While European markets were in a holding pattern at the end of the week, their performance has generally been good so far this year, with investors having little reason to grumble.
The FTSE 100 pulled back slightly on Friday as weakness in miners, pharma, tobacco and banks acted as a headwind. Oil prices are showing no sign of easing back after the recent Middle East conflict-driven spike, which gives investors reason to take stock of events and recalibrate portfolios based on their views of what could happen next.
It’s interesting to note that the top five risers on the FTSE 100 included Sage, Experian and Relx – all united by markets fears earlier this year about how AI could disrupt their respective businesses, which led to share price weakness.
The fact investors are fishing around these names would suggest there is still decent risk appetite to go bargain hunting. That might also explain why gambling group Entain featured in the top risers, with its shares trading a little over eight times earnings.
Aviva
The latest numbers from Aviva are a key milestone in Amanda Blanc’s transformation of the insurer amid record-breaking first-half operating profit which was ahead of forecasts.
The integration of Direct Line is accelerating and, like a driver getting a clear run on the motorway, is ahead of schedule. The deal has had the desired effect of materially boosting Aviva’s exposure in general insurance.
Having cut away the dead wood, by selling off non-core businesses in Europe and Asia, Aviva is now a higher growth, more focused business not weighed down as much by heavy demands on its capital. In hitting its 2026 targets a year early, Aviva is proving to be a victim of its own success, with the market adopting an attitude of ‘what have you done for me lately?’.
There’s an element of that situation in the lacklustre share price reaction to the latest results. Signs of increased competition in commercial insurance will certainly be on investors’ minds.
However, shareholders should still be happy, particularly given the healthy increase in the dividend and the confirmation Aviva is on track for its 2028 goals.
The Works
A shareholder spat is brewing at discount retailer The Works. Investment vehicle Kelso, which owns 10% of the group, wants to put former Card Factory director Graeme Coulthard on the board – himself owning a further 8% stake.
The Works has objected to the proposal, saying it could cause a distraction, tip the balance of independent non-executives on the board, and has questioned Coulthard’s relevance for deserving a position.
Kelso has fought back, saying it is ‘surprised and disappointed’ by The Works’ statement. This suggests the matter is far from over, effectively setting the scene for another boardroom battle among UK plc.
Kelso is an activist investor in all but name. It says it looks to unlock trapped value in UK-listed companies by pushing through change.
The Works launched a new growth strategy last year and recently decided to scrap its digital channel to focus purely on the high street. The shares have already increased by more than 150% year-to-date versus 8% from the FTSE All-Share UK stock market benchmark.
That makes it even more interesting as to why Kelso is pushing hard now, when easy money has already been made from the recovery story.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
