Profit from Predictable Mistakes
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TIPS IDEAS FARM The consequence of this is that incremental Profit from predictable mistakes changes to broker forecasts can often resemble more of an upward or downward trend than a ALGY HALL referred to as “unknown unknowns”, brokers also random walk. This can reveal a positive or negative roker forecasts are wonderful things; not have to grapple with “known unknowns” – events story unfolding and sometimes can be far more Bbecause they are right, but because they are and trends that can be seen coming but are still indicative of a long-term trend than the consensus often so wrong. A great illustration of how off-the- impossible to quantify. It is the efforts of brokers view. The table we publish in the Ideas Farm of mark forecasts commonly are comes from a study to quantify the “known unknowns”, and the pres- consensus broker upgrades and downgrades by contrarian investor David Dreman, updated sures on them to underestimate their significance, hopes to highlight possible trends that are either in 2008 by investment firm Star Capital (a screen that can be regarded as of real value to investors. emerging or are already established. As always based on Mr Dreman’s deep-value approach can What behavioural psychologists term with the information on the Ideas Farm pages, the be found in this week’s stock screen on page “anchoring” often causes forecasts to remain data only provides an indication that something 59). The joint Dreman/Star study covered 1.5m too wed to the status quo. But not only is it hard interesting may be happening – only research can forecasts spanning 33 years. It found that over the to imagine a future that is significantly different really suggest if a decent investment case exists. course of 12 months the average forecast was off from the present, it is also dangerous for brokers Three of the shares in our Tips section this by 30 per cent – ie very wrong. to predict it. For those analysts bold enough to week (see page 40) have shown noteworthy At this point, it may be tempting to conclude make predictions that stand out from consensus recent forecast trends. Earnings forecasts for bike that broker forecasts are useless. Indeed, this forecasts, there can be genuine career risk. Bold and car parts retailer Halfords (HFD) have moved year’s coronavirus crisis illustrates the futility of forecasts are likely to attract ridicule at the time sharply higher after many years of decline, and trying to predict the future. they are made and derision if they are not reason- there are some reasons to think this could prove Many events that are much less high-profile ably accurate – the Dreman/Star analysis shows the start of a positive trend. Meanwhile, down- than coronavirus but are similarly unpredictable inaccuracy is always a strong possibility. In the grades at TI Fluid Systems (TIFS) and Wood tend to jolt individual company forecasts up and words of the great economist and investor John Group (WG.) – a share that also appears in our down over the course of any 12-month period. Meynard Keynes: “It is better for reputation to fail table of most shorted stocks – may be a genuine However, as well as what Donald Rumsfeld conventionally than to succeed unconventionally.” cause for concern. UK global fund manager best ideas New 52-week highs Based on top 3 most overweight Name TIDM Price % from high 27/05/2020 No of funds Abbott Laboratories 1 Ruffer Investment Company LSE:RICA 244p 0.4% Mastercard Inc A 6 Adobe Inc 1 Pacific Horizon Investment Trust LSE:PHI 404p 0.5% Amazon.com Inc 2 Dentsply Sirona Inc 1 IG Group LSE:IGG 800p 0.5% TAL Education Group ADR 2 Alphabet Inc Class C 1 Jersey Electricity LSE:JEL 477p 0.6% Unilever PLC 2 Taiwan Semiconductor Manufacturing 1 Manchester & London Investment Trust LSE:MNL 623p 0.6% Microsoft Corp 2 Ping An Insurance (Group) Co. of International Biotechnology Trust LSE:IBT 776p 0.7% Heineken NV 2 China Class H 1 JPMorgan Japanese Investment Trust LSE:JFJ 497p 0.8% Tencent Holdings Ltd 1 Medtronic PLC 1 AO World LSE:AO. 129p 0.8% Diageo PLC 1 Intuitive Surgical Inc 1 Bango AIM:BGO 159p 0.9% Nintendo Co Ltd 1 Kering SA 1 Accrol Group AIM:ACRL 51p 0.9% PayPal Holdings Inc 1 LVMH Moet Hennessy Louis Vuitton SE 1 Personal Assets Trust LSE:PNL 44,100p 1.0% Exact Sciences Corp 1 AIA Group Ltd 1 Baillie Gifford European Growth Trust LSE:BGEU 970p 1.0% Dassault Systemes SE 1 Nestle SA 1 Ocado LSE:OCDO 2,107p 1.1% The Estee Lauder Companies Inc Class A 1 Accenture PLC Class A 1 Ariana Resources AIM:AAU 4p 1.2% Visa Inc Class A 1 Partners Group Holding AG 1 Uniphar AIM:UPR 168p 1.2% Mowi ASA 1 Fresenius SE & Co KGaA 1 Hilton Food LSE:HFG 1,322p 1.2% Kerry Group PLC Class A 1 Reckitt Benckiser Group PLC 1 Metal Tiger AIM:MTR 2p 1.3% Alphabet Inc A 1 Hoya Corp 1 IntegraFin LSE:IHP 523p 1.3% UnitedHealth Group Inc 1 Macquarie Group Ltd 1 Gresham House AIM:GHE 680p 1.4% Source: Morningstar Verisk Analytics Inc 1 GlobalData AIM:DATA 1,405p 1.5% BB Healthcare Trust LSE:BBH 167p 1.5% Worldwide Healthcare Trust LSE:WWH 3,585p 1.5% New 52-week lows The Biotech Growth LSE:BIOG 1,230p 1.6% Stock Spirits LSE:STCK 237p 1.7% Name TIDM Price % from low Avon Rubber LSE:AVON 3,180p 1.7% Impellam AIM:IPEL 273p 0.0% Gore Street Energy Storage Fund LSE:GSF 102p 1.9% London Finance & Investment LSE:LFI 34p 1.5% Domino’s Pizza LSE:DOM 359p 1.9% Kin and Carta LSE:KCT 52p 1.5% Caledonia Mining Corporation AIM:CMCL 1,220p 1.9% Dignity LSE:DTY 216p 2.5% Polar Capital Technology Trust LSE:PCT 1,944p 2.0% Horizon Discovery AIM:HZD 99p 2.6% Smithson Investment Trust LSE:SSON 1,440p 2.0% Hargreaves Services AIM:HSP 198p 2.7% Landore Resources AIM:LND 1p 2.2% J. Smart & Co. (Contractors) LSE:SMJ 111p 2.7% Bioventix AIM:BVXP 4,300p 2.3% Worsley Investors LSE:WINV 26p 2.7% Spirax-Sarco Engineering LSE:SPX 9,766p 2.3% Source: S&P Capital IQ Source: S&P Capital IQ 44 INVESTORS CHRONICLE 29 MAY - 4 JUN 2020 TIPS IDEAS FARM Shorts 1-month EPS upgrades (top 25) Short No of 1-week change Wednesday, 27 May 2020 FWD EPS CHG Company interest shorters in short interest Name TIDM 1mth 3mth 1yr Premier Oil 19.6% 3 0.0% IGas Energy AIM:IGAS 350.0% -79.9% -81% Hammerson 13.5% 10 0.6% Shield Therapeutics AIM:STX 220.4% 220.9% - Flutter Entertainment LSE:FLTR 164.1% -0.6% -7% Easyjet 8.5% 6 0.2% LoopUp AIM:LOOP 111.5% 132.7% -43% Royal Mail 8.1% 7 0.7% Robert Walters LSE:RWA 93.0% -69.2% -73% Tullow Oil 8.1% 6 -0.7% Serica Energy AIM:SQZ 42.0% -67.8% -76% Metro Bank 8.0% 5 0.0% EKF Diagnostics AIM:EKF 39.3% 39.1% 46% Pearson 7.0% 7 -0.2% Titon AIM:TON 37.6% 37.6% -36% System1 AIM:SYS1 36.8% 36.8% -38% Babcock Intl 6.2% 6 0.6% Alfa Financial Software LSE:ALFA 35.0% -66.0% -88% Weir Group 6.0% 6 0.3% Plus500 LSE:PLUS 26.2% 104.3% 64% Ascential 5.8% 5 0.0% Bloomsbury Publishing LSE:BMY 24.1% -48.8% -51% Wm Morrison Supermarkets 5.8% 4 -0.2% NWF AIM:NWF 19.8% 19.8% 24% Capita 5.7% 4 -0.5% Frontier Developments AIM:FDEV 17.3% 19.1% 30% Antofagasta LSE:ANTO 14.5% -69.5% -79% Sainsbury (J) 5.2% 4 -0.9% Dart AIM:DTG 14.1% 33.8% 70% Gw Pharmaceuticals 5.2% 4 0.0% IG Group LSE:IGG 12.7% 30.4% - Petropavlovsk 5.1% 1 0.0% McBride LSE:MCB 11.8% 8.5% - Marks & Spencer 5.1% 4 0.5% Halfords LSE:HFD 9.9% -29.0% - Petrofac 5.1% 4 0.0% Tyman LSE:TYMN 9.0% -44.8% -54% Water Intelligence AIM:WATR 8.4% 12.9% 13% Pets At Home 4.8% 2 0.0% Playtech LSE:PTEC 8.2% -57.4% -68% IQE 4.8% 3 0.0% Games Workshop LSE:GAW 8.1% -13.5% -2% AA 4.6% 3 -0.1% Warpaint London AIM:W7L 7.7% 7.7% -43% Dignity 4.6% 3 -0.3% Polymetal International LSE:POLY 7.7% 19.3% 48% Tui Ag 4.3% 4 -0.7% Source: S&P Capital IQ Keywords Studios 4.2% 5 -1.5% Intu Properties 4.1% 2 0.0% 1-month EPS downgrades (top 25) Signature Aviation 4.1% 7 0.1% Wednesday, 27May 2020 FWD EPS CHG Future 4.1% 3 0.0% Name TIDM 1mth 3mth 1yr Micro Focus International 4.1% 3 -0.2% The Restaurant Group LSE:RTN -97.3% -99.6% -100% On the Beach LSE:OTB -84.5% -98.4% -99% Croda International 4.0% 5 0.1% Rolls-Royce LSE:RR. -82.4% -94.6% -96% Blue Prism 4.0% 4 0.0% TI Fluid Systems LSE:TIFS -80.5% -92.3% -94% Vodafone 3.8% 4 0.0% HSS Hire LSE:HSS -79.7% -79.7% -81% Virgin Money UK 3.8% 4 0.5% Headlam LSE:HEAD -79.6% -92.5% -93% Wood Group (John) 3.6% 5 -0.1% Hotel Chocolat AIM:HOTC -77.9% -85.6% -86% DFS Furniture LSE:DFS -75.6% -92.2% - Carnival 3.5% 3 0.1% J D Wetherspoon LSE:JDW -74.1% - - Equiniti 3.4% 4 0.0% Henry Boot LSE:BOOT -73.4% -73.4% -74% Daily Mail & General Trust 3.4% 3 0.0% Hunting LSE:HTG -68.2% -86.8% -92% Aggreko 3.4% 3 0.0% NEXT LSE:NXT -64.9% -83.4% -83% Auto Trader 3.3% 5 -0.1% National Express LSE:NEX -62.7% -68.9% -69% MJ Gleeson LSE:GLE -62.3% -77.1% -77% Victrex 3.3% 4 0.1% Hyve LSE:HYVE -58.4% -70.3% -70% Burberry 3.2% 4 New Beazley LSE:BEZ -51.9% -95.5% -97% Cineworld Group 3.2% 5 0.0% Topps Tiles LSE:TPT -49.6% -95.2% -96% AG Barr 3.0% 2 0.0% 4imprint LSE:FOUR -48.7% -69.4% -68% Aston Martin Lagonda Global 3.0% 2 New Flowtech Fluidpower AIM:FLO -48.5% -50.8% -64% The Rank Group LSE:RNK -48.4% -55.8% -38% Smith (David S) 2.9% 4 0.0% Accrol AIM:ACRL -45.8% -45.8% -50% Ashmore 2.9% 3 -0.1% Saga LSE:SAGA -39.7% -81.9% -82% Supergroup 2.9% 4 0.0% PageGroup LSE:PAGE -39.6% -56.8% -65% Crest Nicholson Hldgs Plc 2.9% 2 New Capital & Counties Properties LSE:CAPC -38.9% -62.3% -45% Domino’s Pizza Group Plc 2.9% 4 0.0% Mortgage Advice Bureau AIM:MAB1 -38.7% -49.5% -43% Source: S&P Capital IQ Source: FCA 29 MAY - 4 JUN 2020 INVESTORS CHRONICLE 45 .