STOCKS | FUNDS | INVESTMENT TRUSTS | PENSIONS AND SAVINGS
VOL 20 / ISSUE 14 / 12 APRIL 2018 / £4.49 SHARES WE MAKE INVESTING EASIER
STOCKS INSIDE: JUST EAT, AA, SPOTIFY, RIO TINTO PRICED FOR & MORE PERFECTION ARE THESE STOCKS TOO PRECARIOUSLY BALANCED?
RUSSIAN STOCKS COLLAPSE
BEST PERFORMING INVESTMENT TRUSTS IN Q1
YOUR PENSION LUMP SUM OPTIONS DISCUSSED EDITOR’S VIEW The succession issue WPP line up replacements for under pressure CEO Martin Sorrell
ress speculation suggests This is more of an issue with chief FTSE 100 advertising business executives, like Sorrell, which have been PWPP (WPP) is lining up several in situ for an extended period and/or candidates to replace current chief are particularly dominant in the running executive Martin Sorrell amid an of a business. investigation into his personal conduct. This is something the company would THE RISK WITH DOMINANT CEOs have to confront soon anyway given There are benefits to having an Sorrell turned 73 earlier this year but, as entrepreneurial leader at the helm but AJ Bell investment director Russ Mould material risks too. Fred Goodwin at observes, ‘it is hard to know what the Royal Bank of Scotland (RBS) is perhaps company would look like under different the ultimate example of how it can go leadership’. badly wrong. Sorrell has been in charge since the business was As revealed in a December 2011 report from the Wire and Plastic Products – a wire shopping basket Financial Standards Authority (FSA) (now replaced maker which he used as an acquisition vehicle to by the Financial Conduct Authority) Goodwin build the world’s leading ad company. He made was shown a draft correspondence the FSA was his first significant move with the $566m hostile preparing to send the board in 2005 and he takeover of New York based agency J. Walter asked the regulator’s staff to water down written Thompson just over three decades ago. concerns about risk management policies. The succession issue at WPP is one an increasing In a clear instance of regulatory failure he got number of FTSE 100 companies could face. his way and without proper oversight Goodwin Research from recruiter Robert Half carried out in went on to pursue the disastrous €71bn acquisition 2017 showed there were just eight CEOs under of ABN Amro in 2007. The deal was timed to 50 among the constituents of the index coincide with the beginning of the credit compared with 33 back in 2010. crunch and the bank remains in state There can be advantages to having 55 ownership to this day. an older CEO – principally that they The average Legendary investors Peter Lynch have experienced more business age of a FTSE and Warren Buffett have both and stock market cycles and will remarked that it is better to invest in therefore, in theory at least, be in 100 CEO a business that’s doing so well an idiot a position to make better-informed Source: could run it, because sooner or later, judgements on current economic Robert Half one will. conditions. We plan to look at the role of the The drawback is obviously that they are likely CEO and the difference management change to be closer to the point at which they have to can make to a business in an upcoming issue be replaced. of Shares. (TS)
ABOUT MARTIN SORRELL 1975 $566M 2000 33 YEARS YEAR JOINED COST OF THE 1987 KNIGHTED IN THE LONGEST- SAATCHI & HOSTILE TAKEOVER OF J. THE 2000 NEW SERVING CEO OF ANY SAATCHI WALTER THOMPSON YEAR HONOURS FTSE 100 COMPANY
2 | SHARES | 12 April 2018 SCOTTISHTHE MONKSMORTGAGE INVESTMENT INVESTMENT TRUST TRUST PLC
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*Ongoing charges as at 30.04.17. All other data as at 31.12.17. Your call may be recorded for training or monitoring purposes. Monks Investment Trust PLC is available through the Baillie Gifford Investment Trust Share Plan and the Investment Trust ISA, which are managed by Baillie Gifford Savings Management Limited (BGSM). BGSM is an affi liate of Baillie Gifford & Co Limited, which is the manager and secretary of Monks Investment Trust PLC. USING THE Contents PDF VERSION? CLICK ON PAGE NUMBERS TO JUMP 05 April 2018 TO THE RELEVANT STORY
EDITOR’S VIEW 02 The succession issue
BIG NEWS 06 Brighter skies eyed for airline sector
BIG NEWS 07 R ussian stocks slammed as US imposes sanctions 08 BIG NEWS 07 Ideagen makes smart GREAT IDEAS TALKING POINT US move with 12 Why you can trust in 18 What changes to Medforce deal Merchants fund rules mean for investors BIG NEWS GREAT IDEAS UPDATES 08 Volatility causes big Break up reports lift FEATURE exodus from equity Johnson Matthey 22 Are directors’ interests funds really aligned with shareholders? STORY IN NUMBERS 22 10 Spotify’ s first day of dealings and other stories in numbers
GREAT IDEAS 11 Catalyst for an Eckoh re-rating
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.
4 | SHARES | 12 April 2018 Contents
MAIN FEATURE FEATURE 26 Priced for perfection 44 What does less than a year until Brexit mean INVESTMENT TRUSTS for the FTSE 100? 34 Which investment trusts have beaten LARGER COMPANIES the market’s first 46 Is Just Eat share quarter slide? price fall a buying opportunity? FUNDS 36 How to analyse SMALLER COMPANIES an ETF 47 Wh y it is worth grappling with Sumo MONEY MATTERS 40 What should I do WEEK AHEAD with my 25% tax-free 49 Financial results and pension lump sum? ex-dividends over the coming week MONEY MATTERS 42 H ow to avoid the INDEX pension freedoms 51 In dex of companies emergency tax pitfall and funds in this issue
36
26
WHO WE ARE BROKER RATINGS EXPLAINED: EDITOR: DEPUTY NEWS Daniel EDITOR: EDITOR: We use traffic light symbols in the magazine to illustrate Coatsworth Tom Sieber Steven Frazer broker views on stocks. @SharesMagDan @SharesMagTom @SharesMagSteve FUNDS AND REPORTER: REPORTER: CONTRIBUTORS Green means buy, Orange means hold, Red means sell. INVESTMENT TRUSTS David Stevenson Lisa-Marie Janes Emily Perryman EDITOR: @SharesMagDavid @SharesMagLisaMJ Tom Selby James Crux Holly Black The numbers refer to how many different brokers have @SharesMagJames that rating.
MANAGING DIRECTOR PRODUCTION ADVERTISING Eg: 4 2 1 means four brokers have buy ratings, Mike Boydell Head of Design Senior Sales Executive Rebecca Bodi Nick Frankland two brokers have hold ratings and one broker has a sell 020 7378 4592 rating. CONTACT US: Designer [email protected] [email protected] Darren Rapley The traffic light system gives an illustration of market views Shares magazine is published weekly every Thursday (50 times per year) by AJ Bell Media Limited, but isn’t always a fully comprehensive list of ratings as some 49 Southwark Bridge Road, London, SE1 9HH. Company Registration No: 3733852. banks/stockbrokers don’t publicly release this information. All Shares material is copyright. Reproduction in whole or part is not permitted without written permission from the editor.
12 April 2018 | SHARES | 5 BIG NEWS Clearer skies eyed for airline sector UBS turns positive on sector bellwether Lufthansa
nvestment bank UBS is warming to Germany’s analyst Jarrod Castle. largest airline Lufthansa and has outlined robust Castle believes Lufthansa will not be the only Isales growth forecasts for its European peers. airline to experience growth in 2018, he forecasts The airline industry has endured a volatile spell as all six European airlines under UBS coverage will intense competition led to a price war, somewhat grow sales in aggregate by more than 7% in 2018 mitigated by the demise of weaker rivals Monarch and 2019. and Air Berlin in 2017, and as rising oil prices have Specifically this list includes British Airways owner translated into higher fuel costs. International Airlines Group (IAG), budget airlines There have also been warnings from the likes of EasyJet (EZJ) and Ryanair, Hungarian airline Wizz Air Ryanair (RYA) and Jet2 owner Dart (DTG:AIM) that (WIZZ), Lufthansa and Air France-KLM. ticket prices over the peak summer period may Over the last year, UK-listed airlines have be subdued. experienced some turbulence. While shares in Wizz Lufthansa, whose shares have been falling Air have nearly doubled and EasyJet has advanced since the start of 2018, is generally seen as a good 55.6%, International Airlines made smaller gains benchmark for the wider sector. of 17.7% and Ryanair is up just 6.9%. (LMJ) UBS is turning positive on Lufthansa, moving Three-year share price its recommendation from ‘neutral’ to ‘buy’ and Company arguing its share price weakness is ‘overdone’. It is performance (%) forecasting an increase in earnings this year once Dart Group 114 the impact of higher fuel costs is stripped out. EasyJet -13.7 International 2.2 READY FOR TAKE OFF? Consolidated Airlines ‘We think volume growth will help drive profits and Ryanair 45.2 that underlying profits will be greater than in 2017 - our forecasts are ahead of consensus,’ says UBS Wizz Air 136 Source: SharePad, 10 April 2018 AIRLINES FORWARD PE
INTERNATIONAL CONSOLIDATED 6.5 AIRLINES (IAG)
DART GROUP (DTG) 13.7
EASYJET (EZJ) 15.6
RYANAIR (RYA) 16
WIZZ AIR (WIZZ) 17.3
6 | SHARES | 12 April 2018 BIGBIG NEWSNEWS Russian stocks slammed as US imposes sanctions UK-listed names also affected by crackdown
he Russian stock market endured its biggest directly affected by the sanctions – Russian one-day drop in four years on 9 April after aluminium producer Rusal. T the US Treasury imposed sanctions on several The price of aluminium spiked as Rusal is the Russian individuals and companies. largest supplier outside China and reportedly UK-listed names were caught up in the move, commodity traders have been advised to stop which threatens Western investment in Russia. buying from the company. (TS) Steel producer Evraz (EVR) and gold miner Polymetal (POLY), both based in the country, RUSSIAN EXPOSED STOCKS SUFFER suffered large double-digit declines while sector Share price Company EPIC peer Glencore (GLEN) was also hit. performance 9 April (%) It has an 8.75% stake in one of the companies Evraz EVR -14 RUSSIA RTS INDEX Glencore GLEN -3.4 1350 1300 JP Morgan JRS -9.6 1250 Russian Securities 1200 1150 Polymetal POLY -18 1100 1050 Raven Russia RUS -3.2 Source: Thomson Reuters Datastream OCT NOV DEC JAN FEB MAR Source: SharePad, 10 April 2018 Ideagen makes smart US move with Medforce deal First acquisition Stateside provides platform for faster growth
RED TAPE AND compliance for Medforce, or about £6.1m at Paid out of cash and debt software supplier Ideagen current exchange rates. facilities, that means no new (IDEA:AIM) has made its first There are several things to shares are being issued so acquisition in the US. We like about the purchase. First, there is zero dilution to existing believe this is a significant it gives Ideagen a firm base Ideagen shareholders. stepping stone that could across the pond. About half of While analysts raised forecasts realise substantial value for the new business currently being for the full year to 30 April 2019 company and shareholders. won by the company is in the to £11.4m of pre-tax profit on New York-based Medforce US. Medforce is also profitable, £42.8m revenue, we believe provides productivity and legal chalking-up about £0.7m of there is scope to outstrip compliance solutions that earnings before interest, tax, those estimates. help streamline processes for depreciation and amortisation healthcare organisations and (EBITDA) on rough £3.4m SHARES SAYS: prepare them for auditing. revenue in 2017. Ideagen remains a high quality business that deserves its Healthcare is one of the most A high proportion of those premium 2019 price to earnings highly regulated industries in the revenues are recurring in nature, multiple of 24.1 world. Ideagen is paying $8.7m 82% according to Ideagen.
12 April 2018 | SHARES | 7 BIG NEWS Volatility causes big exodus from equity funds UK’s appetite for equity funds wanes
ebruary’s market sell-off led to the first net in February with both sovereign and corporate outflows from equity funds in the UK since bond funds losing investor confidence. FJanuary 2017, with £136m being taken out Other figures from Thomson Reuters’ Lipper of funds according to data from the Investment revealed that in February BlackRock sold the Association. most equity funds across Europe as a whole, The worse performing sector was UK equity, bringing in €4.2bn during the month. The asset which saw investors redeem £510m in February. manager also sold the second most bond funds Global and North American equity funds also behind investment bank UBS, which took in saw outflows, investors taking out £66m and €3.2bn. £31m respectively. US equity funds were the most popular with The old adage of ‘equities down, bonds up’ sales of €4bn and the best-selling fund across appeared to be ignored as there was correlation Europe for February was Sarasin Endowments between the two asset classes. Fixed income (GB0003119400), a multi-asset product launched funds also experienced net outflows of £235m that month. (DS)
Could French Connection return to the dividend list? High street fashion label sells non-core business
EMBATTLED FASHION retailer in net cash proceeds for French During the year, French French Connection’s (FCCN) Connection and support Connection received an planned sale (9 Apr) of its 75% the £47.5m cap’s return to unsolicited bid from an stake in women’s clothing-to- sustainable profitability. unnamed US group, but the homewares brand Toast has If the sale is approved, French suitor ultimately walked away been well-received. Connection says it will seek from a deal. The shares had advanced to to reinstate the shareholder A honed focus and further 52p as Shares went to press. reward, shelved back in turnaround progress could The disposal will sharpen 2012, once the group has potentially attract other French Connection’s focus been successfully returned to predators, although founder, on its core brand and could profitability. chairman and CEO Stephen drive a resumption of dividend Retail industry conditions are Marks holds sway with a payments from the clothing and tough, especially in the UK, yet 41.6% stake and Mike Ashley’s accessories label. the north London-based fashion Sports Direct International Conditional upon the nod house’s underlying operating (SPD) has built up its stake to from shareholders, the £23.3m loss narrowed by £3.1m to a smidgeon over 27%, just shy sale of Toast to Denmark’s £600,000 in the year ended of the 30% threshold requiring BESTSELLER will yield £13.9m 31 January. a bid. (JC)
8 | SHARES | 12 April 2018 THERE IS STRENGTH IN NUMBERS
INFAMOUS PROVERB NUMBERS
FAMOUS PROVERB
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Spotify shares off to an impressive start SHARES IN MUSIC monthly subscription to streaming group Spotify access media content jumped by 25.7% on digitally. their first day of dealings Spotify has a key to $165.90, compared to difference in that users its $132 initial reference can access its services price. They’ve since for free as long as they eased back to around watch or listen to an the $147 level. advert on a regular 25.7% The company is basis. Netflix is only similar to Netflix in that available to fee-paying they both charge a customers. EVR’s long- delayed virtual reality app closes 10.8% Large number of investors in on launch request to cash out VIRTUAL REALITY (VR) music content business EVR Holdings (EVRH:AIM) is at long last close of Miton’s micro-cap to launching its smartphone app, Melody VR. investment trust That’s almost two years after the company joined the stock market. A SURPRISINGLY large number of investors This will come as a relief to the AIM-quoted have requested to exit Miton UK Microcap Trust company’s fan base of investors. Beta testing (MINI) as part of it is annual redemption offer. started on Christmas The investment trust says investors accounting Eve 2016. for 10.8% of its share capital have asked to cash in EVR’s market value all or part of their holding at net asset value (NAV) has soared from less costs, significantly higher than the 1.12% about £12m to the figure from a year ago. current £155m. The Investment trust experts at stockbroker Numis company has raised say Miton UK Microcap Trust’s performance has £23.4m of growth been ‘respectable’ since launch three years ago, funding since it has however they note the performance has lagged been listed, most the FTSE AIM index since markets started to recently £15m in recover following the Brexit vote sell-off in June October 2017. 2016, with NAV total returns of 33% compared with 46% for the benchmark.
10 | SHARES | 12 April 2018 GREAT IDEAS Catalyst for an Eckoh re-rating Strong results and new business point to material upside
he market mood over technology stories remains XXXXECKOH BUY BUY pretty bleak given recent (xxx)(ECK:AIM) xxxp 40.5p T Stop loss: 32pxxp controversies at global giants like Facebook, Amazon and others. Market value:cap: £102m xxx But this is masking positives elsewhere, particularly among smaller companies. We believe Eckoh (ECK:AIM) is a great example. A further deterioration in sentiment towards the tech sector is a risk but we feel the negative tide can be turned. of the chief ways to win new with all the compliance, Full year to 31 March 2018 customers and keep existing accountability and regulatory results sometime in late ones happy. boxes ticked. May/early June could provide Think energy and broadband US organisations are well the first of several catalysts for providers for example. behind those in Europe on an advance in the share price. Customers include a litany this, you may be surprised to Analysts that follow the stock of corporate giants, such as learn. This makes Eckoh’s sales reckon 60p to 65p levels are Vodafone (VOD), Thames Water proposition compelling and likely over the next 12 months or and Lloyds (LLOY). bolsters its opportunity across so, implying up to 60% upside on It’s been serving UK clients the pond. a best case scenario. for more than 15 years but it is There are execution risks expansion into the US a couple around the pace of US TRANSFORMING THE BACK of years ago that is really driving organisations embracing OFFICE growth. US revenues in the first improved payments and Eckoh provides secure payment half rose 36% (or nearly 60% if contact centre support. Future products that remove personal you strip out closed business lines acquisitions, of which we would and payment data from contact and FX) to more than a third of expect some, also need careful centres and IT environments. the £14.8m total. Encouragingly, handling. But new business It also runs an automated there is significant headroom to has been very strong in recent platform aimed at customer bolster gross margins in the US months both in the US and UK. contact solutions that enable (58% versus 84% UK). A 31 March 2019 price to enquiries and transactions earnings multiple of 20.3 to be performed easily and COMPLIANCE-FRIENDLY is not dirt cheap but nor is quickly from any personal PAYMENTS it hugely expensively given device – phone, PC, tablet, But perhaps most exciting is the opportunities ahead for smartphone etc. Eckoh’s fully PCI-DSS accredited Eckoh. (SF) This is valuable to large secure payments solutions. This organisations, particularly those allows secure credit and debit BROKER SAYS: 002 where customer service is one card payments over the platform,
12 April 2017 | SHARES | 11 GREAT IDEAS Why you can trust in Merchants Above average yields farmed from FTSE 100 picks do the business for dependable Merchants
nvestors whose confidence in the markets has been rocked MERCHANTS TRUST Iby the return of volatility might BUY hunker down in The Merchants (MRCH) 491p Trust (MRCH). This is an investment Stop loss: 392.8p trust with pedigree in offering a high yield and paying out a growing dividend that has outpaced inflation over the long haul. Most of the fund is in safer, income-generating larger companies and this has underpinned an impressive track record of dividend growth, increasing its payout for 36 years on the spin. At 491p it offers a generous yield of 5.1%.
DIVIDEND HERO caps. Merchants cites compelling in FTSE 100 and to a lesser extent Established back in in 1889 by historical evidence that, on the FTSE 250 for stocks with strong some of the leading financiers average, companies paying high franchises, copious cash flows and and lawyers of the day, Merchants dividend yields have delivered fortified balance sheets and he has navigated a variety of market above average total returns, looks to pay a reasonable price conditions and several world wars alongside the higher income for the shares that pepper the during its storied history. stream. portfolio. Managed by value-oriented Results (29 Mar) for the year to Merchants’ blue chip picks range stock picker Simon Gergel of January revealed a 14.5% net asset from mining giant BHP Billiton Allianz Global Investors, Merchants value total return, ahead of the (BLT) and BAE Systems (BA.) to is one of the Association of 11.3% total return from the FTSE Royal Dutch Shell (RDSB), able to Investment Companies’ (AIC) All-Share benchmark. generate substantial cash flows ‘Dividend Heroes’, an elite group of Merchants also proposed a 2.5% over the oil price cycle and fund a investment trusts that have hiked total dividend hike to 24.8p. Last high dividend. their shareholder rewards each year, Merchants also carried out Other positions include Meggitt year for 20 years or more. a debt refinancing which will give (MGGT), the engineer specialising A focused portfolio of 40-60 the board the flexibility to grow in the aerospace, military and shares, Merchants provides an the dividend faster. energy markets, property above average level of income and developer Land Securities income growth, together with long MERCHANTS’ MAGIC (LAND) and Bovis Homes (BVS), term capital growth by investing FORMULA a turnaround tale under new mainly in higher yielding UK large Gergel mainly puts money to work management. (JC)
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FOCUSRITE IMPAX ASSET (TUNE:AIM) 460p MANAGEMENT (IPX:AIM) 162.5p Gain to date: 42% Original entry point: Gain to date: 28.4% Buy at 324p, 30 November 2017 Original entry point: Buy at 126.6p, 21 September 2017 OUR POSITIVE CALL on global music and audio products group Focusrite (TUNE:AIM) is 42% in the OUR BULLISH STANCE on sustainable investment money, buoyed by a positive first half trading update specialist Impax Asset Management (IPX:AIM) is (9 Mar) flagging year-on-year growth in revenue, reinforced by an update on the firm’s assets under profits and cash and bumper Christmas demand. management (AUM). Impax’s AUM stood at £11bn Shares believes Focusrite can become a much on 31 March 2018. bigger business. Developing and marketing This bodes well for first half results expected hardware and software used by amateur musicians from the company on the 5 June. and audio professionals, we see significant upside to The boost to its assets is due to both its come from new product launches and further global acquisition of US asset manager Pax World audio production market share gains. Management as well as £1bn in net new money We’re also encouraged to see Focusrite has in the first half of its financial year. been added to the highly successful CFP SDL UK The company has beaten its own projections for Buffettology Fund (GB00B300FJ66), validating our AUM following the acquisition which completed bullish stance. in January. Targeted growth of 42% implied assets In his April factsheet, manager Keith Ashworth- of £10.3bn. During the quarter to 31 March Impax Lord flags Focusrite’s well established brands and enjoyed inflows of £331m into its products. managers ‘steeped in the industry’. This comes despite a recent increase in market Ashworth-Lord, a highly picky manager who volatility, suggesting there’s a real appetite for applies the methodology of ‘Business Perspective funds offered by Impax. Investing’ championed by Buffett, says: ‘Compound Impax now has added capabilities in the US annual growth over the last five years has been: following its acquisition of Pax, with US equity sales 21.2%; operating profits 29.2%; EPS 22.8%.’ funds, smart beta and fixed income part of the company’s offering.
220 IMPAX ASSET MANAGEMENT 200 FTSE ALL SHARE 180 160 140 120 100 80
60 Source: Thomson Reuters Datastream 2017 2018
SHARES SAYS: We like Impax, a great specialist asset manager SHARES SAYS: which now has more mainstream products and a Keep buying (JC) foothold in the US. (DS)
BROKER SAYS: 001 BROKER SAYS: 002
14 | SHARES | 12 April 2017 GREAT IDEAS UPDATES
JOHNSON MATTHEY (JMAT) £32.62
Gain to date: 6.4% Original entry point: Buy at £30.66, 21 December 2017 SPECULATION THAT an activist investor is building However, we also recognised that the real a stake in chemicals business Johnson Matthey excitement is generated by its battery technology. (JMAT) has revived talk of a break-up of the In a nutshell it requires less cobalt than other business and helped drive the shares higher. solutions, which is a major plus point given The argument is that Matthey should split its pressures on supply of that material. prized vehicle batteries arm from the pressured The company may address the clamour for a exhausts catalyst division. While the former is seen corporate shake up when it announces its results as a beneficiary of a switch to electrical vehicles, for the year to 31 March 2018 on 31 May. the latter is seen as a victim of this trend. When we flagged the stock as one of our picks SHARES SAYS: for 2018 we argued that sentiment towards the We remain fans of the company in its current form catalyst business was overly weak, pointing to but note movement on a restructure might act as a forecasts from investment bank Morgan Stanley catalyst for the share price. which suggested it could continue to grow for at BROKER SAYS: 1310 least another decade.
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Tracker funds that passively BIG OPPORTUNITIES IN MEDIUM-SIZED AND follow the FTSE 100 Index or S&P SMALLER COMPANIES 500 Index automatically had high exposure to technology shares by Medium-sized and smaller companies can offer greater the time the dot.com bubble burst in 2000 and had also invested scope for capital growth than businesses that are already heavily in banks and insurers before very large and may have their best days behind them. But the global financial crisis began in 2008. This demonstrates the risk of not every acorn grows into an oak and higher risks may investing by auto-pilot or algorithm in yesterday’s winners in much the accompany the potential for higher rewards when seeking same way that it is dangerous to the corporate winners of tomorrow. drive by only looking in the rear- view mirror. By contrast, experienced professional fund managers seek to mitigate the risks inherent in investment through active stock selection, aiming to identify companies that have sustainable competitive advantages while shunning over-priced shares that may be fashionable today but might fall from favour tomorrow. Investment trusts enable individual investors to share the cost of active stock selection which aims to buy low and sell high to generate capital growth.
ctive stock selection by biggest shares. WHERE TO FIND THE WINNERS OF experienced professional Investment opportunities do not TOMORROW fund managers can help to end at Dover and investment trusts Just as trees do not grow all the Aidentify medium-sized and offer a convenient and cost-effective way to the sky, diseconomies of smaller companies with sustainable way to gain exposure to markets scale can impose limits on the competitive advantages trading at overseas. For example, JPMorgan growth of very large companies. discounts to their intrinsic value. US Smaller Companies Investment Corporate monoliths sometimes Whether these funds focus on stock Trust plc focuses solely on capital become difficult to manage and markets in Britain, Continental growth from North American may lack entrepreneurial zeal. Europe or the USA, they may be smaller companies and JPMorgan Senior executives and their held within individual savings European Smaller Companies remuneration incentives can accounts (ISAs) to generate tax- Trust plc seeks a mixture of both diverge from the interests of free capital gains – and some also income and growth in Continental customers, shareholders and staff. provide tax-free income. Europe, excluding the United Some or all of these factors played The closed-end structure Kingdom. their part in the decline of corporate of investment trusts may help giants including Carillion, British medium to long-term investors ACTIVELY AIMING FOR GROWTH Home Stores and Woolworths. withstand fluctuations and volatility Stock market indices, such as the Medium-sized and smaller in stock market sentiment and FTSE 100 or the Standard & Poor’s companies may be nimbler and valuations during the economic 500, are based on size or stock more readily able to rapidly reflect cycle. For example, The Mercantile market capitalisation – the total changes in consumer demand and Investment Trust plc is more than value of shares in issue by each stock market conditions. However, 130 years old and now manages constituent company – and so they it is important to remember that over £2bn for its shareholders inevitably tend to be dominated these companies can be higher risk who receive quarterly dividends. by the corporate winners of the than their larger rivals because they JPMorgan Mid-Cap Investment past. However, past performance are less likely to have substantial Trust plc is another fund focussed is not necessarily a guide to the reserves or diversified businesses in the UK All Companies Sector, future and so these shares do not to help them survive economic seeking capital growth and steady necessarily offer the best bargains shocks or other setbacks. dividends from businesses outside for buyers today or the greatest So great care must be taken the FTSE 100 index of Britain’s growth prospects for tomorrow. when considering potential THIS IS AN ADVERTISING PROMOTION opportunities among shares listed years their historic probability of the average total return from all on stock market indices that outperforming cash fell to 68%. investment trusts – excluding include mid-cap (companies with a specialists such as Venture Capital market capitalization between $2 WHAT’S SPECIAL ABOUT Trusts - over the last five years billion and $10 billion) or smaller INVESTMENT TRUSTS? was 99%. Over the last decade, companies (companies with a Diversification is a tried-and-tested the average return from all AIC market capitalization between way to diminish risk. The principle members on the same basis was $300 million and $2 billion), such is the same as not putting too many 199%. as the FTSE 250 Index or the eggs in too few baskets. Pooled The past is not necessarily a FTSE All Share Index. Dedicated funds, such as investment trusts, guide to the future. However, these professional fund managers are automatically put this into effect historical facts do demonstrate able to visit potential investments to by spreading individual investors’ how medium-sized and smaller ‘kick the tyres’ and interview these money over dozens of different companies investment trusts have businesses’ senior executives in a companies’ shares to reduce their delivered big returns and may be way few individual investors could exposure to the danger of setbacks worth considering as part of a do for themselves. The idea is to or failure at any company. However, diversified portfolio for investors identify companies with sustainable diversification does not guarantee seeking growth and income or a competitive advantages, priced at a investment returns and does not mixture of both in future. discount to their intrinsic value with eliminate the risk of loss. Investors should remember senior executives who are capable Investment trust shareholders that share prices can fall without stewards of shareholders’ capital. also enjoy another important warning and they may get back less advantage over investors in other than invested. However, investment INVESTING EFFECTIVELY FOR THE forms of pooled funds – such as unit trusts seek to diminish the risk MEDIUM TO LONG TERM trusts or open-ended investment inherent in stock markets by It is important to remember that companies - because investment diversification and professional fund share prices can fall without warning trusts are closed-end funds. This management. There are hundreds and you may get back less than you means their managers are never of investment trusts to choose from. invest in the stock market. One way forced to sell underlying assets to to reduce the risk inherent in stock raise cash to meet redemptions if For more details see the markets is to invest money you sentiment changes, as it often does Association of Investment can afford to commit for five years at different stages in the economic Companies: www.theaic.co.uk or more, as this will substantially cycle. By contrast, open-ended fund diminish the danger of selling when managers may be forced to dispose prices are temporarily depressed. of whichever assets can be sold RELATED PRODUCTS For example, one of the most when confidence falls, share prices comprehensive and longest- decline and short-term speculators JPMorgan European Smaller Companies established analyses of investment wish to get back into cash. Trust plc returns found that shares reflecting The Mercantile Investment Trust plc the changing composition of the HOW IT WORKED IN PRACTICE: London Stock Exchange beat cash BIG RETURNS FROM MEDIUM- JPMorgan US Smallers Companies deposits over 75% or three quarters SIZED AND SMALLER COMPANIES Investment Trust plc of all the periods of five-consecutive INVESTMENT TRUSTS JPMorgan Mid Cap Investment Trust plc years since 18991. However, if According to the Association of shares were only held for two Investment Companies (AIC)2
1Barclays Equity Gilt Study 2017, page 145: figure 8. 2Association of Investment Companies as at February 2018
IMPORTANT INFORMATION: This is a marketing communication and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not reliable indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/jpmpdf/1320694304816.pdf. Investment is subject to documentation (Investment Disclosure Document, Key Features and Terms and Conditions), copies of which can be obtained free of charge from JPMorgan Asset Management (UK) Limited. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP. 0903c02a8207331b TALKING POINT Our view on topical issues What changes to fund rules mean for investors We look at the big questions raised by new FCA regulations
ew regulations are likely to lead to a significant Nshake of the asset management industry with implications for anyone who The majority invests in funds. of the The Financial Conduct Authority, a UK regulator, wants population to make investing in funds better simply don’t value for money. In a policy understand statement released on 5 April “ it outlined several measures to percentage- help it achieve this aim which based includes: • A ban on ‘box profits’ – i.e. charging, stopping asset managers the impact from keeping as profit the difference between the charges have bid (the price at which the over the provider buys back fund units) and offer (the price long term, or you pay to buy in) on a whether their fund. investments • An end to the practice of taking performance fees are value for based on a fund’s gross money performance; instead these added charges will be based on performance net of other fees. • A requirement to publish a to be taken if a fund is not particular benchmark. report annually that proves providing value for money. • A proposed all-in fee for the value for money a fund • Fund managers will also funds disclosed in pounds delivers to investors. This have to appoint at least and pence. will be based on elements two independent” directors such as whether charges to their boards. Back in June 2017 the FCA are reasonable relative to • Automatically moving noted the industry’s high level costs incurred, the quality investors into the cheapest of profit was an indication that of service provided and the share class when it is in investors were not ‘achieving robustness of the internal their interests. value for money’. investment process. • Requiring an explanation of It noted that the average Corrective action will have why a fund manager uses a asset manager had an operating
18 | SHARES | 12 April 2018 Our view on topical issues TALKING POINT margin of 36% and some as high as 45% in a sample of company results over the last six years. These margins are significantly higher than those generated by most other industries. This is a good illustration of a risk faced by firms which enjoy abnormally high margins, that ultimately either competition or, in this case, regulation will intervene to bring profitability down to more grounded levels.
WHEN WILL THE CHANGES TAKE EFFECT? Firms have 18 months to implement the rules on just track the performance of transparency and fairness in the assessment of value and the market. investment industry. appointment of independent ‘The majority of the ‘The FCA decision not to ban directors and 12 months for population simply don’t legacy (pre-Retail Distribution the rules related to the way in understand percentage-based Review) trail commission which fund managers profit charging, the impact charges was a missed opportunity to from investors buying and selling have over the long term, or modernise the fee structure for their funds. whether their investments are all investors, ensuring money value for money,’ The Lang isn’t unnecessarily taken out of WHAT DOES IT MEAN FOR Cat adds. investment charges on funds sold INVESTORS? ‘This allows providers to hide before the end of 2012.’ Anything which reduces costs potentially expensive products and increases the level of in plain sight. Something had to HOW IS THE INDUSTRY transparency is in theory a change. And the final rules now RESPONDING? good thing for fund investors. published should help with that.’ The body which represents fund Investment consultant The Lang However, Martin Bamford, managers – the Investment Cat describes the new FCA rules managing director of financial Association – has welcomed as a ‘huge change for asset planning group Informed Choice, the changes. managers, and one which should believes the changes announced Chief executive Chris benefit all investors’. do not necessarily go far enough, Cummings says: ‘Our industry A report from the FCA ahead noting there is no ban on trail is committed to demonstrating, of these changes, published commissions. and delivering, good value to the in 2017, suggested that £6bn These were payments made millions of people who entrust worth of assets were in so-called to advisers and platforms out their savings to us. We welcome expensive trackers, essentially of the performance of a fund the FCA recognising that people funds which simply offer the as an alternative to charging an judge their asset manager by performance of the market at an upfront fee. investment performance and inflated price. Trail commissions have been service, as well as cost.’ A whopping £109bn was barred on the sale of products Some figures from within the held in ‘closet trackers’. These since the Retail Distribution industry have been more critical, are actively managed funds Review was introduced at the arguing they will add costs which which deviate so little from their beginning of 2013, being a set of will ultimately be passed on benchmark that they effectively rules aimed at introducing more to investors. (TS)
12 April 2018 | SHARES | 19 Polar Capital Investment Trusts Polar Capital is a specialist, investment led, active fund management company, which is 35% owned by its Directors, founders and employees. We offer professional and institutional investors a wide range of geographical and sector funds based on a fundamental research driven approach, run by dedicated specialist teams. The Company manages three sector-focused investment trusts, covering three of the largest sectors in the world: Global Technology, Global Healthcare and Global Financials. Polar Capital manages over £2 billion across these three investment trusts for a very diverse shareholder base.
POLAR CAPITAL GLOBAL Polar Capital Global HEALTHCARE TRUST PLC Financials Trust plc
GROWING OUR HEALTHCARE IS A OILING THE WHEELS INVESTORS’ ASSETS GROWTH SECTOR IN A OF THE WORLDWIDE SINCE 1996 LOW GROWTH WORLD ECONOMY
Polar Capital Technology Trust plc Healthcare is a long-term, secular The Financial sector oils the wheels provides investors access to the growth sector as ageing populations of the worldwide economy and growth potential of companies in the drive the demand and the need for is the largest sector globally. global technology sector. Managed increased healthcare provision. It includes banks, insurance by a team of dedicated technology Global healthcare spending was companies, asset managers, stock specialists, this trust has grown to over $7.6 trillion in 2014 and is exchanges, speciality lenders and become a leading European investor projected to grow faster than GDP. fintech companies. Technological with a multi-cycle track record – a The political conundrum is how to developments and regulatory result of the managers’ approach to deliver better healthcare to more changes post the financial crisis are investing, with the ability to spot people for less money. Healthcare leading to profound changes which developing technology trends early companies with products or services are providing attractive investment and to invest in those companies that deliver demonstrable value opportunities in a sector in different best placed to exploit them. and drive efficiency are well-placed stages of recovery and within for growth. underpenetrated emerging markets.
For more information visit: For more information visit: For more information visit: www.polarcapitaltechnologytrust.co.uk www.polarcapitalhealthcaretrust.co.uk www.polarcapitalglobalfinancialstrust.co.uk
As at 29 December 2017. This is not a financial promotion. Polar Capital Technology Trust plc, Polar Capital Global Financials Trust plc and Polar Capital Global Healthcare Trust plc are investment companies with investment trust status and as such their ordinary shares are excluded from the FCA’s (Financial Conduct Authority’s) restrictions which apply to non-mainstream investment products. Polar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the UK FCA and registered as an investment adviser with the US Securities & Exchange Commission. The information contained herein is subject to change, without notice, at the discretion of Polar Capital and Polar Capital does not undertake to revise or update this information in any way. No investment strategy is free of risk and there is no guarantee that the investment processes or strategies described herein will be profitable. The Trusts have not been approved, notified or registered in accordance with AIFMD for marketing to professional investors in any member state of the EEA. Therefore, this is only transmitted further to an investor in an EEA Member State at the senders own initiative. ADVERTORIAL POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC
“Opportunity is missed by most people because it is dressed in overalls and looks like work” – Thomas A Edison
When the Polar Capital Global Financials Trust plc (“PCFT”) It pays to remember that, for the most part, the financial was launched in July 2013 - to provide a lower risk way for sector does well when the economies and financial investors to gain exposure to the financials sector - for many markets in which they operate are performing well. the sector at the time was still, but not without good reason, But in contrast to previous economic cycles it is also a uninvestable; it was also too complicated and hard work. beneficiary of rising interest rates. As interest rates have The fact that the financials sector has delivered 68.7%1 in the remained low since the financial crisis so margins of intervening period and the Trust 70.6%2, is at odds with the banks have come under pressure. We have started to perception of the sector. Including what UK banks have paid see the reverse happen as US interest rates have started out in PPI redress in recent years, banks have in total paid out to rise which has led to stronger earnings expectations over $450bn in fines since 2008. Post financial crisis regulation and share prices. If the Eurozone economy continues has lifted capital requirements and compliance costs much to improve then their banks too will be significant further than anyone envisaged, the latter by six-fold for many beneficiaries. In Asia and Emerging Markets, longer term U.S. institutions. Last year the impact of low and negative structural drivers from the much lower levels of consumer interest rates raised the prospects of profitability of the sector debt and higher savings ratio offer significant growth being crushed. potential long term.
But the easy mistake is to look at the sector through the lens There are eight fund managers and analysts in the of the failings of a very small number of large banks or to financials team at Polar Capital, one of the largest if extrapolate short term macro trends too far into the future. not the largest team’s investing in the sector managing The financial sector is the largest sector globally representing $2.3bn of assets. The increased capital requirements and between 18.1% and 21.2% of global indices, depending regulation since financial crisis has significantly lowered whether one includes real-estate investment trusts. It is not only the risk of the sector. With many companies trading about banks which have many different guises from private on undemanding valuations it offers the potential to banks to commercial banks and large so-called universal banks continue to surprise to the upside. which represent the largest part of the sector. It also includes insurance companies, life assurance companies, insurance For further information please visit: brokers, stock exchanges, asset managers and wealth managers www.polarcapitalglobalfinancialstrust.co.uk as well as the more esoteric such as gold lenders and so on. There are therefore significant opportunities within it to find Author: Nick Brind, Fund Manager, attractive investments. Polar Capital Global Financials Trust plc.
Disclaimer: 1Financials Sector: MSCI World Financials + Real Estate Index. 1 July 2013 to 30 November 2017. Total Return in GBP terms. 2PCFT NAV Total Return. Since launch: 1 July 2013 to 30 November 2017. Total Return in GBP terms. Source: Polar Capital, December 2017 - This is not and does not constitute an offer or solicitation of an offer to make an investment into any Fund or Company managed by Polar Capital. Polar Capital Global Financials Trust plc is an investment company with investment trust status and its ordinary shares are excluded from the FCA’s (Financial Conduct Authority’s) restrictions which apply to non-mainstream investment products. All opinions and estimates constitute the best judgement of Polar Capital as of the date hereof but are subject to change without notice and do not necessarily represent the views of Polar Capital. Performance is stated net of fees and expenses and includes the reinvestment of dividends and capital gain distributions. Past performance is not a guide to, or indicative of, future results. A loss of principal may occur. The following benchmark is used: MSCI World Financials and Real Estate Index (£ adjusted). This benchmark is a broad based index which is used for comparative/illustrative purposes only and reflects reinvestment of dividends and, where applicable, capital gains. Investment results and volatility of the Fund may differ from the Benchmark. Please refer to www.msci.com for further information on this index. ARE DIRECTORS’ INTERESTS R EALLY ALIGNED WITH SHAREHOLDERS?
he failure of drinks distributor Conviviality (CVR:AIM) has highlighted a growing ENFORCED problem with UK smaller companies, T namely the misalignment of interests between shareholders and executive management. DIRECTOR SHARE I am shocked how large institutional investors are prepared to throw vast sums at small companies embarking on an acquisition strategy yet demand OWNERSHIP MAY little real financial commitment from executive management of those companies. ENSURE EXECUTIVE To make matters worse, many institutions also seem happy to approve excessive pay packages uncorrelated to ‘real’ returns. MANAGEMENT TAKE WHY CONVIVIALITY’S MORE CONSIDERED INVESTMENT CASE CHANGED ACTIONS My own firm used to hold shares in Conviviality but were compelled to sell in October 2016 having reassessed its acquisition strategy, management remuneration and their absence of ‘real’ equity ownership. While Conviviality’s share option scheme meant there was plenty of incentive for management to increase the share price, up until March 2018, the chief executive had never actually acquired any shares in the business, despite being richly rewarded and having plenty of opportunities through numerous fund raises. I would have expected institutional investors to have demanded real equity participation from the chief executive in the fund raises. This state of play is prevalent throughout AIM and, I would suggest, increasingly linked to sub-par performance. It’s worth reflecting that the best performing small companies are generally led by entrepreneurial founders who have made a material capital commitment to the business and retain a large equity stake.
22 | SHARES | 12 April 2018 POOR MANAGEMENT ALIGNMENT BETTER SHAREHOLDER IN AN EARLY STAGE BUSINESS ALIGNMENT, IF SLIGHTLY
ITM Power (ITM:AIM), the energy storage and ONE-SIDED clean fuel company, has struggled to make much progress since listing in 2004 when it raised Lakehouse (LAKE:AIM), the asset and energy £10m at 50p per share. Fast forward 14 years support services group, has had a challenging time and numerous fund raises later, the share price since floating on the Main Market in 2015 and stands at 32p. subsequently moving to AIM in 2017. The latest interim results saw income of £4.4m In July 2016, shortly after announcing dreadful and a loss of £2.9m, bringing cumulative losses to interim results for the period ending 31 March nearly £62m. 2016, and the share price sinking to 25p, Bob Holt The board of directors of this cash-consuming was appointed executive chairman. business numbers a seemingly excessive eight The board of Lakehouse believed Holt’s expertise people, including four non-execs. Chief executive in support services and his track record of turning Graham Cooley has been in place since 2009 and around underperforming companies would be holds approximately 0.35% of the shares. invaluable to the group. Directors’ remuneration of £1m in 2017 included In connection with Holt’s appointment, £389,000 for Cooley, who has been awarded the board put in place a revised directors’ aggregate remuneration of £1.68m over the past remuneration policy and adopted a new share five years. This appears excessive for a loss making incentive scheme. business that has raised £42.9m from shareholders over the same period. I note Cooley acquired 176,470 shares in 2017 at 17p (£30,000) but this is apparently the only share purchase he has made since 2013. The chief executive’s generous package also seems at odds with the remuneration of other employees, including the chief technology officer, all of whom are the key drivers to the future success of ITM. I am surprised that a cash consuming business like ITM offers such generous remuneration to a single person, seemingly uncorrelated to the real performance of the business and its share price. STRONG REPUTATION
Holt comes with a good reputation and was instrumental in growing Mears (MER) to a market capitalisation of over £360m (at 3 April 2018). Although, it’s worth noting that the market capitalisation of Mears has fallen approximately £180m in value since April 2017, which is broadly twice the fall in value of Lakehouse since it listed. A harsh comparison perhaps, but suggestive that LAKE’s problems may also be partly sector related. Holt receives basic remuneration of £225,000 per annum at Lakehouse and the share incentive scheme could see him receive approximately £4.5m in shares should the share price rise above 98.40p by end January 2019.
12 April 2018 | SHARES | 23 Two fellow directors are also beneficiaries of the however, that’s where the comparison ends. new incentive scheme, although not to the same Unlike Conviviality, Restore has, up to now, extent as Holt. It’s not clear how long the directors been a resounding success under chief executive, will need to hold the shares and Holt has not Charles Skinner who joined in 2009. purchased any shares in the company since joining. Skinner showed his commitment to the future While the awards are based on share price of the company by acquiring an aggregate performance (which admittedly needs to be pretty £132,000 of shares in 2010 which brought his total spectacular), and therefore ensures a large degree holding to 511,415 shares. of alignment with shareholders, the performance I acknowledge this purchase represented period is very short and seems to have little regard a meaningful commitment, however, it’s for the longer-term success of this business. disappointing to note that since then Skinner More significantly, I question how one individual doesn’t appear to have participated in any equity is assumed to be of such high value relative to raises supporting Restore’s numerous acquisitions, others in a people business of this nature. If despite being well remunerated. anything, an award of such magnitude surely risks In May 2016, having been granted just over breeding resentment among the real workforce 2m shares through exercising options Skinner which is essentially working for Holt. immediately sold 1.6m shares resulting in a holding of just over 1m shares, all of which were now effectively option based. WHY AREN’T DIRECTORS In 2016 Skinner received 3,518,145 nil cost share options after achievement of performance BUYING SHARES? hurdles, which were a rather modest share price performance exceeding 10% annualised growth in In similar vein to Conviviality, Restore (RST:AIM), the market capitalisation of the company, adjusted for records management and commercial relocation dividend payments and new equity raised. provider, whose shares my firm used to hold until Upon this hurdle being achieved participants recently, is another acquisition driven business, may receive 10% of the value created above the hurdle. In April 2017 Skinner exercised further option shares lifting his holding to 1,538,560 shares (1.36% of the equity), all now nil cost option based. I believe the CEO and other executive directors could certainly give more confidence to shareholders by supporting future equity raises, backing the acquisition strategy with their own hard-earned money. RAISING STANDARDS
In general, it’s about time large institutions stipulated that executive management participate in fund raises, up to an agreed minimum. Executive management should also be obliged to retain a minimum number of shares, outside any option scheme. Such an approach would ensure more thought is given to acquisitions, achieve better alignment with all shareholders and hopefully help avoid Conviviality-like disasters.
Chris Boxall, joint founder of Fundamental Asset Management
24 | SHARES | 12 April 2018 RETIREMENT Produced by money s how 13 June 2018 12:30 - 17:30
AT AMERICA ARE YOU RETIREMENT SQUARE, READY? LONDON EC3N 2LB Come to the Retirement Money Show to find out more about retirement planning. All attendees receive a goody bag and will be entered into free prize draws.
It’s no fun getting old when you’re worried about running out of money, so do you have a financial plan for the possibility of living to be 100? Did you know that the current average retirement age is 64 years old and the average life expectancy is now 81 years old? To put this into perspective you might have to plan your retirement pot to last 17 years.
Come along to the Retirement Money Show, the London-based afternoon event run by Shares and AJ Bell Media which takes place on 13 June 2018 and features expert pension and financial speakers who will help investors better understand pensions and savings.
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Discover more about the most important retirement issues and how best to manage your hard-earned money. The show is suitable for people still in employment and wanting to better understand financial planning, as well as those already in retirement looking to get the most from their pension and other assets.
Our speakers will be covering topics that are relevant to both those already in retirement and those who are still in work.
Knowing how to manage your pension pot – either in preparation for later life or during retirement – is one of the big challenges facing millions of people today and a central theme to the free-to-attend Retirement Money Show. It is one of a number of topics that we will discuss during the afternoon, so come along to the event armed with questions as there will be a wide range of people happy to talk to you.
You will have the opportunity to ask questions to most of the REGISTER speakers and to interact with specialists in savings, income, funds, ISAs and pensions/SIPPs on the exhibition stands. NOW
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Sponsors and featured companies P
THE STOCKS WHICH ARE PRECARIOUSLY BALANCED R THANKS TO PREMIUM VALUATIONS
t is fair to say that 2018 is shaping up to be a difficult year for investors. Stocks are volatile, I and the market is in very Iunforgiving mood with even the hint of bad news prompting big falls in company share prices. Already this year funerals provider Dignity (DTY) announced a complete change to its business C model which sparked an immediate halving of its share price while technology firms Sophos (SOPH), Alfa Financial (ALFA) and, in perhaps the most dramatic example, Micro Focus (MCRO) have also been heavily punished for their own disappointing updates. E So what have these companies all got in common? It’s simple: they all had high price-to-earnings ratios (PEs) relative to the wider stock market at the point of issuing disappointing news. As a case in point, Alfa Financial D was trading on around 40-times forward earnings when its 8 March update sparked concern about the timing of new contracts. FOR However, a 20% fall in the share price compared with just a 5% r e d u c ti o n i n t h e e a r n i n g s f o r e c a s t PERFECTION by stockbroker Numis.
26 | SHARES | 12 April 2018 PRICED FOR PERFECTION For companies on high PE UNDERSTANDING A HIGH PE IN CONTEXT ratings a profit warning or By Bruce Stout, manager of Murray International Trust (MYI) earnings disappointment typically has a double whammy The PE multiple on a company often carries effect. The shares fall to the full spectrum of opinion from those who reflect a reduction in earnings believe it is the Holy Grail of stock valuation to expectations and the company those who discredit the ratio as being nothing is also de-rated to a lower PE more than unpredictable supposition. as investors react to a more Perhaps it should be considered more in uncertain growth picture. context than in absolute. If a company can FP Octopus UK Micro guarantee earnings growth every year of 25% Cap Growth Fund and trades on a PE of 100-times, then it’s a bargain! (GB00BYQ7HN43) manager If a company projects it can grow earnings by 25% every year and Richard Power says managing trades on a PE of 100-times, then it’s extortionate! expectations is a key element Why? Substitute the word ‘guarantee’ with the word ‘projects’ of running a business in the and the risk to earnings growth takes on a completely different public markets. ‘When newer complexion. So, for us, PE should always be a factor of risk adjusted companies are heading for prediction. IPO (initial public offering) Consider the following case for Murray International. Shares there’s a temptation to put out in Nestle were recently sold outright having been held for stretch forecasts to the market over 10 years. because you’re in that shop The reason was the PE has expanded from 14 times to 28 times window. over the past 10 years, yet earnings growth has decelerated to just ‘However, it is much better 5% per year and five-year dividend growth has slumped to just to put a 50% revenue growth 3% per year. The high valuation was deemed unjustified relative forecast into the market and to the realistic rate of earnings and dividend growth. beat it than start off with a Shares in Taiwan Semiconductor remain the largest holding 100% target which leaves little having been held for over 10 years. The reason is that although margin for error.’ the PE has expanded from 14 times to 18 times over the period, Power says as a typically earnings growth has accelerated to 15% per year and five-year long-term, supportive dividend growth has accelerated to 18% per year. shareholder it’s a conversation The valuation, although high, is still realistic to what earnings he has had with a number and dividend growth can be delivered. So, for us, PE must always of companies. be considered in the context of what is realistically achievable. Nothing more, nothing less. NO MARGIN OF SAFETY The father of value investing, the late Benjamin Graham, described the difference between the price you purchase shares and their intrinsic value as the ‘margin of safety’. Investing in a highly rated growth stock means investing without a margin of safety and can leave you exposed if something emerges to undermine the anticipated growth. Shares in Nestle were recently sold outright by Murray International Trust
12 April 2018 | SHARES | 27 You need to think very GOODBYE FEVERTREE WEIGHING UP THE TECH carefully about your ‘We recently sold out of STOCKS investments which are trading Fevertree Drinks (FEVR:AIM) In hindsight some investors on premium valuations. having got in at IPO,’ he says. may look back and wish To illustrate this point, in Having significantly exceeded they had taken some profit this article we have identified his expectations with its in runaway US technology stocks which are trading on capture of the premium white stocks earlier this year as a PE ratios of 20-times or more, spirits mixers market, Power data scandal and the threat and we flag identifiable risks and his team were concerned a of greater regulation weighed which could undermine the step into the dark spirits space on the likes of Amazon and share price. could be more difficult. Facebook. We highlight four names ‘It remains an extremely The Scottish Investment which look particularly well-managed company but Trust’s (SCIN) fund manager vulnerable alongside two for us the risk/return had Ally McKinnon comments: examples which, in our view, shifted as it required a new ‘Today, shares in Facebook and more than justify their bumper product range to be successful.’ Amazon cost more than six valuations. There are other excellent times as much as they did five It’s not just a case of looking companies on AIM where years ago. You’d need to pay 12 at the PE in isolation; you the valuation has got ahead times more for Netflix shares should also be prepared of events. Examples include and even Google costs 2.5 to make your own wider online musical instruments times more than it did in 2013. assessment of a company’s retailer Gear4Music ‘It’s certainly possible that prospects for cash flow and (G4M:AIM) which at 679p these shares will continue to profit growth and what you are trades on a forward PE of do well, but we see better prepared to pay to gain access 60.2-times despite some opportunities elsewhere: to them. pressures on margins. in stocks that are arguably ‘When to sell a company is Independent cinema valued to reflect a pessimistic something we discuss all the operator Everyman Media view of their prospects and so time,’ says Richard Power at (EMAN:AIM) trades on a have much more potential for Octopus. He says you need to forward PE of more than positive surprises.’ (TS) have a clear view on what the 40-times at 250p despite a business will look like in three risk the current squeeze on or four years’ time and what UK consumer spending will the journey will look like. damage demand for the Examples of companies premium cinema experience which Power holds despite it offers. high earnings multiples include You do not have to sell out of life sciences firm Abcam a successful position all in one (ABC:AIM), which he says has go, as Power notes ‘we take ‘always looked expensive’; some profits along the way patent translation specialist across all of our mandates’. RWS (RWS:AIM) and cyber security play GB Group (GBG:AIM). Crucially he says, ‘for all these firms it is possible to see a much bigger global opportunity’. It is when such potential can no longer be identified that Power considers an exit.
28 | SHARES | 12 April 2018 HIGH PE GROWTH STOCKS One year forecast EPS Two year forecast EPS Company EPIC Forecast PE growth (%) growth (%) EasyHotel EZH 139.4 -42.4 287.5 Gear4music G4M 97 -38.4 64.3 Mulberry MUL 73 -7.1 10 ASOS ASC 71.7 26.2 24.3 Fevertree Drinks FEVR 62.4 10.3 16.5 Keywords Studios KWS 60.9 110.9 54.2 Metro Bank MTRO 54 547.4 82.9 Boohoo.com BOO 51.9 29.6 21.4 Accesso Technology ACSO 42 196.4 35 Hotel Chocolat HOTC 38.9 13.9 16.7 Just Eat JE. 37 43.3 39.5 Alfa Financial Software ALFA 29.6 22.9 13.6 IQE IQE 29.2 99.7 41 Renishaw RSW 28.1 14.2 8.1 Halma HLMA 26.9 7.4 10.5 Source: SharePad, 6 April 2018 FOUR STOCKS IN THE DANGER ZONE EASYHOTEL (EZH:AIM) 111P FORWARD PE: 139.4
EASYHOTEL (EZH:AIM) is a classic case of an value (81.6p) at the end of its financial year in interesting business trading at the wrong price to September 2018. warrant buying the shares. It is expensive on other valuation metrics: it We like its low-cost business model and ability trades on a PE (price to earnings) ratio of 139.4 for to leverage the EasyGroup brand strength. It is the current financial year, falling to 36 times in the expected to see significant earnings growth over following year based on consensus forecasts. the next three to four years as new hotels are EV/EBITDA (enterprise value to earnings before built and extra franchised hotels are added to interest, tax, depreciation and amortisation) is the estate. 40.3-times for the current financial year, falling to The company has taken advantage of a market 15.5 next year. gap beneath Premier Inn and Travelodge in price You could argue that it deserves to trade on a terms by offering a no-frills, purely functional premium because a low accommodation price experience. It posted a strong trading update on point makes it more resilient during tougher 11 April. economic conditions. However, other hoteliers Unfortunately, investors are being asked to could cut their prices in more difficult times pay for tomorrow’s growth today. At 111p, it is and there is also a growing competitive threat trading on a 36% premium to forecast net asset from Airbnb. (DC)
12 April 2018 | SHARES | 29 METRO BANK (MTRO) £34.60 FORWARD PE: 54 METRO BANK (MTRO) has been a darling of the challenger banks, recording record deposit growth to £11.7bn in 2017, a 47% increase on the previous year. It is also arguable whether The bank’s loans increased by 64% to £9.6bn the company is truly and its overall assets were up by a similar amount to £16bn. It exceeded its loan to laying the foundations deposit ratio target by 2%, coming at 82%. Also for future growth having commendable was its maiden £20.8m profit for opened just seven new the year but there are some less positive signs “ for this highly rated bank. branches in 2017 Its return on equity for 2017 was just 1.2% despite management targeting 14% by 2020. Its fast growth rates in deposits and lending come at a cost, its common equity tier one (CET1) ratio Ian Gordon, analyst at broker Investec, says dropped by 2.8 percentage points to 15.3%, a without a capital raise its CET1 ratio is ‘too low for material drop in the bank’s ability to withstand comfort’. It is also arguable whether the company economic shocks. is truly laying the foundations for future growth In its fourth quarter of 2017 alone, its record having opened just seven new branches in 2017, loan growth of £1bn shaved 2.1 percentage below its target. It has now downgraded” its points off its CET1 ratio. branch target for 2020 to 100 from 110. (DS)
OCADO (OCDO) 534.8P FORWARD PE: 205 TIMES* ONLINE GROCER Ocado’s (OCDO) ludicrously fierce and Ocado was cold-shouldered again frothy valuation, based on forecasts from as first quarter retail sales growth of 11.7% to Peel Hunt it will remain loss-making until the £363.4m disappointed, deliveries impacted by November 2020 financial year at which point it winter storms and investors unimpressed by a trades on a PE of more than 200, reflects hype 0.4% decline in Ocado’s average order size to around the business and its potential for growth £110.45. with international retailers. Shares makes no apologies for repeating A ‘marmite’ stock often in the sights of short- the words of Shore Capital’s head of research sellers, Ocado’s shares soared in the wake of Clive Black from February: ‘The placing, also the inking of agreements to power overseas announced today, reflects the magnitude of supermarkets with its technology known as the cash burn for its NASA like projects; high in OSP (Ocado Smart Platform). technological detail but one just never sees These include deals struck with France’s their benefit from Planet Earth. Oh to be such a Groupe Casino and Canada’s Sobeys, building charming company...’. (JC) upon CEO Tim Steiner’s long-promised first overseas deal with a mystery regional European retailer. While these deals put the squeeze on The placing, also announced short-sellers, bears will have the last laugh. An eye-watering valuation leaves Ocado susceptible today, reflects the magnitude to sell-offs on any setbacks. of cash burn for its NASA like Full year results (6 Feb) revealed a lurch from projects; high in technological pre-tax profit of £12.1m to a £500,000 loss, detail“ but one just never sees rising net debt, a dilutive placing and a warning 2018 profits will be constrained by ongoing their benefit from Planet Earth investment to ‘accelerate’ growth. Competition in the groceries space remains
*For Nov 2020 financial year according to Peel Hunt forecasts
30 | SHARES | 12 April 2018 ” Clockwise from above: EasyHotel, Metro Bank, Ocado and Renishaw
RENISHAW (RSW) £45.48 FORWARD PE: 28.1 SHARES IN precision engineer Renishaw (RSW) from exports. have rattled along for about two years, roughly That’s the optimistic case. Alternatively, it doubling to the recent record high of £57.75. could be argued that Renishaw remains, and Renishaw is a world leading developer and has always been, a cyclical business and we are manufacturer of high precision, automated at, or close to, the top now. metrology equipment, or very high- Revenue and profits fell in 2009/2010 (partly specification measurement kit. Products due to the financial crisis) and diverted from are used widely in aerospace, automotive, the growth path again in 2016. healthcare and other industrial markets. The company’s expertise is not in doubt but Driving demand is uniformly solid, if not unpredictability remains a long-run problem, spectacular, global growth. Organisations are with both positive and negative shocks. also investing in technology areas capable of Management admit little more than six weeks widening and improving their own routes to visibility on the order book. market while streamlining operating models. Yet even after January’s steep sell-off the The weakened pound also makes its stock continues to trade at a hefty premium equipment and services less expensive to peers, about 50% on a price to earnings for overseas customers, hugely important measure, based on the next 12 months data considering 95% of first half revenue stemmed from Reuters. (SF)
12 April 2018 | SHARES | 31 AND TWO WHICH JUSTIFY A PREMIUM ACCESSO (ACSO:AIM) £22.75 FORWARD PE: 42 A PRICE to earnings multiple of around 40 solutions for everything from buying tickets, would normally scare off most investors. But queue-busting, merchandise purchasing attractions ticketing and queuing software and more. It has some very big-name clients supplier Accesso Technology (ACSO:AIM) is Merlin (MERL) and Six Flags, for example) and no ordinary company. emerging opportunities across Latin America, Since 2012 it has seen revenue soar from the Middle and Far East, including China. $46m to $133.4m, including last year’s (2017) Accesso is also applying its tried and 30% jump, and has an equally impressive tested solutions beyond its core theme parks record on profits. It has been free cash flow to sporting events, music gigs, ski resorts, positive in every one of those years. museums and theatres, of which there are Analysts anticipate future compound annual thousands of potential new operators and growth of about 18%, which puts it one track venues. for $215m of revenue by 2020. Expect a steady stream of acquisitions to Accesso has cleverly worked out how to continue to bolster increasingly reliable organic leverage its technology platform, providing growth in the future. (SF)
HOTEL CHOCOLAT (HOTC:AIM) 347.5P FORWARD PE: 38.9
HIGH-END chocolatier Hotel Chocolat We’re fans of its disruptive innovation (HOTC:AIM) trades on a rather rich PE ratio, and vertical integration and see scope for yet we believe the rating is palatable given the continued market share gains. growth being generated across retail stores Sales, profit before tax and earnings per and digital wholesale, where new accounts share all fattened up by 15% in the first half partnering with Amazon and Ocado (OCDO) to December, all the more impressive given hold promise. the tough consumer backcloth. Nevertheless, Floated at 148p in May 2016, Hotel Chocolat potential de-rating catalysts are in place, is a high-quality concern with the brand among them a prolonged squeeze on differentiation essential to maintain its customer consumers’ disposable income and rising base and support price increases. interest rates, which could sap spending on posh chocolates. A highly competitive market place cannot be discounted, while an additional risk factor to monitor is currency, as the increased cost of purchasing some premium ingredients in euros is constraining margins. On the plus side, improving free cash flow and a strong balance sheet - with net cash of £18.3m at last count - has enabled Hotel Chocolat to hit the dividend trail, only adding to its allure with growth and income hungry investors. House broker Liberum Capital’s 410p price target implies there’s some 18% near- term upside left on the table too. (JC)
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H034018/0218 In Partnership with INVESTMENT TRUSTS Which investment trusts have beaten the market’s first quarter slide? Smart small cap stock picking puts Lindsell Train at top of performance tree
t has been a difficult start to down 7.8% between January in net assets or share prices. The 2018 for global stock markets. and March. average decline in share price IInvestors have been rattled terms for the UK All Companies by the prospect of rising interest WEAK FIRST QUARTER sub-sector is 5%, according to rates, inflationary pressures, geo- GLOBALLY data from market maker and political tensions and the threat But if there’s an investment research house Winterflood. of an increasingly tense trade cold doing the rounds in the UK, Yet there are a small number war between the US and China. much of the rest of the world has of trusts that have sidestepped The UK has been particularly also come down with the strain. the negative runs of wider under the cosh during the first Japan’s Nikkei 225 declined benchmarks to post positive quarter. Data shows that the about 5.3% during the first returns. For example, the FTSE 100 index has been the quarter, the Eurostoxx 50 is 2.5% Artemis Alpha Trust (ATS) saw worst performing of all the lower while S&P 500, arguably its shares rise around 2% during world’s major stock markets the best barometer for US equity the first quarter to 296p. That since the start of 2018. The FTSE performance, is off about 1.2%. may not look much in isolation 100 has lost about 6.5% based Unsurprisingly, given the but it represents substantial on a closing level of 7,056.61 on backcloth, the performance outperformance versus the 29 March 2018. of most of the UK’s listed performance of the UK’s major The FTSE All Share has investment trusts have struggled indices. performed even more poorly, to post positive returns, either Artemis Alpha concentrates
Q1 INVESTMENT TRUST PERFORMANCE – BEST 5
Stock % Q1 NAV % Q1 Share price Type performance performance
Lindsell Train IT £10.50 20% 2% Global Equity
Independent Inv. Trust 718p 8% -4% Global Equity
UK Equity British & American 701p 8% 13% & Income
Baillie Gifford Shin Nippon 954p 7% 9% Japan
Asia Pacific – Vietnam Enterprise 488p 9% 10% Single Country Source: Winterflood, 4 April 2018
34 | SHARES | 12 April 2018 In Partnership with INVESTMENT TRUSTS on UK-based investment, across the industrial and market cap segments. With a similar investment strategy, Fidelity Special Values (FSV) also managed to post a modest positive share price return (1%), while small cap specialists also performed well. Shares in both the JPMorgan Smaller Companies Investment Trust (JMI) and the Crystal Amber Fund (CRS) returned 4% in the first quarter. Presumably this is a result of smart stock selection away from the spotlight of the FTSE 100. JPMorgan Smaller Companies’ biggest stakes include mixer drinks runaway success story Fevertree (FEVR:AIM) and Fenner (FENR), the conveyor- belt manufacturer that recently accepted a £1.2bn takeover by French tyres giant Michelin.
SMART STOCK SELECTING Yet the biggest first quarter outperformance has been posted by the relatively small Lindsell Train Investment Trust (LTI), up 20% in share price terms Fevertree accounts for 8% of Independent’s invested funds during the first quarter, closely followed by the even smaller Paypal, the US-based online Potts-run smallcap Herald Independent Investment Trust payments giant. Investment Trust (HIT). (IIT), 15% ahead. A couple of Japan focused Both of these trusts take stakes SMALL CAP DARLINGS trusts have also substantially in companies from across the Independent’s roster is chock full outperformed during the January globe, although funds of both of smallcap market darlings, such to March period, even in the are predominantly invested in UK as the previously mentioned face of the Nikkei’s decline. companies (74% for Lindsell Train Fevertree, where it has 8% of its Baillie Gifford Shin Nippon (BGS) and 93% for Independent). funds invested. Other sizeable chalked-up an impressive 8% first Lindsell Train has hefty stakes small cap stakes include 8.2% of quarter performance. in UK stock market stalwarts, the trust in robotic automation Many of its investee such as Diageo (DGE) and process technology star Blue companies will be little-known Unilever (ULVR) with overseas Prism (PRSM:AIM), and 6.4% to UK investors, such as market represented by the likes in online holidays booker On Outsourcing Inc or Yume No of Japanese computer games the Beach (OTB). Machi Souzou, although some firm Nintendo and Heineken, Independent also has 5.3% will have heard of Asahi Intecc, the Dutch brewing group and of its funds tied up in Katie the beer maker.
12 April 2018 | SHARES | 35 FUNDS How to analyse an ETF
While ETF providers may be engaged in a price war, it’s important not to forget what these products are best used for
ne of the great success of assets depending on the stories in investment underlying index it tracks. Oproducts has been the Hortense Bioy, director ETF exchange-traded fund (ETF). of passive fund research at Making its debut in 1993 in the Morningstar, says ‘the broader US, today the ETF industry is the better. The broader the index • MADE ITS DEBUT worth trillions of dollars and new the harder it is for an active IN 1993 IN THE US products are constantly being manager to beat it’. brought to market. For this reason she prefers the But what should an investor FTSE All Share to the FTSE 100 • TOD AY THE ETF look at when choosing from the due to the greater amount of INDUSTRY IS vast choice of ETFs on offer? stocks in the former index. WORTH TRILLIONS For an extremely broad-based OF DOLLARS WHAT IS YOUR EXPOSURE? ETF, one that tracks a global The starting point when index is a good fit, for example choosing an ETF is to look at the MSCI World. Source MSCI • NEW PRODUCTS what it provides exposure to World (SCOJ) and Lyxor MSCI ARE CONSTANTLY and how that lines up with your World (WLDL) have constituent BEING BROUGHT objectives. equities in several developed TO MARKET This will mean looking at the markets and can be useful as a index the product tracks and the core building block of a portfolio. accompanying documentation The MSCI World index consists such as the key investor of companies from 23 developed Given that these plain vanilla information document (KIID). market countries and both of ETFs are market cap weighted, ETFs can grant investors access the aforementioned ETFs aim to they are skewed towards the to a broad and diversified set provide the return of the index. US. The Source and Lyxor ETFs have 50.5% and 36.9% of their holdings in the US respectively. ETFs allow investors to express their own view of where the global market is going, in Bioy’s words, ‘ETFs are a democratic tool as opposed to giving your money to an active manager’. Before the recent technology sector sell off following revelations about Facebook’s use of private data and US president Donald Trump’s attack on Amazon’s business practices, exposure to tech heavy US equities markets seemed attractive.
36 | SHARES | 12 April 2018 FUNDS
Lyxor’s recently launched and spread risk away from Core Morningstar US Equity single countries. (LCUS) has the above tech When choosing An important point when giants in its top ten, as well as an ETF, low costs are choosing any ETF is to look at its peers Google owner Alphabet obviously part of the index provider. For emerging and Apple. markets, two of the largest index One thing to be careful of is the attraction but providers, MSCI and FTSE, have duplication as investors may it would be wrong different views on South Korea. already have exposure to popular to base the entire MSCI classes the country as stocks such as the US tech “ emerging whereas FTSE views it decision on cost. companies, dubbed the FANGs as developed. Given the size of (Facebook, Amazon, Netflix, Achieving the right this market, this difference could Google). Investors may hold the investment outcome have serious implications for companies through holdings in should remain returns. the individual shares, in a mutual paramount at IShares MSCI Emerging fund or as part of another ETF all times Markets (SEMA) is similar to the that tracks a global index. Vanguard product despite the Remember, if an index is differing index provider. The most market cap weighted then the glaring difference is that the top largest companies will constitute five holdings of both ETFs are a more significant part of it. identical apart from Vanguard’s ETF not including Samsung, a A ROUTE TO DIVERSIFICATION South Korean company. According to figures from iShares, the ETF division of asset THE COST FACTOR manager BlackRock, March ” When choosing an ETF, low 2018 was not great for ETFs. In costs are obviously part of the the final week of the month, suited to buy and hold investors. attraction but it would be wrong $3.7bn was withdrawn from US Vanguard’s Emerging to base the entire decision equity ETFs and $3.4bn from Markets FTSE (VFEM) top on cost. Achieving the right European equity ETFs. Even holdings include Tencent, China investment outcome should broad developed market ETFs Construction Bank and China remain paramount at all times. saw outflows, totalling $1.4bn. Mobile. Emerging market ETFs Adam Laird, head of ETF Given the weak performance can also offer broad exposure strategy at Lyxor, says: ‘Lower is of major developed markets better although remember that including the FTSE 100 at the cheap isn’t the same as right. A moment, investors may wish low charge can’t compensate for to gain exposure to emerging buying something that doesn’t fit markets instead. your circumstances’. Some might argue that Laird is in a good position investing in emerging markets to discuss costs, his firm Lyxor is so fraught with dangers launched two ETFs recently that that it is unsuitable for passive have the lowest fee in Europe at investing, and is better suited just 0.04%. The aforementioned to active managers with stock Morningstar US Equity ETF and picking skills. its Core Morningstar UK (LCUK). But Morningstar’s Bioy argues One part of the cost equation a broad emerging market fund that is often overlooked is trading will outperform over the long fees. Less frequently traded term and these products are best ETFs may see a more significant
12 April 2018 | SHARES | 37 FUNDS
difference between the price at be aware of when choosing ETFs, which you buy and sell which especially index-based ones. can add up over time and have You might It measures how far the an impact on returns. However, have heard of performance of an ETF deviates if we assume that ETFs are tracking error from its benchmark. As ETFs buy and hold products and are products constructed to investors have a long investment and this is something mirror an index, the tracking horizon, this impact should be else that you need difference and tracking error relatively modest. to be aware of when are particularly relevant The low fees for ETFs are also “ considerations. The tracking choosing ETFs. linked to economies of scale. difference is the performance ETF providers are looking to It measures how far of the index minus the build assets under management performance of the fund, while (AUM) which then allows them the performance of the tracking error reflects the to further lower fees, for this an ETF deviates from volatility of the fund compared reason it might be sensible to go its benchmark with the underlying. with larger providers if you can. Noting that its PowerShares S&P 500 (SPXS) has a charge of PHYSICAL OR SYNTHETIC? just 0.05%, Chris Mellor, head Physical and synthetic replication of equity and commodities refer to the method by which an product management at Invesco exchange-traded fund achieves PowerShares says: ‘There isn’t its tracking of a market. much more we can do to Physically-backed products performance of a market. reduce that, so instead we trade directly in the underlying Synthetic products” tend to look for ways to incrementally stocks and shares in an index be used when it is difficult to improve the tracking. to replicate the performance track a market through physical ‘Making sure our ETFs are of a market, while synthetic replication either due to a lack competitively priced and have ETFs employ a swap-based of liquidity or restrictions on low tracking error should result method of replication, buying foreign ownership. in our investors getting more derivatives contracts offered by You might have heard of for their money. In our opinion, brokers and investment banks tracking error and this is that’s a better recipe for growing which artificially provide the something else that you need to AUM for the long term.’ (DS)
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iguring out what to do with your tax-free pension F lump sum is a complex but extremely important decision. If you’ve built up a sizeable pension pot, your lump sum could be worth more than £100,000 so it’s vital to ensure you use it wisely. 25% WHAT IS THE TAX-FREE tax-free CASH LUMP SUM? You can start taking money pension from a workplace pension lump sum scheme or self-invested personal pension (SIPP) from age 55 under current rules. Everyone is entitled to withdraw 25% of their pension is a sensible move. paying off debts. tax-free, and the rest is taxed As long as the money is in your This could be especially according to your income tax pension, it will continue to benefit worthwhile if your borrowings band. from tax-free investment growth. are on a high APR rate of You can choose to leave your A lot of people withdraw interest, although Tait suggests tax-free cash lump sum invested, their lump sum and stick it in first considering whether you withdraw it all in one go or take a bank account or Cash ISA, could reorganise your finances to it in smaller instalments. but this could severely limit reduce your interest costs. Your tax-free amount doesn’t investment growth. ‘I would also strongly caution use up any of your personal ‘Withdrawing cash from a against taking money from allowance – the amount of pension plan will clearly have your pension if you have other income you don’t have to pay an impact on the income you sources of finance available to tax on. may get later on, and it is wise reduce your debt,’ adds Tait. to think carefully before going ‘This is because the money SHOULD I TAKE THE MONEY ahead,’ says Fiona Tait, technical which remains inside the pension OR KEEP IT INVESTED? director at Intelligent Pensions. will remain invested under Unless you have a very There are some legitimate favourable tax conditions, and it specific requirement in mind, reasons why taking the cash sum should also be available outside such as paying off a mortgage could be a good idea – principally of your estate in the event of your or other debts, leaving the if you’re able to use the money death, allowing it to be passed on tax-free cash sum untouched to improve your finances by free of inheritance tax.’
40 | SHARES | 12 April 2018 Helping you with personal finance issues MONEY MATTERS
WHY SHOULD I CONSIDER to pay significant pension TAKING THE LUMP SUM IN SHOULD I TAKE contributions,’ says Kate Smith, INSTALMENTS? head of pensions at Aegon. It isn’t necessary to take your THE MONEY OR ‘This can be particularly whole tax-free lump sum in KEEP IT INVESTED? tax-efficient for higher-rate one go, so it makes sense to taxpayers, as they are entitled to only withdraw the amount you 40% tax relief on their pension actually need. WHY SHOULD I contributions, or £2 for every Andrew Tully, pensions £3 paid in.’ technical director at Retirement CONSIDER TAKING Advantage, points out that if your THE LUMP SUM IN I’VE GOT A SMALL PENSION pension grows in value, you’ll POT – WHAT DO I NEED TO end up getting more tax-free INSTALMENTS? THINK ABOUT? cash by taking it in instalments There are special tax rules for over time than if you took it in small pension pots where each is one go. worth no more than £10,000. ‘Another key reason to think From age 55, you can cash in about phasing your tax-free up to three small pots to a total cash is that by taking benefits of £30,000. gradually, rather than all at once, As with other pensions, 25% you can delay the impact of any is tax-free, with the remainder lifetime allowance tax charge,’ added to your taxable income. says Tully. A major advantage is that You can choose to take tax-free using the small pension pots cash as and when it is needed to rule doesn’t affect your annual top up your income. allowance or lifetime allowance. ‘This is tax-efficient and ‘Using the small pot rule may mean you avoid taking allows you to retain the higher taxable income in years when annual allowance, giving you you have high income from the flexibility to continue other sources, for example to pay significant pension employment if you are thinking contributions,’ explains Smith. about going part-time and easing into retirement,’ Tully explains. Another perk is that taking HOW WILL THE TAX-FREE the tax-free cash lump sum LUMP SUM AFFECT IHT? WHAT SHOULD I DO IF I’M A doesn’t affect your annual Any money that stays in your HIGHER-RATE TAXPAYER? allowance – the amount you pension remains outside your If you’re a higher-rate taxpayer, can save into a pension without estate, meaning no inheritance tax the ability to take 25% of your incurring a tax charge. (IHT) is due on it when you die. pension pot tax-free and without The annual allowance According to figures from it adding to your income tax bill reduces from £40,000 to £4,000 Mattioli Woods, someone with a is very attractive. a year as soon as you access the pension worth £500,000 would It could even save you remaining 75%, unless it’s a increase the value of their estate money in the long run if small pension pot. by £125,000 if they took out you expect to continue to ‘Just taking the tax-free cash their tax-free lump sum. be a higher-rate taxpayer in and leaving the remainder of Assuming their home and retirement. This is because the pension fund untouched personal investments are worth the remaining 75% of pension allows you to retain the higher £300,000 each, their IHT bill withdrawals are taxed according annual allowance, giving you would rise from £60,000 to an to your income tax band. the flexibility to continue eye-watering £110,000. (EP)
12 April 2018 | SHARES | 41 MONEY MATTERS Helping you with personal finance issues Avoid the pension freedoms emergency tax pitfall We talk you through the problem and how to sidestep it
s we enter the new tax year, a whole range of PENSION FREEDOMS OVER-TAXATION - HOW THE SYSTEM WORKS* Asavings options and tax TAX AN INDIVIDUAL WOULD EXPECT TO PAY allowances once again open Withdrawal Expected tax due Effective tax rate up to savvy investors. If you £2,000.00 £0.00 0.00% are over 55, you might also £5,000.00 £0.00 0.00% use this as an opportunity to £10,000.00 £0.00 0.00% review your retirement plans £20,000.00 £1,698.20 8.49% and consider your drawdown £50,000.00 £8,696.40 17.39% withdrawal strategy. TAX AN INDIVIDUAL ACTUALLY PAYS ON SINGLE PENSION FREEDOMS WITHDRAWAL While for many taking a Withdrawal Tax due under ‘Month 1’ Effective tax rate regular income stream and £2,000.00 £208.18 10.41% remaining invested will be the £5,000.00 £1,058.03 21.16% right option, others choose to £10,000.00 £3,058.03 30.58% take ad-hoc taxable payments £20,000.00 £7,385.08 36.93% from their fund. This might be £50,000.00 £20,885.08 41.77% to pay a child’s tuition fees, fund *Source: AJ Bell calculations. All examples assume individual has no other taxable income care for an elderly relative to use an emergency ‘Month 1’ have made from your pension or splash out on a luxury tax code. This means the Revenue and your personal circumstances. Caribbean cruise. only gives you 1/12th of the usual Whatever your motive, if tax allowances available on the THE GOVERNMENT WEBSITE you’re going down this route you withdrawal, resulting in many STATES: need to watch out for a pitfall savers being severely overtaxed. • If the payment used up which could see you hit with an For example, someone who your pension pot and you unexpected tax bill running into makes a £2,000 withdrawal could have no other income in thousands of pounds. be overtaxed by over £200, while the tax year, fill in form If you do nothing, you could someone taking out £10,000 P50Z. have to wait 12 months (until could be overtaxed by over • If the payment used up the start of the 2019/20 tax year) £3,000 (see tables). your pension pot and you to get your money back – and have other taxable income, even then you’re relying on the HOW TO GET YOUR MONEY fill in form P53Z. efficiency of HMRC in sorting out BACK WITHIN 30 DAYS • If the payment didn’t use your tax position. Unfortunately there is nothing up your pension pot and you can do to stop HMRC you’re not taking regular WHAT IS THE PROBLEM charging you too much tax if you payments, fill in form P55. The problem can affect anyone make ad-hoc pension freedoms You can only use this form who takes a taxable pension withdrawals. You can, however, if your pension provider freedoms payment from age 55 – fill out one of three reclaim forms can’t refund you. either through drawdown or via in order to get your money back For more information visit: an ‘Uncrystallised Funds Pension within 30 days. www.gov.uk/claim-tax-refund/ Lump Sum’ (UFPLS) withdrawal. How you make a claim for any you-get-a-pension In these circumstances, HMRC overpaid tax depends on the will require your pension provider nature of the withdrawals you Tom Selby, senior analyst, AJ Bell
42 | SHARES | 12 April 2018 You invest Invest from £25 a month in a low-cost DIY pension You choose Choose from a wide range of investment options You benefit Low-cost dealing from as little as £1.50
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AJ Bell Management Limited, AJ Bell Securities Limited and AJ Bell Asset Management Limited are authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales at 4 Exchange Quay, Salford Quays, Manchester M5 3EE FEATURE What does less than a year until Brexit mean for the FTSE 100? The current UK economic and political situation has prompted foreign investors to seek more stable places to hold their wealth
nvestors reared on the quiet calm and steady remain far from resolved. gains of equity markets over the past few Add in the implications of a ‘meaningful vote’ Iyears were given a reminder of that old adage (whatever that means) on the final deal and the ‘investments can go down as well as up’ as stock remote prospect of a business unfriendly Labour markets globally took a turn for the worse over the government, it’s a wonder FTSE didn’t sink to first quarter of 2018. double-digit declines. Bottom of the class was the FTSE 100, which But that’s only the known unknowns. Lurking – in dropping 9% – took the mantle as the worst underneath the Brexit surface are the unknown performing major market. effects it could have on the nation’s currency and We’re told that it was the decline of technology interest rates. related stocks that acted as the dead weight on Collectively, the UK spends more abroad than markets, but it’s hard to reconcile that with a foreigners spend in the UK. While that’s most UK market showing little in the way of hi-tech notable in the trade deficit, even when the trade in representation. We must therefore look elsewhere services and returns on investments held abroad are for answers. taken into account, the UK still managed to spend £83bn more abroad than foreigners spent in the UK. Coming hard on the heels of the £114bn deficit we racked up in 2016, it’s clear to see that demand 2 for foreign goods and services is so insatiable that the only way to keep paying off our tab is to resort 0 to the sale of assets instead. For example, that might be the sale of our -2 football clubs, vast swathes of the West End, properties that lay dormant or, more mundanely, Hang Seng Markets -4 S&P 500 UK Government debt. NIKKEI 225 MSCI Emerging -6 UK Current Account Deficit over last 20 years FTSE 100 Euro Stoxx50 -8 01/12/1997 01/09/1999 01/06/2001 01/03/2003 01/12/2004 01/09/2006 01/06/2008 01/03/2010 01/12/2011 01/09/2013 01/06/2015 01/03/2017 0 Source: Bloomberg -10 -1 -2 It can pay to keep an eye on history and -3 politics when considering investments. With -4 less than a year until Brexit becomes a reality, it is perhaps unsurprising to see the UK indices -5 lagging against a backdrop where thorny issues -6 such as the Irish border and future trade deals -7 Source: Bloomberg
44 | SHARES | 12 April 2018 FEATURE
While US president Donald Trump would have £ Effective Rate over last 5 years us believe that a substantial current account deficit 100 puts a nation in a strong negotiating position as the 95 ‘customer’, the flip-side of the coin is, without the 90 generosity of foreigners to keep on extending credit 85 to us in this way, we will either need to reduce the quantity of things we consume or accept tougher 80 conditions on the deal. 75 Those tougher conditions could come in many 70 65 forms. If foreign investors decided not to buy Source: Bloomberg UK Government debt, interest rates would need 60 to head higher still, hurting the economy in the 28/03/2013 28/03/2014 28/03/2015 28/03/2016 28/03/2017 28/03/2018 process. Worse still, if this triggered the sale of their for…yes, you guessed it, higher interest rates. existing positions (which now exceed £300bn); the And so, as Brexit approaches and the various Treasury could find itself short of cash potentially camps likely increase their hostilities in the pursuit enforcing further austerity. of a final deal, it would pay investors to remember If that were not a worrying enough prospect, that we live in a global world, with global values think of the impact a foreign withdrawal would and reliance upon each other which would have have on the value of the pound. been previously inconceivable. Short of the £83bn or so of foreign investment This interdependency has helped forge a required to balance the books, sterling would prolonged period of peace and a FTSE 100 index undoubtedly plummet in scenes reminiscent of the where over 80% of earnings are generated on immediate aftermath of the Brexit vote. foreign shores. Requiring the nation to work harder just to With this in mind, the decline in the FTSE now stand still, any goods that remain imported would seem overdone, but for global investors, the rise in price, whilst those that transferred to UK message sent by Brexit may keep them waiting in production would serve only to put pressure on an the wings for now. already stretched jobs market. What’s the result? Unquestionably higher Kevin Doran, inflation, which in turn would create the need chief investment officer, AJ Bell
12 April 2018 | SHARES | 45 LARGER COMPANIES Is Just Eat share price fall a buying opportunity? The online food delivery company’s investment plans have divided the market
hares in takeaway ordering specialist Just Eat (JE.) have dropped from the all-time Shigh of 890p marked in February by more than 20% to 686.6p (6 Mar). Is this a buying opportunity or is the company’s new investment strategy too risky? Just Eat generates sales from its online platform, which is used by hungry consumers to find and order takeaway food.
WHAT HAS CHANGED? One of Just Eat’s advantages is its asset-light business model, but this will change as the company moves into handling delivery services for restaurants, essentially following in the foot outside London. steps of the likes of Deliveroo. He argues the company will be exposed to more Initially this will involve investment of £50m in lower-priced restaurants. delivery services and branding. ‘Given these developments, the UK is less stable The UK, Canada, Australia and New Zealand are than previously anticipated and we now value the the prime targets for delivery services, as well as UK at £2.4bn vs. £4bn before,’ comments Diebel. developing markets. The move will materially hit earnings before REASONS FOR OPTIMISM interest, tax, depreciation and amortisation (EBITDA) There are plenty of bulls in support of Just Eat, in 2018 as it absorbs staff and transportation costs. one of whom is Peel Hunt analyst James Lockyer. This is anticipated to fall year-on-year from £226m He forecasts adding delivery services will to between £165m and £185m. expand the market size from £23bn to £41bn, helping to drive earnings in the future. WHAT ARE THE RISKS? Lockyer forecasts sales in 2018 will rise 5% to JP Morgan Cazenove analyst Marcus Diebel says £717m and climb 8% higher in 2019, but EBITDA the delayed move into delivery is bad for Just Eat is expected to fall 18% in both 2018 and 2019 as Deliveroo and UberEats have taken a significant due to the investment. share of the high/mid-price segment, particularly We believe Just Eat’s strategic move makes sense but recognise the increased risk in the JUST EAT FTSE ALL SHARE business that could manifest itself in several ways. 900 850 The company may need to plug more money into 800 delivery services than expected and there are 750 execution and competition risks. 700 Just Eat currently trades on 26.7 times earnings 650 per share in 2019, down from 34.6 times in 600 February. We think this is still too expensive until 550 500 Source: Thomson Reuters Datastream more details are provided on how the delivery 2017 2018 services will be rolled out. (LMJ)
46 | SHARES | 12 April 2018 SMALLER COMPANIES Why it is worth grappling with Sumo Video games champion looks an impressive growth business
ideo games developer Sumo (SUMO:AIM) looks attractive ahead of maiden AIM results V (24 Apr). Positive noises from the Sheffield- based newcomer should be the catalyst for some bullish analyst commentary and potentially lift the stock from recent post-float weakness. Sumo debuted on AIM in December, having raised £38.45m of fresh funding at 100p, since when the stock has drifted back below the IPO issue price to 93.5p. In our view this represents a good entry point for new investors. Sumo’s pre-close update (1 Feb) sounded A highly complementary addition to Sumo, this confident – calendar 2017 results will be ‘at least visual design expert works with brands including in line with management expectations’ - and the Amazon, Marvel and Sony, projects on its CV including group is geared into growing global demand for Guardians of the Galaxy and Mortal Kombat. creative content. BOLSTERED BALANCE SHEET VIBRANT VIDEO GAMES PLAY IPO funds have repaid debt, so that Sumo now The £143.6m cap’s is growing organically as one boasts ‘significant positive cash balances’ to help of the world’s leading co-developers of AAA-rated it invest in organic growth and the acquisitions of gaming titles and its work-for-hire model means premium video game service providers and rival it is not exposed to risks associated with the hit games developers. driven nature of a games publisher. Institutional backers include BlackRock and Given its scale and creativity, Sumo appears well Liontrust, appetite among professional fund placed to capitalise on the forecast growth in the managers reflecting Sumo’s merits and the video games industry, the biggest entertainment strong performances of sector peers Keywords market in the world. Studios (KWS:AIM) and Frontier Developments Core business Sumo Digital is a leading developer (FDEV:AIM). of AAA-rated video games operating out of studios Peel Hunt has initiated coverage with a ‘buy’ in England, India and Canada. rating and 125p price target implying 33.7% Boasting strong ties with major developers potential upside. For 2017, the broker awaits and publishers including Microsoft, Sony and confirmation of adjusted pre-tax profit of £7.1m IO Interactive, Sumo Digital has provided (2016: £2.1m), forecasting hefty increases to development services for hits such as OutRun 2, £8.9m and £11.7m this year and next. Hitman and Sega & Sonic All-Stars. Last year, Sumo Digital released its first own SHARES SAYS: intellectual property title, Snake Pass, which The video games sector has had a deserved has proved a hit albeit this remains a small if reputation for lumpiness, yet Sumo looks an developing part of the business. attractive cash-generative growth story. (JC). Shares notes June 2017 acquisition Atomhawk Design has delivered an especially strong BROKER SAYS: 001 performance post acquisition.
12 April 2018 | SHARES | 47 SMALLERSMALLER COMPANIESCOMPANIES Why Charles Taylor’s results were better than the market thought Insurance services business looking cheap after mixed reaction to results
ll told 2017 was a tough year for do not ‘relate to the underlying the insurance industry but this performance’ of the company and are Apresented opportunities for 31.3% therefore stripped out. Charles Taylor (CTR). As the sector On an adjusted basis, the company’s struggled with technical innovation, drop in profit was up 3.5% to £15.3m Charles Taylor continued to build statutory although its share price took a hit after its capabilities as a provider of profit results were released on 14 March. professional services to the insurance for 2017 The company states this was due to industry. confusion over the reasons behind the Existing in one form or another since the adjustments and, in this context, it is worth mid-19th century, Charles Taylor has three main noting a 5% hike in the full year dividend to 11p. areas of business. It loss adjusting arm is commissioned by insurers BUILDING OUT THE BUSINESS to estimate the costs of pay-outs across aviation, Charles Taylor acquired Criterion Adjusters in energy and marine markets. 2017, a loss adjusting business focused on high The management services division earns fees net worth individuals. for running pooled insurance funds for industry It also bulked up its US third party administrator groups. It runs the Standard Club, which insures business with the purchase of workers around 10% of the world’s shipping fleets. compensation claims administrator Metro The company has recently made major Risk Management. investments into InsureTech, its digital platform. It already manages all the workers’ claims for The insurance sector has suffered from a failure its client Signal Mutual, the largest provider of this to adapt to using technical innovation to reduce type of service to the US maritime industry. costs and increase efficiencies. InsureTech seeks The company’s acquisition of a closed book of to address this. Zurich International portfolio bonds boosted the The company’s CEO David Marrock attributes company’s ability to generate fund management a 31.3% drop in statutory profit for 2017 to costs revenue and saw it enter the fund administration arising from the InsureTech investment and services market. acquisitions made during the year. He says these The company has also been branching out internationally, It is working with a company called Fadata as part of its tech strategy. CHARLES TAYLOR FTSE ALL SHARE Justin Bates, analyst at broker Liberum, is 300 excited by the company’s prospects. He upgrades 280 his 2018 adjusting services profit forecast by 20% to £4.3m with a resulting 2% hike for its 2018 260 earnings per share forecast to 22.6p. 240 At 257p and based on this forecast the shares
Source: Thomson Reuters Datastream trade on an undemanding price to earnings ratio 220 2017 2018 of 11.3 times. (DS)
48 | SHARES | 12 April 2018 WEEK AHEAD
MONDAY 16 APRIL TRADING STATEMENTS INTERIMS BHP Billiton BLT Carrs CARR Bunzl BNZL Jupiter Fund Management JUP TUESDAY 17 APRIL Polymetal POLY FINALS RELX REL AA AA. Segro SGRO Clearstar CLSU AGMS JD Sports Fashion JD. 88 Energy 88E TP Group TPG Primary Health Properties PHP INTERIMS ECONOMICS Associated British Foods ABF UK APC Technology APC Unemployment Rate Egdon Resources EDR TWO BIG NAMES in the mining TRADING STATEMENTS THURSDAY 19 APRIL industry are set to update on Ashmore ASHM FINALS trading over the next week. Rio Tinto RIO Camellia CAM Rio Tinto (RIO) will publish AGMS Xeros Technology XSG its first quarter operations Dialight DIA INTERIMS review at 11.30pm on 17 April, MD Medical MDMG Gattaca GATC a slightly unusual time for a ECONOMICS Unilever ULVR UK-quoted company to issue UK TRADING STATEMENTS information explained by it also RPI Evraz EVR having a listing in Australia – it PPI AGMS will be 8.30am the following CPI Acacia Mining ACA day in Sydney when the details HPI Essentra ESNT come out. Idox IDOX It’s a similar situation for BHP WEDNESDAY 18 APRIL Science Group SAG Billiton (BLT) when it reports a FINALS Segro SGRO third quarter operational update AFI Development AFRB ECONOMICS late in the UK day on 18 April and Be Heard BHRD UK 8.30am on 19 April in Australia. Retail Sales During the second part of EX-DIVIDEND March, Rio Tinto announced AFH Financial AFHP 4p $4.15bn worth of coal asset sales Aggreko AGK 17.74p meaning it has now exited the BAE Systems BA. 13p coal industry completely. The Balfour Beatty BBY 2.4p sales should complete in the Barratt Developments BDEV 8.6p second half of the year and most Bodycote BOY 25p of the proceeds are expected to Bodycote BOY 12.1p be returned to shareholders. Capital & Regional CAL 1.91p Capital & Counties Pendragon PDG 0.8p Properties CAPC 1p Polypipe PLP 7.5p ROADSIDE ASSISTANCE City Merchants High Rathbone Brothers RAT 39p PROVIDER AA (AA.) releases Yield Trust CMHY 2.5p RPS RPS 5.08p full year results on 17 April and Communisis CMS 1.77p Science Group SAG 4.4p investors will be eager to see Croda CRDA 46p SCS SCS 5.3p what new changes CEO Simon Drax DRX 7.4p Standard Life Aberdeen SLA 14.3p Breakwell has in store. Fevertree Drinks FEVR 7.64p Stilo International STL 0.05p Breakwell shocked the market Global Ports GPH 20.1p Taptica TAP $0.05 in February with his new strategy Greggs GRG 22p Tyman TYMN 7.7p for the company and also slashed Informa INF 13.8p UBM UBM 18p the dividend. John Laing JLG 7.17p Vitec VTC 20.1p He’s not been in the job long Kerry Group KYGA €0.44 Wood Group WG. $0.23 and has the blessing of Neil Lloyds LLOY 2.05p Zotefoams ZTF 4.02p Woodford who increased his McColl’s MCLS 6.9p stake following the update. Will Merchants Trust MRCH 6.3p Click here for complete diary other investors stay on board? Northamber NAR 0.1p www.sharesmagazine.co.uk/market-diary
12 April 2018 | SHARES | 49 NEW TAX YEAR MEANS NEW INVESTMENT OPPORTUNITIES Are you looking for new companies to invest in? Come and join Shares at its evening event in London on Monday 21 May 2018 and meet directors from Echo Energy, Goldplat, ThinCats and VolitionRx.
Sponsored by London – Monday 21 May 2018
Companies presenting
Echo Energy Speaker TBC Echo Energy is pursuing a high value piped onshore gas strategy across South and Central America, which commences with a multi trillion cubic feet potential Bolivian exploration portfolio. The company is led by a team and cornerstone investor with strong regional connections and an impressive track record. Goldplat Gerard Kisbey-Green, CEO Goldplat is a profitable African gold recovery services company with two market leading operations in South Africa and Ghana. Goldplat’s strategy is focussed on utilising its robust cash flow generated from its flagship gold recovery operations in Africa to self-fund sustainable growth and expansion of a niche gold recovery business model. ThinCats Stewart Cazier, Head of Retail ThinCats is one of the pioneers of the peer-to-peer business lending industry; specialising in loans with security and linking retail and institutional investors directly with established business borrowers to provide an alternative to high street banks.
VolitionRx Cameron Reynolds, CEO Volition is a multi-national life sciences company developing simple, easy to use blood-based cancer tests to accurately diagnose a range of cancers. The tests are based on the science of Nucleosomics which is the practice of identifying and measuring nucleosomes in the bloodstream or other bodily fluid – an indication that disease is present.
Follow this link www.sharesmagazine.co.uk/events for full details.
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During the event and afterwards over drinks, investors Event details will have the chance to: Location: Novotel Tower Bridge, London EC3N 2NR
Discover new investment opportunities Registration 18:00 Presentations to start at 18:30 Complimentary drinks and buffet available after the presentations Get to know the companies better Contact
Chris Williams, Spotlight Manager Talk with the company directors [email protected] and other investors 020 7378 4402
Register free now www.sharesmagazine.co.uk/events INDEX
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The value of investments can go down as well as up and you may get back less than you originally invested. We don’t offer advice about the suitability of our products or any investments held within them, if you require financial advice you should consult a suitably qualified financial adviser. Tax treatment depends on your individual circumstances and rules may change.
AJ Bell includes AJ Bell Holdings Limited and its wholly owned subsidiaries. AJ Bell Management Limited and AJ Bell Securities Limited are authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales at 4 Exchange Quay, Salford Quays, Manchester M5 3EE
KEY Crystal Amber Fund 35 Impax Asset 14 Murray International 27 (CRS) Management (IPX:AIM) Trust (MYI) • Main Market • AIM Dart (DTG:AIM) 6 Independent 35 Ocado (OCDO) 30 Investment Trust (IIT) • ETF Dignity (DTY) 26 On The Beach (OTB) 35 • Fund EasyHotel (EZH:AIM) 29 International Airlines 6 Group (IAG) • Investment Trust EasyJet (EZJ) 6 iShares MSCI 37 Eckoh (ECK:AIM) 11 Emerging Markets Everyman Media 28 (SEMA) (EMAN:AIM) ITM Power (ITM:AIM) 23 AA (AA.) 49 EVR Holdings 10 Johnson Matthey 15 (EVRH:AIM) (JMAT) Evraz (EVR) 7 JPMorgan Smaller 35 Polymetal (POLY) 7 Fenner (FENR) 35 Companies (JMI) PowerShares S&P 38 Fevertree (FEVR:AIM) 28, Just Eat (JE.) 46 500 (SPXS) 35 Lakehouse (LAKE:AIM) 23 Renishaw (RSW) 31 Land Securities 12 Restore (RST:AIM) 24 Abcam (ABC:AIM) 28 (LAND) Rio Tinto (RIO) 49 Accesso (ACSO:AIM) 32 Lindsell Train 35 Royal Bank of 2 Alfa Financial (ALFA) 26 Investment Trust (LTI) Scotland (RBS) Artemis Alpha 34 Lloyds (LLOY) 11 Royal Dutch 12 Trust (ATS) Lyxor MSCI 36 Shell (RDSB) BAE Systems (BA.) 12 Fidelity Special 35 World (WLDL) RWS (RWS:AIM) 28 Baillie Gifford Shin 35 Values (FSV) Mears (MER) 23 Ryanair (RYA) 6 Nippon (BGS) Focusrite (TUNE:AIM) 14 Meggitt (MGGT) 12 Sarasin Endowments 8 BHP Billiton (BLT) 12, 49 FP Octopus UK Micro 27 Merchants Trust 12 (GB0003119400) Blue Prism 35 Cap Growth Fund (MRCH) Sophos (SOPH) 26 (PRSM:AIM) (GB00BYQ7HN43) Metro Bank (MTRO) 30 Source MSCI World 36 Bovis Homes (BVS) 12 French Connection 8 (SCOJ) (FCCN) CFP SDL UK 14 Sumo (SUMO:AIM) 47 Buffettology Fund GB Group (GBG:AIM) 28 The Scottish 28 (GB00B300FJ66) Gear4Music (G4M:AIM) 28 Investment Trust Charles Taylor (CTR) 48 Glencore (GLEN) 7 (SCIN) Conviviality (CVR:AIM) 22 Herald Investment 35 Vanguard Emerging 37 Markets FTSE (VFEM) Core Morningstar UK 38 Trust (HIT) Micro Focus (MCRO) 26 (LCUK) Hotel Chocolat 32 Vodafone (VOD) 11 Miton UK Microcap 10 Core Morningstar US 37 (HOTC:AIM) Wizz Air (WIZZ) 6 Trust (MINI) Equity (LCUS) Ideagen (IDEA:AIM) 7 WPP (WPP) 2
12 April 2018 | SHARES | 51