Spot When the Market Is Wrong

STOCKS | FUNDS | INVESTMENT TRUSTS | PENSIONS AND SAVINGS

VOL 19 / ISSUE 06 / 16 FEBRUARY 2017 / £4.49 SHARES WE MAKE INVESTING EASIER MOTOR INSURERS BRACED FOR OGDEN HIT

SPOT WHEN THE THE RATIONALMARKET IS WRONG INVESTOR: £ My investment £ £ has FALLEN IN VALUE, can I get my MONEY BACK? £

Why FREEAGENT could be the next big DISRUPTIVE BUSINESS

WHAT TO BUY WHEN THE MARKET GETS GRIZZLY Bespoke

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CMC_Moneyweek_Bespoke_297x210_V5.indd 1 08/11/2016 12:58 EDITOR’S VIEW Two ways to access the revival in corporate bonds Fixed interest investments are back in fashion...but for how long?

n, out and back in favour: what is going general public in the UK in smaller portions for as on with the corporate bond market? US little as £100 a time. I corporate bonds have rallied since the You can presently invest via its website in bonds presidential election in November thanks to from Enterprise Inns – whose shares now trade higher risk appetite and higher expectations for as EI Group (EIG) – as well as AA (AA.) and Virgin corporate earnings. Media, among others. Wise Alpha says it hopes to Also in swinging in favour of the bond market expand its bond range in time. are reduced expectations for interest rate hikes in Before you get carried away, there are both the US and UK. Higher rates can make bonds downsides to this otherwise interesting less attractive versus equities, so no action on proposition. Wise Alpha hasn’t got permission yet rates is positive for bonds. to offer an ISA, so you can’t hold bonds bought Corporate bonds are like ‘IOUs’. A company through its platform via a tax-efficient wrapper. borrows money from investors in exchange for You are therefore liable for income tax on the paying a fixed rate of interest and return of capital coupon payments. You also pay 1% a year in fees after a fixed term. to Wise Alpha which further reduces your return. Microsoft (MSFT:NDQ), Apple (AAPL:NDQ) and Liquidity is another potential issue if you want AT&T (T:NYSE) are among the companies to have to sell your bond before it matures. Wise Alpha tapped debt markets so far in 2017 for significant says it has been able to buy back bonds from amounts of cash. investors selling earlier as there have only been Even UK-listed companies are part of this year’s a handful of requests. What happens if there is corporate bond frenzy including miner Vedanta a barrage of people wanting to exit at the same Resources (VED) which launched $1bn worth of time? Wise Alpha makes no guarantee it bonds in January. will buy back the bonds ‘on demand’.

HOW TO ACCESS THE MARKET TAKING A DIFFERENT ROUTE Many of the best corporate An alternative, more tax- bond opportunities are efficient way of investing in restricted to institutional corporate bonds is to consider investors such as pension a fund like Henderson funds and investment Diversified Income (HDIV). banks. Corporate bonds It also provides exposure to often require a minimum secure loan assets. £100,000 investment You can hold the which is too high for most Henderson product in an retail investors. and you should be able to One solution is to sell whenever you like as its use the services of Wise shares are quoted on the London Alpha, an online platform Stock Exchange. It yields 5.5% at which launched in 2016. It present, provides more diversity invests in corporate bonds than investing in single bonds at a typically yielding 5% to 8% and time (as per Wise Alpha) and has a 1.1% effectively resells them to the ongoing charge (DC).

16 February 2017 | SHARES | 3 INTERACTIVE Contents PAGES CLICK ON PAGE NUMBERS TO JUMP 16 February 2017 TO THE RELEVANT STORY 03 Two ways to access 14 Treatt has all the the revival in ingredients for upside corporate bonds 16 FreeAgent could be the next big disruptive business

36 The big property conundrum

06 Motor insurers 30 More ways to prosper braced for Ogden hit with ETFs: Part 3 of our fund series 07 Wait for return of 18 10 reasons why our China panic to buy Great Ideas are 41 ‘The pound could miners shooting ahead fall by another 20%’ says market expert 08 New fund will take 20 My investment has stakes in depressed oil gone wrong, can I get 42 Rare opportunity to and gas stocks my money back? play Halma 09 Results, trading 22 Should you dip into 44 St Ives’ dividend is updates, AGMs and your pension pot to under threat more over the coming pay for financial week advice? 45 What to buy when the market gets grizzly 12 Vital stats on 24 The rational investor: diamonds, hotels, how to spot when the 48 The way to play Japan Trump’s wall and market is wrong more

securities, derivatives or positions with spread betting organisations that they have an interest in should first clear their writing with the editor. If the editor DISCLAIMER agrees that the reporter can write about the interest, it should be disclosed to readers at the end of the story. Holdings by third parties including families, trusts, IMPORTANT self-select pension funds, self select ISAs and PEPs and nominee accounts are included in such interests. Shares publishes information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters. 2. Reporters will inform the editor on any occasion that they transact shares, Comments published in Shares must not be relied upon by readers when they derivatives or spread betting positions. This will overcome situations when the make their investment decisions. Investors who require advice should consult a interests they are considering might conflict with reports by other writers in the properly qualified independent adviser. Shares, its staff and AJ Bell Media Limited magazine. This notification should be confirmed by e-mail. do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions. 3. Reporters are required to hold a full personal interest register. The whereabouts of this register should be revealed to the editor. Members of staff of Shares may hold shares in companies mentioned in the magazine. This could create a conflict of interests. Where such a conflict exists it 4. A reporter should not have made a transaction of shares, derivatives or spread will be disclosed. Shares adheres to a strict code of conduct for reporters, as betting positions for seven working days before the publication of an article that set out below. mentions such interest. Reporters who have an interest in a company they have written about should not transact the shares within seven working days after the 1. In keeping with the existing practice, reporters who intend to write about any on-sale date of the magazine.

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121026398_MINT_SH_01.indd 1 07/02/2017 11:47 BIG NEWS Motor insurers braced for Ogden hit Change to the way compensation payments are calculated could wipe millions off insurers’ profit he Government is poised to announce a change in the rate used by courts to work out T compensation payments for victims of car accidents. This could have a significant impact on motor insurers and their share prices. Our preferred name in this space, Hastings (HSTG), looks relatively unaffected by the anticipated changes and could even benefit in some respects.

WHAT IS THE OGDEN RATE? negative impact on share prices. The Ogden rate is an assumption, used by the ‘Based on disclosures, we estimate that courts in determining compensations awards, on reduction to 1% could lead to reserving additions how much interest any money paid out will earn of 3% to 5% of market capitalisation,’ says UBS. when it is invested. ‘However, we highlight future earnings could be The higher the rate, the lower the lump sum at risk up to 13% depending on levels of ongoing required. The rate has been set at 2.5% for nearly reserve release expectations in future earnings, 16 years but with interest rates falling from more reinsurance arrangements and ability for insurers to than 5% to a record low of 0.25% in the interim pass on required (high single digits) price increases.’ there has been clamour for a change. In its annual report, Direct Line (DLG) says a one WHO COULD BENEFIT? percentage point decrease in the Ogden rate would We think Hastings will stand out from the crowd. wipe £190m off its profits. Most of Hastings’ policies are new and it does not have a backlog of liabilities which would be CRUNCHING THE NUMBERS affected by changes to the Ogden discount rate. Investment bank UBS has made its own assessment We like the company for its low costs, well- of the sensitivities. The motor insurers have integrated approach to price comparison sites and underperformed the market in recent weeks and strong technology platform. UBS sees a reduction to 1% as being priced in, The insurer could also be a beneficiary if the particularly as most of the insurers have already change to the Ogden rate forces some of its rivals assumed a MOTOR INSURERS’ OGDEN to increase their premiums, allowing it to capture reduction in ASSUMPTIONS market share more quickly. the rate when Forecasts from Berenberg, which is a buyer of the Company EPIC Current determining their assumption stock with a 253p price target, imply a 2017 price- capital buffers Admiral ADM 0.50% to-earnings growth (PEG) ratio of 0.5 times. A figure (see table). below 1.0 is generally considered to represent a Direct Line DLG 1.50% Investors could cheap stock versus its growth potential. expect any move Esure ESUR 2.50% Hastings HTG n/d beyond 1% SHARES SAYS:  Saga SAGA n/d to have a Buy Hastings at 233p. materially Source: UBS

6 | SHARES | 16 February 2017 BIGBIG NEWSNEWS Wait for return of China panic to buy miners Resources analyst says mining stocks far too expensive at the moment

he best time to buy mining stocks is when the market is worried about China, according to T Haitong Securities analyst Andrew Keen. And that is not now. The analyst believes the mining sector is broadly 20% overvalued at present and ‘vulnerable to deterioration in news flow from commodity markets in China’. The market currently favours the sector, as evident by a strong rally at the start of this week from miners on the back of rising iron ore and (BLT), Glencore (GLEN) and Antofagasta (ANTO), copper prices. The much-hyped infrastructure together with a ‘neutral’ rating on Rio Tinto (RIO). splurge promised by Donald Trump in the US has He criticises Rio for cutting dividends at the start of also lifted metals producers. 2016, only to then use spare cash to buy back stock Keen believes Chinese demand for metals is 12 months later when the equity had doubled in going to soften over the coming months. He also price. He thinks special dividends would be a better notes that Chinese demand is seven times higher use of the money. for steel and four times higher for copper versus In contrast, UBS believes Rio Tinto could be one the US. Therefore, China really matters when it of the highest returning stocks in the FTSE 100 this comes to influencing commodity prices. year. It believes the miner will boost shareholder The analyst has ‘sell’ ratings on BHP Billiton returns by a material level in a year’s time.

Record period Learn from DX’s Rolls-Royce’s big for M&A dividend disaster loss is no surprise

JANUARY 2017 saw the strongest PARCEL DELIVERY business DX SHARES IN Rolls-Royce (RR.) fell start to a year on record in terms of (DX.:AIM) says it will not pay earlier this week after posting the mergers and acquisitions activity, dividends for the foreseeable biggest loss in its history for 2016. according to Mergermarket. The future after issuing yet another We believe the market will soon financial information group says profit warning (7 Feb). The news focus on the future. The £4.6bn loss there were 1,137 deals in the month is a reminder not to trust super encompassed a £4.4bn hit from worth £254.5bn – which is 58.8% high dividend yields; in the vast weak sterling and a £671m fine to higher than January 2016. The majority of cases this is the market settle bribery charges. Underlying consumer sector accounted for a rightly guessing a dividend will be profit at £813m was actually 18% third of the deals in January 2017 in cut or suspended. DX was yielding ahead of expectations. Free cash monetary terms. (DC) more than 13% before this latest flow of £100m is expected to announcement. (TS) be similar in 2017 with ‘modest’ improvements in performance. (TS)

16 February 2017 | SHARES | 7 BIG NEWS New fund will take stakes in depressed oil stocks Investment trust is pinning its hopes on a sustained re-rating in the commodities sector

new investment trust is being launched by 250% between January 2001 and April which will allow you to gain 2006 and by 200% between February Adiversified exposure to the small 2009 and January 2011. cap oil and gas space. POTENTIAL FOR A repeat of this kind of performance Guinness Oil & Gas Exploration 25% ANNUALISED on a five-year horizon would result in Trust is set to commence trading a gross annualised return of around on the Main Market on 27 February. RETURN CLAIMS 25%, according to parent Guinness It hopes to raise between £30m ASSET MANAGER Asset Management. and £100m. The fund will be managed by two The funds will be used to take former energy sector analysts from M&G advantage of an opportunity to invest in Investments, Stephen Williams and Sachin ‘depressed junior oil and gas equities’. Oza. No dividends are planned as the emphasis is The expectation is that these shares will recover firmly on capital growth. as larger companies return to invest in pre-cash Total costs and expenses are guided not to flow projects, noting in the last two significant exceed 2% of net asset value and there is a ‘up cycles’ the FTSE AIM Oil & Gas Index saw performance fee of 20% of the excess return above significant gains. In particular, the index increased 8% a year.

The emerging markets markets peers. Stabilising commodity prices and fading investment opportunity US dollar strength would also be 00 supportive, say economists at Positive catalysts to outweigh dollar power investment bank JP Morgan. Recent 2016 figures from SEVERAL FUND managers some Latin American economies UK based emerging markets and analysts are pointing out have low domestic savings and fund manager Ashmore (ASHM) opportunities in emerging markets high external debt levels, making showed a big spike in outflows being missed by many investors them more vulnerable to a further around Trump’s victory to around Donald Trump’s presidential strengthening of the dollar, but the $700m. Were it not for those victory sparked worries for emerging two biggest markets, China and outflows, UBS analysts calculate markets investors because he India, are much less vulnerable, Ashmore would have reported had pledged to protect American according to investment experts at $1bn inflows in the last quarter interests and renegotiate the terms fund management firm BlackRock. of 2016. of international trade. Investors can play emerging A stronger dollar is generally POSITIVE BACKDROP markets through low-cost regarded as bad for emerging Several catalysts are in favour exchange-traded funds such as market countries with large debts of emerging markets, not least iShares Core MSCI EM (EIMI) as denominated in dollars. Nations that stocks are trading at lower well as more traditional funds like such as Turkey, South Africa and valuations versus developed JP Morgan India (JII). (SF)

8 | SHARES | 16 February 2017 WEEK AHEAD

FRIDAY 17 FEBRUARY WEDNESDAY 22 FEBRUARY FINALS FINALS Essentra ESNT Capital & Counties Properties CAPC Kingspan KGP Indivior INDV Millennium & Copthorne Hotels MLC Lloyds LLOY Segro SGRO Petrofac PFC ECONOMICS Serco SRP LLOYDS BANKING GROUP (LLOY) UK UBM UBM Lloyds Banking Group will announce Retail Sales Unite Group UTG 2016 results on 22 February. Interims Investors will be most interested in Barratt Developments BDEV any developments to the dividend Hays HAS policy. An anticipated special dividend was thrown into doubt in THURSDAY 23 FEBRUARY December 2016 when the company Finals announced the £1.9bn acquisition BAE Systems BA. of MBNA’s consumer credit card business. That could consum cash Barclays BARC previously mooted by analysts to PEARSON (PSON) British American fund additional dividends. Shares in academic publisher Pearson have started to recover RSA Insurance RSA following a profit warning on 18 Rentokil RTO January. The future direction of Greencoat UK Wind UKW the share price could swing on the commentary which accompanies Interims full year results on 24 February. Monitise MONI Investment bank Liberum is a Wilmington WIL long-standing bear of the stock and EX-DIVIDEND expects the numbers to highlight BARRATT DEVELOPMENTS (BDEV) Alumasc ALU 2.85p further issues around cash flow Investors will be keeping a close Aberdeen Private conversion and goodwill write- eye on housebuilder Barratt Equity Fund APEF 2p downs. Developments when it reports its first Hollywood Bowl BOWL 0.19p half results on 22 February. A trading Carnival CCL $0.35 update in November 2016 was Diageo DGE 23.7p MONDAY 20 FEBRUARY broadly reassuring on the impact of EasyJet EZJ 53.8p Finals the Brexit vote on demand but was a GlaxoSmithKline GSK 23p Hammerson HMSO little more downbeat than some of its Ideagen IDEA 0.07p Interims peers. There may also be comment Independent Investment Sareum SAR on the Government’s recent white Trust IIT 2.5p Vedanta Resources VED paper on the housing market. Rio Tinto RIO 100.56p Shoe Zone SHOE 6.8p TUESDAY 21 FEBRUARY Shoe Zone SHOE 8p Finals Tobacco BATS Securities Trust Anglo American AAL Centrica CNA of Scotland STS 1.45p HSBC HSBA Glencore GLEN S&U SUS 28p InterContinental Howden Joinery HWDN Utilico Emerging Hotels IHG Intu Properties INTU Markets UEM 1.7p Lighthouse Group LGT Kaz Minerals KAZ ECONOMICS John Wood Group WG Macfarlane Group MACF UK Interims Morgan Advanced BBA Mortgage Approvals BHP Billiton BLT Materials MGAM Second Estimate GDP Galliford Try GFRD Mondi MNDI Green Reit GRN National Express NEX Playtech PTEC For complete diary go to Image Scan Holdings IGE www.moneyam.com/forward-diary Vernalis VER Rathbone Brothers RAT RELX REL

16 February 2017 | SHARES | 9 THE ULTIMATE EXPERIENCE

BECOMING A PLATINUM MEMBER PROVIDES YOU WITH THE COMPLETE HOSPITALITY EXPERIENCE; FOOD, DRINK AND FIRST CLASS FOOTBALL.

rguably one of the club’s history within its leading stadiums in the new surroundings and this A world, Emirates Stadium is evident throughout. is marking its tenth season since it open to supporters in 2006. The Royal Oak, open to all Club When building the stadium, Level guests, offers a Victorian- Arsenal had a desire to provide themed pub experience which pays something special for fans looking homage to the pub where Arsenal for a new experience. Emirates Football Club was founded in Stadium’s Club Level, houses the 1886. Recently refurbished in the premium matchday restaurants summer of 2015, the Royal Oak and bars and is home to Arsenal’s is a clear example of Arsenal’s Platinum Members. The stadium’s continued commitment to invest premium tier is considered to in its facilities, ensuring that they be one of the leading hospitality remain best in class. With family- facilities in sport. friendly dining and pre-match entertainment, the Royal Oak Whilst designing the new stadium, is a firm favourite with Arsenal sought to incorporate the Platinum Members. ncluded in all Platinum Memberships, is access to Club and provides an exceptional five course à la carte dining Level’s four corner bars, the Emirates Lounge, Legends experience along with a complimentary bar. I Bar, Champions and 49ers, where Members can enjoy catching up with fellow fans, whilst sampling the matchday In contrast, The Foundry celebrates Arsenal’s origins, fayre on offer. Every matchday, Platinum Members are contrasting modern furniture, lighting and finishes with the treated to a complimentary matchday programme hand-crafted traditions of Arsenal’s original era. The Foundry as well as a half-time drink. restaurant offers a luxurious four course buffet, paired with halfway line or midfield seats. With both restaurants, guests For Members looking for something more formal, Club Level can enjoy a complimentary bar throughout the day and has a number of seasonal restaurants including the WM first-class football just a short walk away. Club. A private ‘club within a club,’ it was named after the revolutionary 3-2-2-3 formation introduced in the 1920s by If you’d like to become a Platinum Member or Herbert Chapman and his team captain Charlie Buchan. would like more information, email Ben Hanafi at This impressive restaurant is located on the halfway line [email protected] or call 0207 704 4199.

EXPLORE PLATINUM MEMBERSHIP AT EMIRATES STADIUM STORY IN NUMBERS

A new wave of UK $12BN-$25BN 300,000 export experts TRUMPS’ WALL COST ESTIMATES DIFFER WILDLY US PRESIDENT Donald Trump is still insisting that he will get his ‘Great Wall of Mexico’ built but cost estimates for this project vary hugely, according THIS IS THE number of places being made available in a new Skills to several sources. Section of the Duke of Edinburgh Award scheme designed to Trump’s own $12bn estimate create a new generation of UK export experts. The scheme will give is unsurprisingly the lowest young people in Britain the opportunity to be educated, trained yet even that would mean and mentored on exporting every year. The idea emerged following an average $31 for every one a pioneering competition devised by Warrington-based global of the nation’s near 384m payment industry specialist, ICC Solutions. It challenged schools population, it would top $65 a to think creatively and choose a product or service to export to head on Bernstein Research’s a country that is involved in the Duke of Edinburgh programme, forecast. More than 1,250 which celebrated its 60th anniversary in 2016. miles of new fortification will be needed to completely seal the border with its southern neighbour. OPEC MEMBERS COMPLYING WITH PRODUCTION CUTBACKS A RECORD 93% of oil production cartel OPEC’s members have complied with the major output cuts agreed on 30 November 2016. The largest contributor is Saudi Arabia with 496,200 barrels of oil per day cut in January. However, the impact on oil prices is being capped by a ramp 93 % up in drilling activity in the US. According to data from Baker Hughes (BHI:NYSE), the number of rigs operational in the US is now at its highest level since October 2015.

BETTER THAN EXPECTED SALES BY FIRESTONE DIAMONDS 30% LESOTHO-BASED Firestone Diamonds (FDI:AIM) has recommenced diamond sales with a bang. Shareholders have been without production for three years while Firestone raised a large amount of money and built a new processing plant at its Liqhobong mine. Production recommenced in late 2016 and the first batch of diamonds have now been sold for prices up to 30% higher than expected, according to investment bank Mirabaud. Firestone generated $8.14m revenue including more than $1m for a single stone. The range included a number of yellow diamonds.

12 | SHARES | 16 February 2017 STORY IN NUMBERS

NINE YEAR HIGH OCCUPANCY LEVELS IN THE LONDON HOTEL MARKET THE BENEFITS of a weak pound are becoming clear in the leisure sector as tourists flock to the UK’s Capital. The London hotel market at the start of 2017 saw its highest occupancy level for a January month since 2008, according to hotel data expert STR. Occupancy increased by 5.8% year- on-year to 70.5%. DEMAND FOR artificial grass for Average daily rate increased by a similar level to £127.84, residential homes is forecast to grow which is the highest for a January by 15% a year in Europe out to 2019, period since 1994. according to AMI Research. That’s Companies on the UK stock market good news for carpets manufacturer with a presence in the London hotels Victoria (VCP:AIM) which has just industry include Whitbread bought two Dutch artificial grass (WTB), Millennium & producers, Avalon and GrassInc. Copthorne Hotels Artificial grass is a high margin (MLC) and PPHE business and its production is almost Hotel (PPH). identical to carpet manufacturing, using the same machinery and similar fibres.

UK STOCKS: TOP FALLERS ON AIM MARKET US STOCKS: TOP RISERS ON DOW JONES SO FAR IN 2017 INDUSTRIAL INDEX SO FAR IN 2017

Name EPIC Sector Year to Name EPIC Sector Year to date date rise decline (%) (%) 1 Apple AAPL Leisure Goods 15.1 1 Prospex Oil & Gas PXOG Natural Resources -72.5 2 Visa V Financial 10.8 2 Grand Group GIPO Financial Services -66.7 Services 3 South African SAPO Real Estate -65.7 3 Nike NKE Personal Goods 10.3 Property Investment & Opportunities Services 4 Merck & Co MRK Pharmaceuticals 10.0 4 Jiasen International JSI Household -60.5 5 International IBM Software & 8.1 Goods & Home Business Machines Computer BETTER THAN EXPECTED SALES BY FIRESTONE DIAMONDS Construction Services 5 Strat Aero AERO Support Services -60.0 6 Boeing BA Aerospace & 7.9 6 DX Group DX. Industrial -47.5 Defense Transportation 7 American Express AXP Financial 6.5 7 Graphene Nanochem GRPH Chemicals -47.4 Services 8 CloudTag CTAG Health Care -45.9 8 Caterpillar CAT Industrial 6.2 Equipment & Engineering Services 9 EI Du Pont de DD Chemicals 6.0 9 Nautilus Marine NAUT Oil & Gas -40.2 Nemours Services Producers 10 Cisco Systems CSCO Tech Hardware & 5.8 10 365 Agile 365 Electronic -40.0 Equipment & Electrical Equipment Source: SharePad

16 February 2017 | SHARES | 13 GREAT IDEAS FreeAgent could be the next big disruptive firm Discover why we think now is an ideal time to buy this fast-growth business

ow is the perfect time to Royal Bank of Scotland buy accounting software FREEAGENT  BUY (RBS) has signed up to offer supplier FreeAgent (FREE:AIM) 116p FreeAgent’s software to its N Stop loss: 80p (FREE:AIM) as we believe a business bank account clients for rotation is underway from short- Market value: £47m free, paying the software firm an term traders to more committed undisclosed licence fee. longer-term shareholders. Investors shouldn’t get Many investors buy companies to sell its accounting tool kit. carried away with this recent as soon as they join the stock The £47m cap’s system deal. Barclays (BARC) signed a market in the hope of making a provides ‘real-time’ tax similar partnership seven years quick 10%+ return. A lot of floats liability tracking, invoicing ago which helped FreeAgent are priced below intrinsic value, and automated chasing, all when still in its infancy. However so there is an opportunity to seamlessly linked to a business’ Barclays’ importance as a profit once they join the market bank account. Its platform is easy source of revenue stream has as the price moves towards fair to use but advanced enough to ‘diminished’ in recent years, value (or beyond). charge premium fees. according to FreeAgent’s AIM The rally and subsequent In addition to direct sales, admission document. pullback in FreeAgent’s share the company has successfully price since its IPO (initial public partnered with accountants THE PATH TO PROFIT offering) in November 2016 is who act as resellers. This helped FreeAgent’s average customer a textbook performance. We customer numbers more than lifetime runs at 66 months believe the next phase for the double to 27,137 in the six (direct) to 96 (channel) versus share price is more a sustained, months to 30 September 2016 customer acquisition costs (CSC) albeit slower upwards rally. year on year, compared to 15% of 14 to 17 months. growth to 16,724 customers in Its software-as-a-service WHY WE LIKE THE STORY the direct channel. model means revenues are FreeAgent has the potential to Average revenue per user was virtually 100% profit beyond significantly disrupt the small £17.63 on average in the period the CSC, or between £800 and business accounting market. for direct sales and £10.86 from £950 per account over the Most of the big accounting the reseller channel. contract lifetime. software firms largely serve Analysts forecast maiden profit businesses with at least 20 in the financial year to March employees. FreeAgent is focused 2019. (SF) on sole traders or firms with only

FREEAGENT HOLDINGS a handful of staff. FTSE ALL SHARE 150 Rebased to ﬁrst An estimated 90% of small 140 businesses still use basic 130 spreadsheets to add up their 120 110 sales. The taxman wants all 100 businesses to comply with digital 90 80

accounting by 2020. That presents 70 Source: Thomson Reuters Datastream a large opportunity for FreeAgent NOV DEC JANFEB

14 | SHARES | 16 February 2017

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Trade Facts Ltd trading as SALT is authorised and regulated by the Financial Conduct Authority. GREAT IDEAS Treatt has all the ingredients for upside Flavour-and-fragrance specialist would make a quality addition to any portfolio

lavour and fragrance the US is Treatt’s biggest market, specialist Treatt (TET) has TREATT  BUY followed by the UK. China many ingredients of a high (TET) 258.93p represents a major long-term F Stop loss: 207.14p quality company. Guided by growth opportunity. management with a pedigree Market value: £133m Record results for the year in under-promising and over- to September 2016 revealed delivering, low risk organic an improvement in return on growth looks sustainable. deepening relationships with capital employed to 24.6% customers. Since taking over (2015: 22.1%). WHAT DOES IT DO? in 2012, CEO Daemmon Reeve Free cash flow grew to £8m Bury St Edmunds-based Treatt has transformed the business from £6.2m, while the net provides innovative ingredient from a seller of flavour and operating margin nudged higher solutions to the flavours, fragrance-based commodities to 10.8%. Net debt fell from fragrance and cosmetics to a value added, higher margin (£6.2m to £1.7m. This is an 11 industries and to consumer ingredients supplier. year low and was achieved in goods companies. spite of increases in key raw The £133m cap’s ingredient THIRST-QUENCHING material costs such as orange oil solutions are used by food OPPORTUNITIES and sterling depreciation against ingredients companies within Treatt is a play on the growing the US dollar. their formulations and by food clamour for products with better One point to note is that and drink companies directly; health credentials, many of Treatt has outgrown its Bury St typical end-products using which make use of its specialist Edmunds site and plans a costly Treatt’s ingredients include soft ingredients. relocation nearby. Research drinks, craft beers, confectionery, With manufacturing sites house Edison says the resulting soaps and shampoos. in the UK, US and Kenya, a £21m to £31m cash outflow Competitive strengths key growth driver for Treatt is over a two-to-three year period include Treatt’s experience beverages. This is a defensive can be funded from existing in sourcing and trading raw sector seeing trends towards facilities. materials and its long-term and natural, clean label and calorie- Edison forecasts £10.3m pre- free products. Sugar reduction tax profit in 2017 and £10.6m is a focus for drinks customers. in 2018. They work closely alongside Treatt’s BROKER SAYS: 001

laboratory TREATT technicians, FTSE ALL SHARE 280 Rebased to ﬁrst helping 260 forge closer 240 relationships. 220 Geographical 200 exposure by 180 Source: Thomson Reuters Datastream revenue is diverse; 160 2016 2017

16 | SHARES | 16 February 2017 VIDEOS WATCH THE LATEST SHARES VIDEOS

SAMPLE VIDEOS James Parsons, CEO and Brian Tim Guinness, CEO of Mitchener, Executive VP CLICK TO Guinness Asset Management Exploration of Sound Energy (SOU) PLAY

Neill Ricketts, CEO of Versarien (VRS) David Lenigas, Executive Chairman - Doriemus PLC

Visit the Shares website for the latest company presentations, market commentary, fund manager interviews and explore our extensive video archive

www.sharesmagazine.co.uk/videos 10 REASONS WHY OUR GREAT IDEAS ARE SHOOTING AHEAD There has been a significant amount of news flow in recent weeks linked to our top stock tips

ajor events in 2017 have fuelled (ULVR), Proctor & Gamble (PG:NYSE) and our running ‘Great Ideas’ stock Shares’ L’Oreal (OR:EPA). selections, as well as our Great Ideas: The deal is expected to be earnings M ‘10 for 2017’ annual share and free cash flow accretive in the

portfolio. +15% current financial year. The real kick Acquisitions have certainly been average gain* to earnings should come in 2018 on the agenda for many of our FTSE All-Share: +10.3%** with broker N+1 Singer upgrading preferred stocks. Other catalysts *12 months to 13 Feb 2017 its earnings per share forecast have been trading updates and broker **over same 12 month period in which by an impressive 15% to take into commentary. our trades were/are live account a full year’s contribution from FTSE 250 chemicals group Elementis SummitReheis. (ELM) is to boost the size of its personal Elementis is up 30% to 304.8p since we care business with the $360m acquisition of said to buy in November 2016. We believe the SummitReheis. This will give Elementis a strong shares have much further to rise. position in the antiperspirant market as the target business provides critical components for this RECKITT’S BIG MOVE $13bn industry with customers including Unilever We’re supportive of Durex-to-Cillit Bang brand ELEMENTIS owner Reckitt Benckiser’s (RB.) $16.6bn FTSE ALL SHARE 320 Rebased to ﬁrst acquisition of US baby formula maker Mead 300 Johnson (MJN:NYSE). 280 260 The acquisition shifts Reckitt further into higher 240 margin consumer health where infant nutrition is 220 a category with low price elasticity, high barriers to 200 180 entry and strong profitability. It also brings the Enfa

160 Source: Thomson Reuters Datastream family of brands into the fold and expands Reckitt’s 2016 2017

18 | SHARES | 16 February 2017 presence in developing markets, principally China. Full year results (10 Feb) were solid; like-for-like sales were up 3%, gross margins in expansion mode and the dividend raised 10% to 153.2p.

TOP QUALITY SELECTIONS Howden Joinery (HWDN) is an ‘extraordinary stock at an ordinary price’, proclaims investment bank Liberum. We are inclined to agree, having ever. An outstanding performer since we flagged its said to buy at 368.9p on 26 January in light of attractions on 20 October 2016 at 285p, the stock unjustified share price weakness. Liberum says the now trades at 367.5p. market is overestimating risks to the business and underestimating its strengths. The shares currently TIPS OF THE YEAR UPDATES trade at 408.8p. FTSE 100 service group DCC (DCC) has made its A strong third quarter update and an interesting largest ever retail transaction, buying Esso’s petrol acquisition have helped to drive up shares in cyber station network in Norway for £235m. Analysts security business Sophos (SOPH) over the past believe this will boost group pre-tax profit by 2% week. The shares are now up 22.6% since we said in 2018 and by 8% in 2019. The ability to make to buy in July 2016. earnings-enhancing acquisitions in the energy Sophos signed up 3,000 new customers for its space was a core reason behind choosing DCC as Intercept X solution in the last three months of one of our tips of the year. 2016. Billings growth across its products increased Capital Drilling (CAPD) is up 22.2% to 61p since by 16.1% in the period. There are also signs of better we said to buy in December 2016 thanks in part cross-selling, giving an operating profit of £1.7m to a very positive trading update (6 Feb). Its rig from the previous year’s equivalent $13.3m loss. utilisation hit 59% in December which is nearly The $120m purchase of Invincea adds next twice as much as at the start of the year (34%). generation malware protection to Sophos’ skill This proves the company is benefiting from mining base. We remain big fans of the company. sector resurgence which is central to our ‘buy’ case. Stockbroker FinnCap has lifted its price target to 95p. GOOD NEWS FOLLOWED BY MORE The market is reacting positively to non-life GOOD NEWS insurer RSA’s (RSA) deal to sell £834m worth of RM2 (RM2:AIM) has had its glass fibre and resin legacy insurance liabilities in the UK to Enstar pallets approved by one of the largest US retailers Group. The shares are now up 5.5% since we said for use by its suppliers. This followed news in late to buy in December 2016. December that low-cost manufacturing had begun in Mexico following a shift from uneconomic operations in Canada. We believe 2017 will be the year when RM2 finally convinces the market it has Howden a credible business, so keep buying at 29.01p. Our bullish call on British premium lifestyle Joinery is an brand Joules (JOUL:AIM) proved well timed. A strong Christmas trading statement (11 Jan) and ‘extraordinary superb half year results (31 Jan) acted as catalysts for recent share price appreciation. We’re staying stock at an or- positive on this structural growth retailer for the potential of the brand across multiple channels, in dinary the UK and overseas. Gaming logic box designer Quixant (QXT:AIM) price had an ‘outstanding year’, according to stockbroker FinnCap, after saying full year results would hit recently-upgraded earnings forecasts. Importantly, management remain as upbeat on the future as

16 February 2017 | SHARES | 19 MONEY MATTERS Helping you with personal finance issues My investment has gone wrong, can I get my money back? We explain the situations in which you might be able to claim for compensation

e’ve been asked by members of the W public who invested without financial advice if there is a way to get a full refund if their stocks or funds fall in value. Seasoned investors may think that is a silly question; for the less experienced it is fair question to ask. Some people who made investment decisions themselves think there should be compensation because they didn’t understand the risks associated with putting money into the stock market. In defence of the finance industry, the risk warnings are sold an investment by your bank Compensation Scheme (FSCS) is very clear when you go to make or another financial company. the UK’s statutory compensation an investment via a stockbroker ‘Mis-selling means that you scheme for customers of or fund platform. were given unsuitable advice, authorised financial services Just so everyone understands; the risks were not explained firms. It offers protection for up you cannot get compensation to you or you were not given to £85,000 per person for cash if there is a fall in the value of the information you needed, deposits per financial institution. an investment you made on and ended up with a product Temporary high balances your own and without financial that isn’t right for you,’ says The of up to £1 million held for six advice. You are buying a slice Money Advice Service. months or less and resulting of a company either directly or You can also seek from life events like a property indirectly when investing, so you compensation if the financial transaction, redundancy share that company’s pain as company holding your payment, retirement benefits or well as the gain. investments goes bust as long inheritance are also covered. You cannot get compensation as it was authorised by a UK Investment protection is if your investee company says it regulator. limited to £50,000 per person, is going to do something but fails per financial institution. The main to deliver on its promise. HOW THE COMPENSATION exception to this limit is pension However, you can get SYSTEM WORKS assets managed in an insured compensation if you were mis- The Financial Services pension which are fully protected.

20 | SHARES | 16 February 2017 MONEY MATTERS

‘MIS-SELLING MEANS THAT YOU WERE GIVEN investment trust shares (which are structured in the same way UNSUITABLE ADVICE, THE RISKS WERE NOT as public limited companies), EXPLAINED TO YOU OR YOU WERE NOT GIVEN THE and individual corporate bonds. If a company is declared INFORMATION YOU NEEDED, AND ENDED UP WITH insolvent, a liquidator or A PRODUCT THAT ISN’T RIGHT FOR YOU.’ receiver is appointed to realise the failed company’s assets. The liquidation expenses are met Trust-based pensions are and you had sought financial first from the proceeds. Then in theory only covered up to advice, you may have recourse there is a typical hierarchy that £50,000 if the pension company to the Financial Ombudsman determines the order in which goes bust. In reality, the assets Service (FOS). investors get paid: corporate in the pension are ring-fenced If you feel the adviser bondholders, preference as they’re held on trust for you, made mistakes, either in the shareholders and then ordinary not by the pension manager. So advice given or due to an shareholders. you’ll still get your pension if the administrative error, you must As bondholders own tranches company managing the pension outline these clearly to the firm of corporate debt, they are goes out of business. first and give them a chance to creditors of the failed company, This will be the position if you resolve the matter or answer whereas shareholders own have a self-invested personal your complaint. If you are not equity and are not automatically pension (SIPP) which is held as satisfied with the response you owed anything; they may find it a trust, even if the SIPP trust sits can write to FOS asking it to difficult to get any money back on an investment platform. You review the case. at all. may suffer some delay in terms of being able to buy and sell HOW ARE DIY INVESTORS WATCH OUT FOR any investments if the pension PROTECTED? INVESTMENT SCAMS provider goes bust, but you Investments you make via a ‘As with any investment it’s should eventually get the money. stockbroker or fund platform important to be on your guard Commenting on the FSCS, are generally held in a nominee against scams and to be wary of Alison Treharne, a chartered account. offers that come out of the blue,’ financial planner and principal ‘The investments are held says Kat Barry, expert advice lead of Shore Financial Planning in a nominee account and the at Citizens Advice. in Plymouth, says: ‘It covers creditors of the platform (if it ‘If you consult an independent if you were given bad advice, goes bust) will be unable to financial adviser make sure misrepresented or suffered poor touch these to settle any debts they’re certified and that the investment management if the of the platform business,’ says company you want to invest authorised firm is unable to Treharne. in is legitimate. You can check pay the claim against it or has Assets held in unit trusts both of these by referring to the gone out of business and cannot and open-ended investment Financial Conduct Authority’s return the money. companies are also ring- (FCA) website.’ ‘Remember, it’s not protecting fenced away from the financial If you’re worried an you if the investment was a bad company. As these are held with investment offer might be investment and its value goes an independent custodian, the a scam contact the Citizens down: that is investment risk and money is safe even if the fund Advice consumer service on you take that on personally.’ provider goes under. 03454 04 05 06 or visit the FCA’s The situation is more complex ScamSmart website for help. If WHAT HAPPENS IF I USED A for investors who hold shares you think you’ve been a victim FINANCIAL ADVISER? directly (outside a pooled of fraud contact Action Fraud on If an investment goes wrong investment fund), including 0300 123 2040. (JH)

16 February 2017 | SHARES | 21 MONEY MATTERS Helping you with personal finance issues Should you dip into your pension pot to pay for financial advice? New rules allow you to take £500 from retirement savings to help fund the services of an expert

nvestors planning for a secure retirement face a I complex financial maze of often baffling jargon, tax rules and investment options. While some will feel confident enough to navigate a safe path solo, many could benefit from speaking to a UK regulated pension pots, and from a Only you can decide whether financial adviser. stocks and shares ISA; it’s worth your while paying for Research by Unbiased, a UK- • whether income from a financial advice, but the £500 wide adviser directory, found pension will be sufficient for allowance is unlikely to cover the individuals who seek retirement your retirement, or whether total cost. While the Government advice increase their retirement you may want to supplement hopes cheaper technology- savings by on average £98 a this income by releasing based ‘robo advice’ services will month. However, less than a equity from your house; in time develop, this industry is third of people have accessed • whether the asset allocation embryonic at best in the UK. financial advice on their pension, of a drawdown product is If you want a full, holistic according to the Treasury. appropriate; financial plan you’ll need to go This so-called advice gap has • how to use assets to fund to a human adviser and, in all prompted the Government to care in old age. likelihood, £500 won’t be enough. create a new tax-free allowance You will be able to use the According to the Treasury, face- designed to boost the take-up tax-free allowance up to three to-face advice costs £150 per of advice. times and the money will be hour on average, and can take paid directly from your pension up to nine hours for pensions – HOW DOES IT WORK? scheme to the adviser. meaning even with the allowance The Treasury last week The allowance will only you still might have to make up a confirmed how the new advice be available to those with shortfall of £850. allowance will work. From April defined contribution or ‘hybrid’ Furthermore, remember this 2017, you will be able to take pensions, so if you have a final is not free money – your pension up to £500 once-a-year from salary pension you won’t be will be reduced by £500, plus your pension pot, at any age, to able to use it. any growth that money would pay towards regulated financial You will need to speak to your have enjoyed, although the value ‘retirement advice’. pension provider to find out added by advice often exceeds This covers a wide range of if the allowance will be made the cost. scenarios, including advice on: available to you from April this • how to draw an income for year because it is not compulsory TOM SELBY, retirement from all of your for them to offer it. SENIOR ANALYST, AJ BELL

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0118 324 3190 / 0800 690 6568 / Company No: 8120200 / Authorised and Regulated by the Financial Conduct Authority THE RATIONAL INVESTOR: WHY IT PAYS TO WEIGH UP ALL THE INFORMATION BEFORE MAKING£ AN INVESTMENT DECISION£ £

£ £

24 | SHARES | 16 February 2017 ne of the key principles of investing is that you you buy a share because it is racing upwards as can make good money by exploiting market could easily have paid too much compared to its inefficiencies. intrinsic value. O The stock market, made up by the actions It is easy to get caught up in the euphoria of of hundreds if not thousands of investors, is not a rising share price and think ‘I’ll have some always right when it comes to pricing in good or of that, too’. We saw a recent example of this bad news. herd mentality in mid-January 2017 when many You can often buy a company that is priced too people made the mistake of buying into Fitbug’s cheaply and hook yourself a bargain. The same (FITB:AIM) share price rally. applies when the market gets too excited, enabling The strategy of ‘act first, think later’ rarely ends you to sell something for a nice profit when it well. You could end up overpaying if you raced becomes overpriced. to buy a share without properly digesting Over time most market inefficiencies the information at hand. That’s exactly should even out and a stock will trade RATIONAL what happened with Fitbug which at fair value. Your job is to act before INVESTORS DON’T left shareholders fuming. A rational that event happens. investor wouldn’t have made this Rational investors are the best at RUSH; THEY TAKE TIME mistake, as we now explain. exploiting market inefficiencies, in TO CONSIDER IF THE our view. MARKET IS RIGHT OR WHAT HAPPENED TO FITBUG? They don’t get caught up in sudden Fitbug is one of several companies market movements and follow the WRONG that believe the world would be herd in terms of whether to buy or sell a better place if everyone’s health is a particular share. They take time to consider monitored and that information used to the evidence at hand and work out whether the market is either right or wrong. This article will illustrate how logical thinking can help you spot market inefficiencies. We will talk throughGB GROUP three practical examples so you can see the340 thought process in action. 320Hopefully after 1reading this article you will be able300 to approach investment decision making in a slightly different way and question whether significant280 share price movements are justified. 260 1. 20 Oct: Says Government Verify project roll-out slower than expected. DON’T240 PANIC BUY OR PANIC SELL Shares decline, analysts clarify minimal impact to earnings. 2 An irrational investor is someone who is either 3 2. 31 Oct: Analysts reiterate that Verify issues aren’t as bad as market fears. 220 overconfident when they are investing or panics at 3. 28 Nov: Shares start their recovery rally.

200 Source: Shares, Thomson Reuters Datastream the first sign of OCTany significant news. ItNOV is important DECJAN FEB to stress that someone can panic buy as well as panic sell. The former is particularly dangerous if

FITBUG HOLDINGS 0.80 2

0.70

0.60 1. 18 Jan: Wins contract to supply 14,000 devices. Shares soar; company value moves from £2m to £11.4m. 2. 19 Jan: Admits contract only worth £60,000. Shares slump. 0.50

0.40

0.30

0.20 1

0.10 Source: Shares, Thomson Reuters Datastream NOV DEC JANFEB

16 February 2017 | SHARES | 25 PHOTO-ME INTL. 180

175 1 170 2

165

160 1. 21-22 Jan: Weekend papers say passports photos can be taken via a mobile phone. 155 2. 23 Jan: Investors rush to sell; shares collapse. Photo-Me says photos from phones incompatible with developing security requirements. 150 3. 27 Jan: Shares start to recover. 3

145 Source: Shares, Thomson Reuters Datastream JAN FEB encourage us to do more exercise and have a include any service income hinted by Fitbug in better diet. its announcement. We find it hard to believe the The small cap business recently announced it service income would be of any significance given had won a contract with a big financial services you and I could buy one of these devices and get company in Asia which had 14,000 employees. It all the information at the click of button on our said the unnamed client would use its services to home computer or phone. Furthermore, you need help maximise employee performance and reduce to have spotted another important fact – namely absenteeism and risk of chronic illness. this was only a one-year contract. At first glance that certainly sounded positive If we’d been Fitbug shareholders, we would have for Fitbug, particularly has it had been struggling considered all the evidence and potential revenue for a while amid intense competition for and made a decision about whether the wearable health devices. market had underpriced or overpriced Investors were ecstatic and the YOU COULD HAVE the contract win. share price kept rising and rising as The conclusion was obvious: the the day went on. It was eventually AVOIDED LOSING market had overpriced the news by a up 467% by mid-afternoon before MONEY ON FITBUG significant amount. We would have being suspended pending another WITH LESS THAN sold the shares in the belief that they announcement. could soon be bought back at a much We calculate the market value 20 SECONDS’ lower price. of Fitbug increased from £2m to RESEARCH You wouldn’t have waited long for £11.4m on that day, directly as a result the price to come down. Fitbug’s shares of the contract win. The market therefore crashed the following day after issuing a new attributed £9.4m value to the new contract. announcement clarifying that it would only get But had investors really thought this through? £60,000 revenue for the one-year contract – so Were they caught up in the excitement and raced even our estimate was far too high. to buy without thinking through the potential gains On the face of it, thumbs up to Fitbug for getting for Fitbug? the contract – you never know where it could lead to next. Small companies can benefit from having IT TOOK US 20 SECONDS TO REALISE THE prestigious clients as can it help with their next MARKET WAS WRONG sales pitch and adds credibility. A quick glance on Amazon’s website says On the downside – a lot of Fitbug’s monitoring product £ investors probably sells for £21.99. You can be bought near the certain Fitbug aren’t selling £ top and then them at that price if the £ nursed a big new financial services loss. client takes one for Did those every member of its investors take 14,000-strong staff. the time to Shall we take a guess examine the at £10 per unit? Let’s £ evidence and do the maths: 14,000 x try and work out £10 = £140,000 revenue if the contract was for Fitbug. Not exactly £ really worth the £9m earth shattering money, ascribed to it is it? That kind of revenue by the market? would certainly not justify Probably not. a £9.4m increase in the But it shouldn’t have company’s valuation. taken them long to do some basic That is a rough maths and realise the market had calculation of the potential got carried away and over-priced revenue and doesn’t this information.

26 | SHARES | 16 February 2017 WHY THE MARKET GOT IT WRONG ON In Europe, there is a shift towards more PHOTO-ME sophisticated security photos including 3D imaging Photo-Me International (PHTM) saw its share price and iris scanning. Therefore you could assume fall 20% on 23 January 2017 after old news reached there is a chance the UK Passport Office could a wider audience. rethink its stance towards pictures from phones. A couple of the national newspapers ran stories Our conclusion is that the market has about the public being allowed to take photos with incorrectly priced this earnings threat and applied their mobile phone for passports too much of a discount to the – the market panicked that share price. Therefore the rational Photo-Me’s photo booth investor could have picked up services would no longer be cheaply-priced shares. And required. that’s exactly what people have This supposed risk to its been doing as the shares have earningsGB GROUP wasn’t entirely subsequently recovered a good breaking340 news, and people chunk of the lost territory. had320 talked about this1 last year. For the smart investor, GB GROUP UNFAIRLY the300 sell-off presented an PENALISED opportunity280 buy a great In Photo-Me’s case, some discount company260 at a much lower than is warranted given the threat to normal price. 1. 20 Oct: Says Governmenpartt Verify of project its roll-ouearningst slower – than so expected. we aren’t 240 Shares decline, analysts clarify minimal impact to earnings. Yes, the UK is trialling 2 saying the shares shouldn’t have 3 2. 31 Oct: Analysts reiterate that Verify issues aren’t as bad as market fears. 220 potential changes to passport 3. 28 Nov: Shares start theirfallen recovery at rall all.y. This is an important applications.200 It is potentially point to consider. Source: Shares, Thomson Reuters Datastream allowing adults agedOCT over NOV DECJIt is also relevantAN to a situationFEB 26 to use mobile photos to last year with data intelligence renew their passport, but only specialist GB Group (GBG:AIM) if theFITBUG photos HOLDINGS are of the requisite whose market value declined by a quarter on a 0.80 standard (set by ICAO and ISO), something which is contract delay. 2 very0.70 hard to achieve. This example shows how it can be harder 0.60Photo-Me’s1. 18 Jan: UKWins photocontract to booths supply 14,000 only devices. account Shares soar;for company thanvalue moves you from think £2m toto £11.4m. judge whether the market an estimated2. 19 Jan: Admits5% of contract group only profit, worth £60,000. so a Shares decline slump. in has been too cautious about a negative news income0.50 from this area of the business wouldn’t announcement. have0.40 a major impact on group earnings. The GB Group said on 20 October the roll-out of earnings0.30 threat certainly didn’t warrant wiping off a a Government project had been slower than fifth of the company’s market value. expected. Its share price fell by 26% to 254p on 0.20 The company replied by saying it believed the day. You might think1 the market reaction accepting0.10 photos from mobile phones for official was fair if you didn’t know too much about the Source: Shares, Thomson Reuters Datastream NOV DEC JANFEB documents was ‘incompatible with developing company. security requirements’. In reality, analysts hadn’t expected the

PHOTO-ME INTL. 180

175 1 170 2

165

145 Source: Shares, Thomson Reuters Datastream JAN FEB

16 February 2017 | SHARES | 27 Verify project (which validates citizens for gauge the market’s mood when also weighing up online interaction with Government services) the pros and cons of a news announcement. to make a big contribution to earnings for a Let’s say there was a succession of companies while. Stockbroker FinnCap said at the time issuing profit warnings as a result of contract that it expected little impact to group profit delays. A firm in GB’s situation could easily have in either 2017 or 2018 as a result of the delay. been considered as ‘yet another one’ with project Therefore the 26% share price decline was totally delays, so investors could have rushed to sell unjustified, in our view. without examining the evidence. ‘GB Group went into the programme with its The other issue to consider is that many investors eyes wide open to the record of Government IT won’t have understood how much the Verify failures in the past and consequently planned for project was expected to contribute to earnings over a very slow take up of the scheme,’ said FinnCap the next year or so as GB didn’t explicitly comment following the news. ‘If the GOV.UK Verify news on this issue in its trading update. affects sentiment on the stock it may prove a We only knew about Verify’s minimal profit buying opportunity for investors,’ added FinnCap contribution because we get access to analyst before the share price collapsed. ‘This remains an research notes – where they publish valuable excellent, well-run business with a strong position information as a result of spending a lot of time in a growth market, whose earnings are unlikely to with a company’s management. Essentially retail be affected.’ investors are at a disadvantage as the general There were downgrades to revenue forecasts, public can’t get research notes for free. but we’re ultimately interested in how much profit is made by a business. WHERE TO GET IMPORTANT INFORMATION You can generally get headline earnings forecasts THE POWER OF MARKET SENTIMENT via financial data websites such as Stockopedia or Interestingly the share price fell even further in Morningstar, but you don’t get that breakdown of the days after the announcement, suggesting the earnings per division or per project which often market still felt the news on the Verify project was appear in analyst research notes. very negative. Stockbroker Peel Hunt said on 31 One solution is to pay £25 a month to use October 2016: ‘we believe the market is unfairly ResearchTree which publishes research notes punishing GB Group given the strength of the from a few of the stockbrokers, although the underlying business (despite the adjustments service is restricted to what it describes as for Verify).’ ‘sophisticated investors’. The rational investors eventually decided the The alternative is to keep reading Shares as we market had been too pessimistic, thereby taking will always endeavour to discuss opportunities advantage of the share price weakness and the where the market appears to have got it wrong. stock soon recovered most of the lost ground. Overall, the key message is not to get carried GB’s example highlights the importance of away by hype and rush to buy or sell shares. You understanding market sentiment. It can be a must always examine the facts carefully before you powerful force and it is always worth trying to press the ‘transact’ button. (DC)

GB GROUP 340

320 1

300

280

260 1. 20 Oct: Says Government Verify project roll-out slower than expected. 240 Shares decline, analysts clarify minimal impact to earnings. 2 3 2. 31 Oct: Analysts reiterate that Verify issues aren’t as bad as market fears. 220 3. 28 Nov: Shares start their recovery rally.

200 Source: Shares, Thomson Reuters Datastream OCT NOV DECJAN FEB

28 | SHARES | 16 February 2017 FITBUG HOLDINGS 0.80 2 0.70

0.60 1. 18 Jan: Wins contract to supply 14,000 devices. Shares soar; company value moves from £2m to £11.4m. 2. 19 Jan: Admits contract only worth £60,000. Shares slump. 0.50

0.40

0.30

0.20 1

0.10 Source: Shares, Thomson Reuters Datastream NOV DEC JANFEB

PHOTO-ME INTL. 180

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MORE WAYS TO PROSPER WITH ETFS: PART 3 OF OUR FUND SERIES

How to use momentum, low beta, minimum volatility and multi-factor strategies to enhance your portfolio

nvestors are pouring in money in the hope that smart beta and factor-based ETFs will outperform ‘vanilla’ ETFs which just track broad I stock market indices. They also attracted to smart beta and factor-based ETFs because they can add some extra diversification to an investment portfolio. In last week’s feature we explained the ins and outs of three commonly-used factors: quality, size and value. In the final part of our ETF series, we now look at momentum, low beta/minimum volatility and multi-factor products. As with all smart beta ETFs, these products follow an index that uses a weighting scheme other than market capitalisation. They are still ETFs because they passively track the index, instead of being discretionary.

30 | SHARES | 16 February 2017 In partnership with

markets turn it is usually one of the worst Momentum Momentum performing strategies. ‘It comes with A momentum strategy buys the trades can be some pretty painful pullback periods,’ stocks that keep going up in exciting but you must he says. 1value in the expectation they be aware that an upward Momentum is negatively will continue to move upwards. correlated with value, which is Think about a particular company trend can quickly reverse about buying undervalued stocks. whose share price goes up, up and share prices can ‘Ultimately it’s about whether it is and up a bit more. Many investors fall fast better to be right with the crowd or will spot this and want to hitch a ride right but against the crowd,’ says Mellor. upwards by also buying the stock. ‘With value, you can be right over It’s a strange concept to get your head around the long-term but you need to be prepared to if you’re used to the theory that you should invest be wrong in the short-term. Momentum is the in something before everyone else realises how opposite – you might be right in the near term but good it is. it could hurt you over the long run. ‘The theory behind momentum is that stocks are ‘In theory, what you lose in the bad times should going up for a reason, whether that’s earnings or be more than offset by the good times,’ he adds. mergers and acquisitions activity,’ says Chris Mellor, executive director at ETF provider Source. ARE THERE PARTICULAR BENEFITS TO A ‘You use price momentum as a short hand for MOMENTUM STRATEGY? getting exposure to the underlying trend. Evidence Momentum can be a useful way of capturing suggests price rises usually carry on for longer than trends and themes in the market, such as demand people expect.’ for technology and biotech. For example, Apple A common way to screen stocks for a (AAPL:NDQ) would have featured in many momentum index is to use a ’12 month minus one momentum strategies over the past decade. month’ strategy. According to the theory, there You can get exposure to the strategy via products is usually a positive correlation between the past such as iShares Edge MSCI World Momentum year and the future but this isn’t necessarily the Factor UCITS ETF (IWMO). It invests in a sub-set of case for the final month. The strategy screens out global MSCI stocks which have been experiencing companies with a large jump in the share price an upward price trend. over the past month, which could reverse shortly Stocks currently being tracked by this ETF thereafter. include Amazon (AMZN:NDQ), British American Mellor says momentum is one of the more Tobacco (BATS), BP (BP.), Facebook (FB:NDQ), stable outperformers in the factor space, but when HSBC (HSBA), Johnson & Johnson (JNJ:NYSE) and

16 February 2017 | SHARES | 31 In partnership with

Microsoft (MSFT:NDQ). An alternative product is Source RBIS Equal The MSCI World Momentum Index Risk Equity Europe UCITS ETF (REQR). It tracks an underperformed the broader index in 2016, index which eliminates the 50% riskiest stocks, as returning 4.75% versus 8.15% for the MSCI World. determined by their volatility and correlation, and On a 10 year basis it has outperformed, with then weights the remaining stocks so that each one annualised return of 6.07% versus 4.54% for the contributes an equal amount of risk. MSCI World (based on data up to 31 January 2017). ‘You get a similar performance as you would with a minimum volatility ETF but it’s a simpler construction. It puts risk control at the heart of the Low beta/minimum volatility process, rather than at the end,’ says Mellor. Investors might want to consider ETFs with This ETF currently provides exposure to such a low beta or minimum volatility strategy companies as Syngenta (SYNN:VTX), Kerry 2 if they’re seeking a lower-risk component (KYGA), Lindt & Spruengli (LISN:SWX) and Adidas for their investment portfolio. These products (ADS:ETR). may be particularly interesting to anyone who is worried about the stock market falling in value in the near term. Multi-factor ‘Low beta/minimum volatility tends to If you’re not convinced about the merits of outperform during market pullbacks. It does less single factor ETFs you could opt for a multi- well when there are very strong (upwards) moves 3 factor product which combines several in the market, but it saves you from big declines,’ factors into one vehicle. says Mellor. Multi-factor products aim to get around the Low beta and minimum volatility strategies fact that many single factors will have prolonged achieve a similar outcome to one another but their periods of underperformance and outperformance. approaches are different. Value, for example, underperformed for most of A low beta strategy selects the stocks based the past two years before having a resurgence in on their exposure or correlation to the market. the middle of 2016. It selects stocks with the lowest beta. In simpler ‘Multi-factor strategies underperform less – terms that means companies with lower volatility you get a higher hit rate – and they have lower than the market or whose price movements are volatility,’ says Mellor. not highly correlated with the market. It is important to stress this outcome isn’t A minimum volatility ETF looks at stocks’ historic guaranteed. The past six months have been a tough volatility and selects the ones with the lowest time for most factor products (aside from value), volatility. These stocks also tend to be low beta. which has resulted in multi-factor also struggling. An example is iShares Edge MSCI Europe Yet over the long-term, the MSCI World Minimum Volatility UCITS ETF (MVEU). It tracks an Diversified Multiple-Factor Index has index which is constructed of European companies outperformed the MSCI World by 2%. and seeks to minimise the stock market’s This index is tracked by iShares Edge MSCI peaks and troughs. World Multifactor UCITS ETF (IFSW). Companies in the index include It provides exposure to four factors: Danske Bank (DANSKE:CPH), Nestle Low beta/ value, momentum, quality and low (NESN:VTX), L’Oreal (OR:EPA) and minimum volatility size. Buying that ETF would provide Randgold Resources (RRS). ETFs may suit a nervous exposure to the likes of Accenture The MSCI Europe Minimum (ACN:NYSE), Cigna (CI:NYSE), Volatility (EUR) Index has a 10-year investor worried about General Motors (GM:NYSE) annualised return of 4.5% compared a pullback in the and Hewlett Packard Enterprise with 3.2% for MSCI Europe. stock market (HPE:NYSE).

32 | SHARES | 16 February 2017 In partnership with

Income is not a factor Smart beta risks

ALTHOUGH YOU might come across some THERE ARE three potential risks when it comes dividend-themed ETFs, income is not actually to factor investing, according to Russ Mould, a factor. investment director at AJ Bell Youinvest: Most income strategies have a value bias because they select stocks based on the highest yield, which in itself is a value metric. Although smart beta or factor ETFs seem to be If a stock has a high yield it could indicate 1a passive investment, the investor is making it is undervalued, although there is a risk it is an active choice based on the factors involved. under financial distress and dividends could It is unlikely that one factor will always work all be scrapped. To minimise this, some dividend- of the time, as evidenced by the recent fall from focused indices also include a quality check. grace of low-volatility and quality growth and the A popular ETF is the SPDR S&P UK Dividend resurgence of the long-neglected value option. Aristocrats UCITS ETF (UKDV), which chooses stocks with a high yield and whose dividends have increased or held steady for at least 10 The ETF could suffer from tracking error and years. In doing so, it avoid companies which 2underperform its targeted benchmark index. don’t pay dividends every year or have had to make cuts to their dividends over the past decade. To qualify for the index, companies must Smart beta or factor ETFs can come with also have to be profitable and not pay dividends 3higher total expense ratios than those from reserves or borrowings. which follow mainstream indices like the FTSE Companies in the index include G4S (GFS), 100 or the S&P 500, so it is possible some of GlaxoSmithKline (GSK), SSE (SSE), BAE Systems the performance generated could be lost to (BA), AstraZeneca (AZN) and Burberry (BRBY). additional fees. Source has a suite of FTSE RAFI equity income ETFs which focus on dividends. The products also look at company quality by analysing return on equity, interest coverage ratios and accounting quality. Stocks are weighted by a combination of dividend yield and economic size. There are UK, European and US versions of this ETF. The US version, Source FTSE RAFI US Equity Income Physical UCITS ETF (DVUS), provides exposure to well-known companies including Wells Fargo (WFC:NYSE), Chevron (CVX:NYSE) and Wal-Mart Stores (WMT:NYSE). The fund has a short performance history as it is relatively new; over the last six months it produced a total return of 9.7% (as of 6 February 2017).

16 February 2017 | SHARES | 33 In partnership with

PRODUCT FOCUS: Source Goldman Sachs Equity Factor Index World UCITS ETF (EFIW)

that they contribute an equal amount of risk. SOURCE GOLDMAN SACHS EQUITY FACTOR INDEX The stocks are then combined and weighted to WORLD UCITS ETF create a portfolio that maximises the overall factor Total expense ratio: 0.65% score. The maximum weighting per constituent Replication method: Physical with swap overlay is 0.5%. By combining stocks in this way the fund avoids Dividends: Accumulating selecting stocks that may score well on one factor but badly on another; for example, if a stock scored Source Goldman Sachs Equity Factor Index World +2 for value and -2 for momentum, they would UCITS ETF offers broad, global equity exposure. cancel each other out. It aims to outperform traditional benchmarks by The ETF aims to provide consistent emphasising five equity market factors: low beta, outperformance by providing diversified exposure size, value, momentum and quality. to the five factors while strictly controlling exposure The portfolio is drawn from a universe of to unrewarded risks. securities from 22 developed markets around Source’s Chris Mellor says the product aims to the world. give a general bias to stocks that will outperform A combined factor score is calculated for each over the long term. He likens it to a football team stock, with the five different factors weighted such which might have some players with specific goal- scoring skills, others with tackling skills and others with goal-saving skills. SOURCE GOLDMAN SACHS EQUITY FACTOR INDEX WORLD UCITS ETF 125 ‘A really good team would be comprised of

120 players who are good at all these things. The midfield might not be good enough on a single 115 factor but it is good enough on different factors for 110 a multi-factor team,’ he says. 105 Mellor admits the ETF is more complex than

100 Source: Thomson Reuters Datastream 2014 2015 2016 a market cap or equal weighted ETF, but he says it still uses the same idea of picking stocks and ensuring the fund tracks the performance of TOP 10 HOLDINGS SECTOR EXPOSURE an index. Deutsche Telekom Financials 15.4% The ETF was launched in January 2014 so it Valero Energy Consumer goods 13.3% has very short performance history. In 2016, it Fifth Third Bancorp Oil and gas 12.3% produced a total return of 4.6%, underperforming SunTrust Banks Consumer services 11.7% the traditional Source MSCI World UCITS ETF WhiteWave Foods Healthcare 11.4% (MXWO), which returned 7.5%. Over the last three Sysco Utilities 10.6% years the fund has returned 19.3% on a total return Chevron Basic materials 5.9% basis, 1.1% more than the MSCI World ETF. Nippon Telegraph & Telephone Other 19.3% The ETF uses a ‘swap-enhanced’ structure. It invests in the physical equities but there is a swap Quest Diagnostics overlay to try to minimise tracking error. It uses Spectrum Brands several counterparties to reduce the impact of one defaulting.

34 | SHARES | 16 February 2017 KEEP READING THIS CLICK ON THE BOXES TO JUMP WEEK’S SHARES AND TO A STORY DISCOVER: THE BIG PROPERTY HOW TO PROFIT FROM RARE OPPORTUNITY CONUNDRUM CURRENCY TRADING TO BUY DIVIDEND PAGE 36 PAGE 38 CHAMPION AT CHEAPER PRICE PAGE 42

WHAT TO BUY THE WAY TO WHEN THE MARKET PLAY JAPAN GETS GRIZZLY PAGE 48 PAGE 45

WHO WE ARE BROKER RATINGS EXPLAINED: EDITOR: DEPUTY NEWS FUNDS AND Daniel EDITOR: EDITOR: INVESTMENT TRUSTS We use traffic light symbols in the magazine to illustrate Coatsworth Tom Sieber Steven Frazer EDITOR: broker views on stocks. @SharesMagDan @SharesMagTom @SharesMagSteve James Crux @SharesMagJames Green means buy, Orange means hold, Red means sell. JUNIOR REPORTER: CONTRIBUTERS CONTRIBUTERS Lisa-Marie Janes Emily Perryman Nick Sudbury @SharesMagLisaMJ Tom Selby Jennifer Hill The numbers refer to how many different brokers have that rating. PRODUCTION ADVERTISING MANAGING DIRECTOR Head of Production Sales Executive Mike Boydell Eg: 4 2 1 means four brokers have buy ratings, Michael Duncan Nick Frankland 020 7378 4592 two brokers have hold ratings and one broker has a sell Designer [email protected] rating. Rebecca Bodi Shares magazine is published weekly every Thursday (50 times per year) by AJ Bell Media Limited, The traffic light system gives an illustration of market views 49 Southwark Bridge Road, London, SE1 9HH. Company Registration No: 3733852. but isn’t always a fully comprehensive list of ratings as some All Shares material is copyright. Reproduction in whole or part is not permitted without written banks/stockbrokers don’t publicly release this information. permission from the editor. TALKING POINT Our views on topical issues The big property conundrum UK financial regulator is looking at solutions to fix liquidity issue in real estate funds

he UK financial regulator Investment funds are Standard Life UK Real Estate is looking at potential essentially the only way for the (GB00BJFL1639) had reserves T changes to commercial general public to gain exposure representing 13% of the fund’s property funds to avoid a repeat to commercial property, value but it was one of the first of last year’s investor panic with whether that’s shopping malls, to suspend trading. Other funds the sector. It is part of a wider offices, leisure destinations or hiked their exit fees to discourage probe into the use of illiquid warehouses. investors from pulling out. assets in open-ended funds. Therefore the Financial The fundamental problem is Several property funds Conduct Authority’s (FCA) clear. Investors want to be able suspended trading in July consultation is very important to buy and sell funds whenever 2016 as investors scrambled for anyone with exposure to they want. The underlying to get their cash out. There commercial property. asset class held by these funds was widespread concern that doesn’t work in the same way the Brexit vote would hurt the CASH RESERVES AREN’T as a fund that holds individual property market. ENOUGH stocks and shares and which can The funds suspended trading A large number of funds hold easily pay investors back their as they wanted to avoid asset substantial cash buffers to money on demand as it has fire sales in order to generate protect against a rush of ‘sell’ more liquid assets. cash to meet redemption orders orders from investors. Sadly that If you put your house on the from investors. is only a partial solution. market you would not expect it

36 | SHARES | 16 February 2017 TALKING POINT to be sold within minutes. Even don’t leave remaining investors if a sale is agreed, concluding the to bear the burden of further transaction would likely take at price falls in the market.’ least a month. Hughes notes M&G Property A fund manager trying to sell its Portfolio (GB00B8FYD926) sold interest in a commercial property £700m worth of assets while would also struggle to achieve a trading was suspended at a 3% sale in a short time-frame. discount to their pre-Brexit price. Investors therefore need ‘If they hadn’t suspended trading to take a more realistic view they would have been selling at a regarding the speed at which much more significant discount; property funds can sell assets. it would have been a fire sale,’ he adds. WHAT IS THE BEST SOLUTION? Solving this problem is likely to FUND MANAGERS DID THE require a compromise between RIGHT THING HERE’S WHAT THE REGULATOR the interests of asset managers AJ Bell’s Hughes believes IS PROPOSING: and investors as well as between managers acted ‘responsibly’ • A cap on the illiquid assets held those who look to sell and those last year with many introducing within a fund (or in other words a who stay invested. suspensions even though they minimum buffer of liquid assets). Ryan Hughes, head of fund still had at least 10% liquidity DOWNSIDE? This could negatively selection at AJ Bell, comments: because they could see the impact returns if fund managers are ‘There is not a perfect solution if ‘direction of travel’. forced to hold more cash. you want to retain daily liquidity He believes the problem in these funds. was created because a lot • Split the investments of ‘The only solution which really of ‘hot money’ had flowed institutional and retail investors, with works is to accept that certain into commercial property as different terms applicable to each. types of funds shouldn’t be daily valuations recovered from the DOWNSIDE? One class of investor traded and instead allow bi- lows hit during the financial crisis. is likely to enjoy an advantageous weekly or monthly trading. The The vote for Brexit acted as position. problem is, there’s absolutely no a catalyst for a lot of that ‘hot advantage of any fund manager money’ to come out. • Diversify the investor base of these being first to implement this.’ Ultimately it is up to individual funds. investors to understand what DOWNSIDE? Unclear how this would DON’T PANIC IF IT they are investing in and knowing be achieved. HAPPENS AGAIN who they are invested alongside. In the meantime it makes sense A property-focused investment • Reduce the frequency of dealing in to wait and not panic if a trading trust is perhaps a better option if these funds. in fund is suspended. That you want daily liquidity. DOWNSIDE? Would further essentially gives the manager That said, if you try to sell undermine the appeal of these funds the chance to sell assets so it can when the market is in panic relative to other ways of gaining eventually resume trading. mode then you will probably do exposure to property. ‘In reality, people may not so at a significant discount to net need to wait very long for this to asset value. • Develop a secondary market in happen,’ says Sally Merritt, head We believe it is better to units of open-ended funds. of product for Saga Investment accept commercial property as DOWNSIDE? This would represent a Services. ‘Regardless of a long-term holding where the fundamental shift in the mutual fund timescales, a trading suspension majority of the return will be industry and would be very complex ultimately just helps to ensure delivered through income rather to implement. that those who cash out early than capital gain. (TS)

16 February 2017 | SHARES | 37 TAKE YOUR FOREX TRADING TO THE NEXT LEVEL How to approach the currency markets

ou have set up an account and are itching to start trading forex but first it is worth getting some answers to Y some common questions about the Ycurrency markets. WHAT STRATEGY SHOULD I USE? This is the number one question for new traders and is the most difficult to answer. There is not one ‘silver bullet’ approach that will ensure that every trade is a winner. There are a couple of common mistakes that can help point you towards a strategy that fits your own personal style. Don’t be too short term. Because of the

38 | SHARES | 16 February 2017

HOW CAN I FIND OUT MORE INFORMATION FOR THE FOREX PAIRS I AM WATCHING? Today we are spoilt for choice when it comes to financial news and some would say we actually have too much information, making it hard to sort what is relevant from just the noise. One good source that can help give you a volatility in the forex markets, many are tempted feel for current sentiment and what is really to try trading for a just few points of profit important for your particular forex pairs is the every time. This can initially prove fruitful but Bloomberg news website. It breaks its sections a trade that goes straight against you from the down by market type, so it is easy to delve outset can very quickly wipe out any profit deeper into the economics moving forex and from previous trades. Looking for medium term remain abreast of what could happen to change opportunities, over a few days for example, can trends. The Shares and sister MoneyAm sites are be better for your trading balance and means also worth a look. you do not have to be glued to a screen around The last few years have seen plenty of market the clock. commentary move onto social media and the Currencies trend so don’t fight it. Trying to usefulness of this should not be underestimated. pick tops and bottoms in forex markets can be The likes of Twitter can be a very powerful an expensive exercise. Use the trend to your newsfeed, delivering breaking news and views advantage and make sure your trades are in as they happen. It can take some time to follow the same direction. For example, following the the right people, but it is well worth the effort to US Presidential Election in 2016, the US dollar help build your own tailored news feed of what’s trended higher for many days. The pain free important for your trading. approach here was to hop on board, rather than second-guessing where it might end. HOW QUICKLY WILL I BE PROFITABLE? Stop losses are all important particularly as Too many people approach trading as some sort forex trades around the clock. Look for ‘big levels’ of ‘get rich quick’ endeavour and it really is not. If to place your stops beyond - for example the it is something you have never done before, then previous days high or low. Don’t get shaken out you shouldn’t expect to be an expert straight of a good trade because your stop loss was far away. You will get better if you stick at it, that’s too tight. why it’s important in the beginning to trade small. If you have a series of losses, you will have HOW CAN I TRACK KEY ANNOUNCEMENTS learnt some lessons along the way, just make THAT COULD MOVE PRICES? sure you have adequate funds left in your trading There is plenty of newsflow that can drive the account to put them into practice. forex markets. What’s important can change Keeping a diary is something that many depending on the current environment -but experienced traders still do, writing down the there are some staples that all forex traders reasons for the trade can help you identify if you should be aware of every month. These have developed some bad habits along the way, tend to be major economic announcements and change them for future trades. It can be a unemployment numbers and central bank steep learning curve but one that many find very interest rate decisions for example. Most rewarding. decent trading platforms these days will have an economic calendar to help you see what is coming up for the week ahead. And many platforms will flash up the news release as soon as it is made public so you can always stay on top of what other traders are watching, and how it could move the market.

40 | SHARES | 16 February 2017 European Union. ‘Once triggered, a two-year time frame will be given to the UK in which to completely remove itself from the EU. I expect sterling to depreciate in a drastic and disorderly fashion when this happens. ‘There has already been much conjecture about outcomes in the build-up to this event, but I think the reality of being outside the largest trade group in the world and having to negotiate Britain’s first ‘THE trade deal in more than 30 years would likely have a sobering effect. POUND ‘A weaker sterling is generally positive for the large amount of blue-chip equities that make up the FTSE 100 and whose profits are generated COULD overseas. However, the reverse side to this would be the FTSE 250, whose constituents are FALL BY largely based in the UK with significant domestic operations, would likely not benefit from a weaker sterling in terms of core incomes. ANOTHER 20%’ ‘There may also be further headwinds from the relocation costs for any companies moving MARKET EXPERT PREDICTS £1 MIGHT from the UK to Europe, as well as from listed ONLY BUY $1 IN THE NEAR FUTURE finance companies not being part of the Mifid EU passporting scheme,’ he says.

he decline in the value of sterling has NOT A BLANKET TRADE dominated the headlines for the past ‘At this stage I can’t decide what will be the more seven months – is the worst over for the prevalent factor and I think it would be illogical T currency? ‘No’ is the answer, according to to suggest a “one size fits all” outcome to the Jordan Hiscott, chief trader at spread betting firm hundreds of different constituents of the FTSE 100 Ayondo Markets. & FTSE 250. He now explains why the UK’s departure from ‘Should the trade deals, either with the EU or the EU could knock another 20% off the value of other potential trading partners like the US or the pound so that £1 only buys $1 versus $1.25 Australia, become delayed or not materialise at present. during the two-year period after the triggering of Article 50, then we could find ourselves in a bleak MORE PAIN TO COME situation in 2018/2019. ‘The impact of triggering Article 50 will be the ‘The potential worst case scenario could be realisation that there are no more appeals, parity for the pound/US dollar exchange rate,’ debates or votes and that Britain will be leaving the he concludes. US $ TO UK £ EXCHANGE RATE 1.50

1.45

1.40 7 October 2016 17 January 2017 1.35 GBPUSD ﬂash crash Hard Brexit looks to become a reality 1.30

1.25 24 June 2016 Britain votes to leave the EU

1.20 Source: Ayondo, Shares, Thomson Reuters Datastream MAY JUN JUL AUG SEP OCT NOV DECJAN

16 February 2017 | SHARES | 41 LARGER COMPANIES Rare opportunity to play Halma Shares in safety kit maker may not stay low for long

ersham-based Halma (HLMA) will be keen consistent the company has been over many years to redress the balance between buyers and in maintaining operating margins in the low 20s, Msellers after a spell in the grip of the bears. ‘which benchmarks well against the peer group,’ In three months to early January the share price he says. The sector average is 13.2%, according to slid 21% to 887.5p, its lowest level in almost a year. Morningstar data. That slump has left many City analysts baffled; ‘This has produced a virtuous circle of reliable certainly half year results to 1 October 2016 were growth and cash generation that pays for the next typically robust. stage of investment, and for an unrivalled record in dividend growth,’ point out Investec analysts STILL TIME TO GRAB A DISCOUNT Michael Blogg and Chris Dyett. The recovery already appears to have been kick- Halma has increased the dividend by more started; the stocks has staged an 8% rally to 955.5p. than 5% every year since 1979, a staggering But there is still time to get in on this high-quality, achievement. It’s also worth noting the accelerating and relatively rare growth and income story in the trend of the payout, as illustrated in the table. technology space. Halma is a global manufacturer and seller of a wide range of equipment largely demanded HALMA: COMPOUNDING KING by health, safety and environmental rules. This YEAR TO 31 MAR DIVIDEND (p) GROWTH (%) includes hazard detectors, sensors and assorted 2007 7.18 5.1% environmental protection kits. The approach allows 2008 7.55 5.2% the FTSE 250 company to consistently perform 2009 7.93 5.0% almost regardless of the economic cycle. 2010 8.50 7.2% Organic growth is supplemented by carefully 2011 9.10 7.1% selected, bolt-on acquisitions. Halma is very careful 2012 9.74 7.0% in how it chooses its business areas, seeking 2013 10.43 7.1% resilient growth drivers based on advances in safety 2014 11.17 7.1% regulations, ageing and urbanising populations, and 2015 11.96 7.1% other demographic trends. 2016 12.81 7.1% It also buys businesses that generate strong FORECAST returns and which it can help to develop and 2017 13.73 7.2% spread into new geographic markets. The model 2018 14.77 7.6% works. Yet finding a continual stream of buyout 2019 15.92 7.8% targets capable of moving the earnings needle Source: Company accounts, Reuters appears to be one of the key issues for sceptics. SHARES SAYS:  WELL DEFINED AND SUCCESSFUL STRATEGY Based on consensus forecasts Halma is trading on a ‘Halma has a well-defined and highly successful price to earnings (PE) of 22.2-times next year’s 43.1p strategy of focusing on structurally growing niche earnings per share (EPS). That’s a two year low for markets driven by increasing safety, health and the PE and we side with the majority bullish view. environmental considerations,’ says Numis analyst Nick James. BROKER SAYS: 339 Interestingly, the analyst also notes how

42 | SHARES | 16 February 2017 SMALLER COMPANIES Shoe Zone keeps going in a tough market Retailer takes action to mitigate difficult trading conditions

e are keeping the SHOE ZONE faith with budget Year to Sales Pre-tax Earnings per Dividend per Price to Dividend Wfootwear purveyor Sep (£m) profit (£m) share (p) share (p) earnings ratio yield (%) Shoe Zone (SHOE:AIM) 2015 166.8 10.1 16.2 9.7 11.0 5.4 despite the uncertain 2016 159.8 10.3 17.0 10.1 10.5 5.7 sector outlook. The company pays an 2017* 158.2 10.5 17.3 10.4 10.3 5.8 attractive dividend which 2018* 160.6 10.7 17.7 10.6 10.0 6.0 we think is sustainable *forecast. Source: Numis, Shares and its new large store format is letting the company trade in previously- inaccessible towns. The ‘big box’ format is more modern than its existing 500+ high street stores and sees Shoe Zone stock third party brands such as Skechers and Rieker alongside its own-label products, thereby widening the appeal of its offering. Stockbroker Numis forecasts scope for £5m-plus of operating profit from the new format in six years’ time, if successfully expanded to a 60 store target. Three trial stores are currently open, while demographic should benefit from higher another six stores are planned for 2017. minimum wage levels. The ‘big box’ format represents an exciting new source of growth to accompany the early-stage- SPECIAL DIVIDEND RETHINK? yet-profitable online operation, where growth is Numis forecasts improved pre-tax profit of £10.5m accelerating from a low base. (2016: £10.3m) for the financial year to September 2017, while a forecast dividend of 10.4p implies a SHOE ZONE IS FIGHTING BACK yield of 5.8%. The company’s full year results (reported on 11 Stockbroker FinnCap warns that investment January) were below market expectations as a in future ‘big box’ stores and multichannel sales result of tough trading conditions, store closures initiatives, together with additional pension and currency headwinds. contributions, could mean that Shoe Zone rethinks We are encouraged by the way Shoe Zone is paying special dividends. It has previously rewarded coping with these challenges. It is negotiating shareholders with extra cash rewards on top of the rents downwards, exiting unprofitable outlets normal dividends. and growing the proportion of Grade 1 stores – by bearing down on costs and increasing direct SHARES SAYS:  sourcing from China. At 178p, Shoe Zone is attractive for its generous Its products have an average retail price of just distributions and the upside from the Big Box £10. That should resonate with shoppers should initiative. (JC) inflation crimp disposable income in 2017 and beyond. Moreover, its price-sensitive customer BROKER SAYS: 011

16 February 2017 | SHARES | 43 SMALLER COMPANIES St Ives’ dividend is under threat Shareholder payout could be canned as company suffers a string of bad news

nvestors tempted to take advantage of a 70% This initially seemed to pay off but in April share price dive in printer and marketing services 2016 the company was hit by clients cancelling Iplay St Ives (SIV) over the past year should or deferring significant projects. Exposure to an beware further nasty surprises. We believe the embattled groceries sector was a big factor behind company could cut or suspend its dividend when another profit warning in January 2017. it reports half year results on 7 March. Stockbroker N+1 Singer says the latest setback The company issued its third profit warning in with HarperCollins ‘fundamentally changes the a year on 8 February when it revealed the loss debt and dividend outlook’. Prior to the latest profit of a contract to produce monochrome books for warning, analysts had expected 7.8p per share publisher HarperCollins. dividend for the current financial year, implying Although the non-renewal of the contract will 13.2% yield on the current 59p share price. not impact results in the current financial year to N+1 Singer has now slashed its dividend forecast July 2017, the following financial year’s sales are to 4p and suggests St Ives should sell or close some expected to drop £11m and adjusted earnings will of its more troubled businesses. be down £3.5m. St Ives has been slowly reinvesting cash flows from its mature printing business over the SHARES SAYS:  years into a buy-and-build effort in the digital There could be further bad news to come. marketing space. Steer clear at 59p. (TS)

GoTech’s obesity TLA sets up Brazil- Portmeirion’s dollar battle Argentina clash appeal HEALTH AND fitness technology SPORTS AGENT and marketing DOLLAR STRENGTH is a micro cap Guscio has changed its play TLA Worldwide (TLA:AIM) is translational tailwind for name to GoTech (GOT:AIM) as it bringing a match between global Portmeirion (PMP:AIM). The looks to build a more meaningful footballing giants and legendary homewares maker is regaining brand with consumers and rivals Brazil and Argentina to investor confidence following an investors. The company is Australia. The match is set to Indian and South Korean sales using data analysis aimed take place on 9 June with TLA slump. Record overall sales at fighting the global obesity chairman Bart Campbell noting were delivered in 2016 with battle, particularly in children, the company’s events business is healthy growth generated in by developing a range of sports, ‘gaining momentum’ with further Portmeirion’s biggest market, health and general wellbeing announcements flagged for the the US. Cantor Fitzgerald applications. Revenue last year to coming weeks. (TS) Europe’s £12 price target implies 30 September was just £40,000. 21% upside versus the current (SF) 995p price. (JC)

44 | SHARES | 16 February 2017 FUNDS What to buy when the market gets grizzly Investment ideas if you are ultra bearish and worried about the future

lobal stock markets whether he will go ahead with recommends that an ultra- finished 2016 in a his protectionist policies and bearish individual who is worried Gbuoyant mood with the undermine world trade. about the downside risk should FTSE and the Dow starting the There is also a risk that China’s have exposure to gold. new year at or close to all-time debt problems could get out of ‘We have exposure to highs. In bull markets it is easy hand, or that Russian president the CF Ruffer Gold Fund to ignore the potential pitfalls of Vladimir Putin takes advantage of (GB0033628156) and BlackRock investing, but the list of macro a weakened NATO and the West Gold & General (GB0005852396) events that could bring it all suffers a serious terrorist attack. to guard against some of the crashing down seems to be Each of these have the bearish risks that threaten to longer than ever. potential to become a black swan undermine the value of bonds In Europe there is a real risk event with the power to trigger a and equities.’ that Brexit could help to inspire a stock market crash, thus creating He says that among the most far-right win for Marine Le Pen in a real dilemma for bearish serious threats is a disorderly the French election in the spring, investors. If they keep their unwind to the problem of which could result in the country money in cash and none of these rising debt levels. If there was a leaving the euro. There is also a things happen the market will spike in the rate of inflation or lot of unhappiness in Germany probably climb a wall of worry, widespread defaults then gold about Angela Merkel’s refugee but if they invest in a traditional would probably be one of the policy that could see her lose the portfolio they could get their few assets to perform strongly. chancellorship in the autumn. fingers badly burned. So what It would also be likely to provide Across the pond it is not yet should the nervous investor do? protection against negative geo- clear whether president Trump political shocks or a break-up of can deliver sufficient tax cuts GOLDEN INVESTMENT the eurozone. and infrastructure spending to Richard Scott, senior fund ‘We believe both the Ruffer stimulate the US economy, or manager at Hawksmoor, and the BlackRock funds provide

16 February 2017 | SHARES | 45 FUNDS

a well-managed exposure to to bonds will mean the fund She thinks it likely that mainly gold mining shares, with is likely to lag strong equity Personal Assets will continue the weekly dealing Ruffer fund market rallies, we believe it is an to preserve capital in difficult having a higher exposure to mid attractive vehicle for investors markets and says that it remains and small cap gold miners.’ looking for low volatility long- a low volatility vehicle that Another option would be to term capital growth. It should should be capable of delivering invest in a gold ETF such as ETFS also provide protection on the attractive absolute returns over Physical Gold (PHAU) or Source downside in the event of a the long‐term. Physical Gold P-ETC (SGLD). market decline.’ These are designed to track the Her second recommendation, UNCORRELATED INVESTMENT price of gold and have ongoing Personal Assets, has an TRUSTS TO CONSIDER charges of 0.39% and 0.29% absolute return mandate with Nick Greenwood, manager of respectively. an objective to ‘protect and Miton Global Opportunities Physically-backed silver increase (in that order) the value (MIGO), says that India Capital ETFs should also offer similar of shareholders’ funds over the Growth (IGC) is not particularly protection with examples long-term’. correlated with mainstream including ETFS Physical Silver ‘Troy Asset Management equity markets and should hold (PHAG) and iShares Physical is focused on strategic asset up better than most if president Silver (SSLN). allocation and stock selection, Trump starts a trade war that with the latter concentrated on results in a slowdown in the pace DEFENSIVE INVESTMENT high quality companies available of global trade. TRUSTS TO CONSIDER at the right price. The portfolio is ‘The current management Emma Bird, a research analyst invested across equities, US TIPS, team arrived in 2010 and are the in the Winterflood investment UK T-Bills, gold bullion and UK third incumbents India Captial trust team, recommends that Index-Linked Gilts.’ Growth’s relatively short but ultra-bearish investors should consider Capital Gearing Trust (CGT), managed by Peter Spiller of CG Asset Management, and Personal Assets (PNL) which is managed by Sebastian Lyon of Troy Asset Management. ‘Capital Gearing seeks to achieve absolute returns through active asset allocation across equities, bonds and commodities. Equity investments are made in quoted closed- ended investment trusts and other collective investment vehicles. The aim is to preserve capital over the short run and generate strong risk-adjusted returns over the long-run.’ She says the fund has an impressive record of delivering strong absolute returns with considerably lower volatility than equity markets. ‘While the 60% allocation

46 | SHARES | 16 February 2017 FUNDS initially disastrous life. They low correlations to equities. endured a tough time turning And that’s the point: diversifiers around the legacy portfolio, should be chosen on correlation, but during the past three years not volatility. That means returns have been significantly having nerves of steel, but it stronger than better known peers can also mean better portfolio such as JPMorgan India (JII).’ performance overall.’ India Captial Growth is trading These sorts of trend-following on a discount to net asset value strategies aim to identify price (NAV) of 22%, and Greenwood trends in different markets and says it is a classic example of then take advantage of them. By when a trust discount reflects going long and short in various the track record of the vehicle up and down trends at the same rather than that of the current time they can remove much of managers. the systemic market risk. ‘India has a more developed Aspect has a UCITs version equity culture than most of its fund that is registered emerging markets. The benefits in Dublin and that in theory from the arrival of a market is available to all investors, friendly majority government although you would need to focused on removing check whether your broker will inefficiencies should feed allow you to invest in it. through into earnings forecasts, A more accessible alternative a trend which will run for years would be Highbridge Multi- rather than months,’ says the Strategy (HMSF), a listed hedge Miton fund manager. fund that has been included in His second uncorrelated the Winterflood investment trust suggestion is the Taliesin team’s top picks for 2017. Property Fund (TPF), which is HMSF is fully invested in a a specialist closed-ended fund global multi-strategy hedge that invests in Berlin residential fund run by Highbridge Capital property. It is trading at a 26% Management. It uses relative premium to the latest estimated to privatise a portfolio into value techniques including NAV, but the open market value their valuation process. arbitrage and long/short of its apartment blocks remain This implies a further sharp strategies to target a return of well below replacement cost. increase in Taliesin’s NAV. The 7% to 12% per year with 3% to The trust is slowly selling trust is handing cash back to 6% volatility and a low beta to assets. The sale of apartments shareholders from the proceeds the S&P 500. in the first privatised blocks of the disposals.’ The investment trust was achieved prices of around previously known as BlueCrest €4,000 per square metre, which HEDGE FUNDS TO CONSIDER All Blue, but since switching the compares favourably with David Coombs, head of multi- underlying capital to Highbridge Taliesin’s average carrying value asset investments at Rathbones, at the start of March 2016 of €2,440 per square metre, a says it holds commodity trading the share price is up by about price that reflects the valuation adviser funds (CTAs) Aspect 6%. There is a share buyback methodology for apartments as Capital and Schroder GAIA programme to control the yet unconverted from rental use. BlueTrend. discount to NAV. The costs are ‘Those responsible for valuing ‘These are extremely on the high side with estimated the properties are likely to bring volatile quantitative trading ongoing charges of 1.6% into consideration permission strategies, but they have very excluding performance fees.

16 February 2017 | SHARES | 47 INVESTMENT TRUSTS The way to play Japan Discount on Japan trust fails to reflect new management focus

here are any number of ways UK investors can gain T exposure to Japan, the world’s second largest developed economy. There are plenty of open-ended and closed-ended funds to choose from but for us one investment trust stands out. It trades at a wide discount to net asset value (NAV) with scope to narrow and the ‘GARP’ approach of its relatively new manager is compelling. Step forward Fidelity Japanese Values (FJV). Long-serving Fidelity man Nicholas Price, who has been managing money in Japan for about 16 years through any number of market cycles, says earnings are picking up in Japan and companies are generally making positive revisions to Since taking over as manager discount to NAV, the trust having forecasts. He believes higher in 2015, the bottom-up underperformed the benchmark long-term global interest stockpicker has reduced the for many years according to rates, a further weakening of number of holdings from more Morningstar data, Price answers: the yen against the US dollar than 100 to 88 and pursues more ‘The key thing that will cause and continued increases in of an all-cap approach than the discount to come in on a shareholder returns through his predecessor. mid-term basis will be sustained dividends and buybacks should When pressed on the reasonable performance of the support Japanese stocks. fund against its peer group. And then periodically, the board of GARP APPROACH directors has done buybacks.’ Price follows a consistent ‘growth at a reasonable price’ investment COMPETITIVE ADVANTAGE approach. ‘I utilise Fidelity’s ‘My advantage is that I’m on the extensive research capability ground, I speak the language in Japan and globally, but I also and I visit companies. Those conduct my own research as companies may not be well well, looking for undercovered understood in the market and names in the mid and small cap that gives us an advantage as we space,’ says the Tokyo-based look for their growth prospects Price. ‘Companies that I own in over the mid term,’ says Price. the portfolio are definitely more ‘I have a fairly aggressive risk- focused than in the past on reward profile, so I have quite buybacks and dividends,’ he adds. a concentrated portfolio and a

48 | SHARES | 16 February 2017 INVESTMENT TRUSTS

consistent bias towards mid and TOP NET LONG POSITIONS small cap growth stocks,’ adds OTHER JAPAN TRUSTS TO Price, who likes companies that PIQUE YOUR INTEREST Yamaha Motor (7272:TSE) 6.9% are transforming from stable Atlantis Japan Growth (AJG) Nippon Shinyaku (4516:TSE) 5.4% Mitsubishi UFJ (8306:TSE) 5.3% domestic cash generators to Baillie Gifford Shin Nippon (BGS) Asian growth stories. FIN ‘The typical name I would JPMorgan Japan Smaller Co’s Nissin Chemical 5.1% (JPS) like would be a company that Softbank (9984:TSE) 4.8% Prospect Japan (PJF) has a good runway of growth Yonex (7906:TSE) 3.6% for the next three to five Mitsubishi (6503:TSE) 3.5% years, an ROE going north of Electric FAST FUND FACTS: 10%, a shareholder friendly Nitori (9843:TSE) 3.4% management and also a Fidelity Japanese Values M3 INC (2413:TSE) 3.3% relatively reasonable valuation Ticker: FJV relative to its growth.’ Zojirushi (7965:TSE) 3.1% Price says he is not interested Launch date: 15/03/94 Source: Fidelity in hyper-growth, hyper high Manager: Nicholas Price earnings multiples. ‘My ideal Appointed to trust: 01/09/15 fifteen years. Up until about two company would be one where Share price: 106p years ago, the company really the market is not yet recognising NAV: 123.4p did no IR at all – it was a bit of a its growth prospects and black box. therefore as it does and we Discount: -14.1% ‘Recently they’ve opened up own the stock, you get multiple Source: The AIC/Fidelity International a bit more and I’ve been able to expansion,’ he adds. understand the growth strategy better. The company continues BIG IN JAPAN (S:NYSE), a listed company in the to grow successfully in Japan While mid and small caps are United States. and its Chinese operation has the primary focus, one large cap ‘When we bought into become more profitable, with stock in the portfolio is Softbank Softbank, we felt the market the market pricing in a higher (9984:TSE), the telecom services was very negative on the Sprint multiple for the stock.’ titan steered by billionaire acquisition, but our analysts in He also owns Yume no Machi Masayoshi Son that bought London and Tokyo felt that Sprint Souzou Iinkai (2484:TSE) which London-listed tech giant ARM would turn around,’ says Price. it compares to Just Eat (JE.) in last year. Price argues the market The former retail analyst is the UK. However he notes more is overlooking the immense a fan of Nitori (9843:TSE), ‘the growth potential as commission synergies that can be achieved number one furniture retailer in rates are significantly lower than through the acquisition, Softbank Japan which has grown its sales its UK counterpart. having previously bought Sprint and earnings consecutively for Other names that excite Price include Kakaku.com (2371:TSE), PERFORMANCE DATA: Total returns (NAV) – annualised 40 the company behind Tabelog, a 35 restaurant reservations site that Fidelity Japanese Values 30 will the key growth driver in the Benchmark next few years. 25 Another is sports equipment 20 brand Yonex (7906.TSE), ‘the 15 number one in badminton 10 globally’, currently accelerating 5 its sales in China, one of the 0 Source: Morningstar world’s biggest markets for 1 Year 3 Years 5 Years 10 Years players of badminton.

16 February 2017 | SHARES | 49 INDEX

Deal online and from £4.95 never pay more than £9.95 The value of investments can go up and down and For more details visit you may not get back your original investment www.youinvest.co.uk

KEY DX (DX.:AIM) 7 iShares Edge MSCI 31 Reckitt Benckiser 18 World Momentum (RB.) • Main Market EI Group (EIG) 3 Factor UCITS ETF • AIM (IWMO) Rio Tinto (RIO) 7 Elementis (ELM) 18 • Fund iShares Edge MSCI 32 RM2 (RM2:AIM) 19 • I nvestment Trust ETFS Physical Gold 46 World Multifactor • Exchange-Traded (PHAU) UCITS ETF (IFSW) Rolls-Royce (RR.) 7 Product ETFS Physical Silver 46 iShares Physical 46 Royal Bank of 14 • IPO coming soon (PHAG) Silver (SSLN) Scotland (RBS) • Overseas Facebook (FB:NDQ) 31 Johnson & Johnson 31 RSA (RSA) 19 (JNJ:NYSE) AA (AA.) 3 Fidelity Japanese 48 Shoe Zone 43 Values (FJV) Joules (JOUL:AIM) 19 (SHOE:AIM) Amazon (AMZN:NDQ) 31 Firestone Diamonds 12 JPMorgan India (JII) 8, 47 Sophos (SOPH) 19 Antofagasta (ANTO) 7 (FDI:AIM) Just Eat (JE.) 49 Source FTSE RAFI 33 Apple (AAPL:NDQ) 31 Fitbug (FITB:AIM) 25 US Equity Income Kerry (KYGA) 32 Physical UCITS ETF Ashmore (ASHM) 8 FreeAgent 14 (DVUS) (FREE:AIM) L’Oreal (OR:EPA) 18 AstraZeneca (AZN) 33 Source Goldman 34 G4S (GFS) 33 Lloyds Banking 9 Sachs Equity Factor AT&T (T:NYSE) 3 Group (LLOY) Index World UCITS GB Group (GBG:AIM) 27 ETF (EFIW) BAE Systems (BA.) 33 M&G Property 37 GlaxoSmithKline 33 Source MSCI World 34 Baker Hughes 12 Portfolio (GSK) UCITS ETF (MXWO) (BHI:NYSE) (GB00B8FYD926) Glencore (GLEN) 7 Source Physical Gold 46 Barclays (BARC) 14 Mead Johnson 18 (MJN:NYSE) P-ETC Certs (SGLD) GoTech (GOT:AIM) 44 Barratt 9 Source RBIS Equal 32 Developments Microsoft 31 Guinness Oil & Gas 8 Risk Equity Europe (BDEV) (MSFT:NDQ) Exploration Trust UCITS ETF (REQR) BHP Billiton (BLT) 7 Millennium & 13 Halma (HLMA) 42 Copthorne Hotels SPDR S&P UK 33 BlackRock 45 Hastings (HSTG) 6 (MLC) Dividend Aristocrats Gold & General UCITS ETF (UKDV) (GB0005852396) Henderson 3 Miton Global 46 Diversified Income Opportunities (MIGO) Sprint (S:NYSE) 49 BP (BP.) 31 (HDIV) Pearson (PSON) 9 St Ives (SIV) 44 British American 31 Highbridge Multi- 47 Taliesin Property 47 Tobacco (BATS) Personal Assets 46 Strategy (HMSF) (PNL) Fund (TPF) Burberry (BRBY) 33 Howden Joinery 19 Photo-Me 27 TLA Worldwide 44 (HWDN) Capital Drilling 19 International (PHTM) (TLA:AIM) (CAPD) HSBC (HSBA) 31 Portmeirion 44 Treatt (TET) 16 Capital Gearing Trust 46 (PMP:AIM) India Capital Growth 46 Unilever (ULVR) 18 (CGT) (IGC) PPHE Hotel (PPH) 13 Vedanta Resources 3 CF Ruffer Gold Fund 45 iShares Core MSCI 8 (VED) (GB0033628156) Proctor & Gamble 18 EM (EIMI) (PG:NYSE) Victoria (VCP:AIM) 13 DCC (DCC) 19 iShares Edge MSCI 32 Quixant (QXT:AIM) 19 Europe Minimum Whitbread (WTB) 13 Direct Line (DLG) 6 Volatility UCITS ETF Randgold Resources 32 (MVEU) (RRS)

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