit warning means it looks more like a case of Debenhams Undone,” says Russ Mould, AJ Bell Investment Director.
“One technical sign of a really healthy market is good breadth, with lots of the constituents taking an index higher, while it can be a cause for concern if a small group of heavyweight stocks or just one hot sector, is responsible for a benchmark’s gains,” says Russ Mould, AJ Bell Investment Director.
“In a marked contrast to the start of 2017, when a profit warning hammered the shares, Next sits proudly at the top of the FTSE 100 leaderboard after its Christmas statement showed improved full-price sales momentum, exceeded profit expectations and offered a £300 million share buyback, as the firm demonstrated the power of its online operations,” says Russ Mould, AJ Bell Investment Director.
“A slight decline in UK manufacturing activity according to the latest monthly survey shows how even the modest gains made by the pound in late 2017 could provide a headwind to companies and their exports in particular in 2018, a factor which may well influence Bank of England thinking when it comes to setting interest rates in the coming year,” says Russ Mould, AJ Bell Investment Director.
“In dollar terms silver is broadly flat this year and gold up by some 10%, returns which pale in comparison to those made by any intrepid soul who piled into Bitcoin back in January - some 1,500%,” says AJ Bell Investment Director Russ Mould.
Investors can now trade in Bitcoin futures as an alternative to buying the actual cryptocurrency, so they can now take a view on its price movement without owning it. Anyone who feels Bitcoin is capable of going higher can therefore get involved, although anyone who has their reservations is likely to stay well clear.
“Whether Bank of England Governor Mark Carney’s comments on Tuesday about the London Stock Exchange Group’s (LSEG) succession plans had any impact or not, this messy situation has been resolved in one way by the decision of chief executive Xavier Rolet to step down immediately and chairman Donald Brydon’s choice not to seek re-election in 2019,” says AJ Bell Investment Director Russ Mould.
“Chinatown-owner Shaftesbury continues to defy the doubters of the UK commercial property market with a 12% increase in its net asset value per share and a 9% increase in its full-year dividend,” says Russ Mould, AJ Bell Investment Director.
“The fourth annual round of banking stress tests may not totally satisfy those who argue that 2007-09 was a liquidity crisis and not a solvency crisis, but the Bank of England may be happy to take the relatively minor share price movements in the Big Five FTSE 100 banks this morning as a sign that investors share its view that the major lenders are much better placed to withstand the next economic and financial market downturn,” says Russ Mould, AJ Bell Investment Director.
The final FTSE reshuffle of 2017 will be based on this evening’s closing prices and barring any dramatic changes today Just Eat, DS Smith and Halma will be promoted to the FTSE 100 at the expense of Merlin, ConvaTec and Babcock.
“A profit warning amid falling customer numbers and price pressure means that shares in Centrica are showing a double-digit fall in early trade, amid worries over the long-term sustainability of the dividend.
Analysis from AJ Bell shows that first time buyers can use a combination of the new stamp duty relief and the Lifetime ISA (LISA) to pay for 10% of their house purchase.
“Better-than-expected full-year profits, a 50% increase in its dividend to 8.1p and a £100 million special dividend (worth around another 21p per share) mean that Upper Crust-owner SSP is providing investors with a feast of good news today and the shares are up strongly to a new all-time high as a result,” says AJ Bell Investment Director Russ Mould.
“Bank of England Governor Mark Carney and his colleagues on the Monetary Policy Committee will not welcome this week’s latest bout of weakness in sterling or renewed strength in the oil price, as both are complicating factors when it comes to inflation, which at 3% is still running some away above the official 2% target,” comments Russ Mould, investment director at AJ Bell.