Royal Mail chairman Donald Brydon announces he is stepping down

Otmane El Rhazi from Mindful Money » Shares.

Royal Mail chairman Donald Brydon is to leave his post, the company has today confirmed.

Brydon, who oversaw the controversial privatisation of the delivery company in 2013 has been in the position since 2009, will remain in the job until at least the AGM in the summer the company said in a statement.

Senior independent director, Orna Ni-Chionna, has already started looking for a successor.

Brydon said: “I am proud of what Royal Mail has achieved as a company in the last six years. Our transformation is well underway and we are now a FTSE 100 listed company. I feel that now is the right time for me to make this decision.”

Group chief executive Moya Greene added: “Donald has played a key role as Chairman during one of the most eventful periods in our history. I would like to personally thank him for his support and counsel.”

Last week the delivery firm reported in its trading update for the nine months to 28 December 2014, that it handled around 120m parcels in the month of December alone, 4% more than last year and that revenues overall were up 1%.

This morning Royal Mail shares were down by 5.3p or 1% at 432.5p by 09:29 following the news.

Shop talk: Why did the market react so badly to Boohoo’s recent trading update compared with Sainbury’s?

Otmane El Rhazi from Mindful Money » Shares.

Earlier this month, two very different retailers issued very contrasting trading statements and saw their share prices react in very divergent ways writes Nick Kirrage.

Nothing too surprising there you might think – except for the fact that Boohoo.com, the business that saw its share price consequently dive, had published the sort of numbers for which the other, Sainsbury’s, would happily chew off its metaphorical arm.

On 7 January, the date of both announcements, Boohoo’s share price fell some 40% as the online fashion retailer admitted recent growth had been a little down on the 35% it had been stating for the full year. That would still, of course, be amazing growth and a level about which those at the helm of Sainsbury’s, or indeed any of its competitors, can only dream of.

As the supermarket giant itself put it: “The outlook for the remainder of the financial year is set to remain challenging, with food price deflation likely to continue.” So why did its shares stay pretty much flat on the day while those of Boohoo plummeted? Well, would you like to guess which business began the morning trading on a price/earnings (P/E) ratio of 40x and which was on a P/E ratio of 8x?

When all is said and done in investing, it is not enough to predict the direction a business is heading or to judge whether any associated newsflow will be good or bad or even to call the expectations of investors correctly. It all comes down to paying the right price – and, equally, not paying the wrong one. Here on The Value Perspective, we were – and remain – invested in just one of these businesses.

Brokers label PR and advertising giant WPP a ‘buy’

Otmane El Rhazi from Mindful Money » Shares.

Brokers are putting their cash behind advertising and public relations giant WPP as its shares continue to rally.

The FTSE 100 constituent is typically regarded as the bellwether of the advertising industry and therefore something of a global economic barometer.

The past three months alone have seen the firm’s shares rise by 21% while the present analyst consensus has the stock in ‘strong buy’ territory.

For his part Graham Spooner, investment research analyst at The Share Centre, is recommending WPP as a ‘buy’ for long term investors with a balanced portfolio.

He says: “The company offers a wide range of exposure to both digital media and global markets, and has seen its share price rally since October. The growing importance of emerging markets and digital media to the company looks set to continue, allied to improving dividends, earnings momentum and a steady flow of acquisitions.”

Despite a trading update in October, which cautioned that clients remained cautious over the group’s advertising spend, like for like sales rose by 3% in the third quarter.

But the recent strength in the dollar in conjunction with the weakness of the pound could see the group’s earnings receive a boost in 2015 asserts Spooner.

He says: “New technology should help open up avenues for growth for the group over the longer term. This is reflected in new media related business becoming WPP’s fastest growing area. Currently the shares trade on around 14.6 times 2015 forecast earnings, which does not appear overly expensive.”

Strong dollar and weak oil price likely to boost Europe’s corporate profits

Otmane El Rhazi from Mindful Money » Shares.

The strong rise in the US dollar and the fall in the oil price are likely to provide a boost to corporate profits in Europe and Japan this year asserts Carlo Capaul, head of global equities at Swiss & Global Asset Management. He explains why…

In both regions, profits are likely to exceed expectations, while there could be disappointments in the USA.

However, there is limited room for dividend increases in regions where the strong US dollar and the low oil price are causing problems, for example emerging markets such as Brazil, Russia or Malaysia.

The individual business models of companies, as well as the climate in their specific industries are key considerations for investors in these markets. This also applies to countries such as France or Italy which are struggling with economic problems.

For certain euro countries the framework conditions are indeed difficult; however, this does not mean that companies in these countries – in particular outside the finance sector – should be avoided. Many European companies operate globally and achieve only a small share of their sales in their home countries. Russia should however be approached with caution. Given the political and economic conditions, it will remain an unattractive environment for dividend investors in 2015.

This year, global dividend volume will grow by a single-figure percentage. The most important influencing factor will be corporate profits, as the global backdrop is unlikely to change much, even if the US Fed becomes the first leading central bank to introduce a more moderate monetary policy during the year. We expect real economic growth of 2.3 percent and nominal economic growth of 4.1 percent in industrial countries (measured in US dollars), and nominal growth of 11 per cent in emerging markets.

Non-index-oriented investors will likely shift part of their commitments to favourable markets such as the eurozone, Japan, China, Thailand, Taiwan and Turkey, in attractive sectors such as industrials, telecommunications and non-basic consumer goods.

Brokers calling Taylor Wimpey a ‘buy’ as the house builder enters 2015 with record order book

Otmane El Rhazi from Mindful Money » Shares.

A flurry of analysts have thrown their support behind house builder Taylor Wimpey which has declared it has started 2015 in an “excellent position.”

The UK-based firm, which has with subsidiaries in North America and Spain, in its trading update today announced that total completions for 2014 rose by 6% with average prices rising by 12% to £213,000 and that the company has entered 2015 with a record order book worth almost £1.4bn.

As a result brokers at JP Morgan Casenove, Citigroup, Deutsche and Liberium Capital have all issued positive notes on the firm leaving the shares, which are up 4% over one year and by 14% over the past three months, in “strong buy” territory according to Digital Look.

In statement Taylor Wimpey chief executive Pete Redfern, commented: “Taylor Wimpey starts the year in an excellent position and whilst the global economic outlook is uncertain, in the UK we have an environment of sensible mortgage regulation and a reduced risk of UK interest rate increases in the near term.“

Brokers at The Share Centre are also backing the stock. Helal Miah, investment research analyst at firm said ” It believes it is currently at its optimal size in terms of the amount of plots it has acquired and owns. Furthermore, the group expects to improve the operation margin by 400 basis points and currently sit on a cash balance of £113m.

“Although 2015 may not be as successful as 2014, we recommend Taylor Wimpey as a ‘buy’ for medium risk investors. The expectation of a moderation in the housing market should lead to a more sustainable growth rate, which will still be supported by government policies and the demand for housing.”

Tesco unveils massive cost-cutting plans as it gears up to close 43 stores and final salary pension scheme

Otmane El Rhazi from Mindful Money » Shares.

Embattled supermarket group Tesco is to shut 43 “unprofitable stores” and will not pay a final dividend for 2014/15.

In addition it is closing its generous defined benefit, or final salary pension scheme, and closing its headquarters in Cheshunt in 2016. It will instead make Welwyn Garden City the UK and group centre.

The firm is also scrapping plans to open 49 more stores. The market welcomed the news as shares in the firm jumped by 7%, or 13.32p to 195.32p by 9:32am.

The dramatic cutbacks come on the back of a tumultuous period for the firm which has seen it issue a number of profit warnings.

Last year it was revealed that the retailer had over-stated profits by £263m, prompting the launch of an investigation by the Serious Fraud Office and the suspension of a number of senior executives.

In the retailing giant’s latest trading statement, it reported that like-for-like sales fell back by just 0.3% during the six-week Christmas period and by 2.9% for the 19 weeks to January 3. The group’s new chief executive Dave Lewis who took over in September last year said the business has some “very difficult changes to make”.

He added: “I am very conscious that the consequences of these changes are significant for all stakeholders in our business but we are facing the reality of the situation.

“Our recent performance gives us confidence that when we pull together and put the customer first we can deliver the right results.”

It has also agreed a deal to sell its online streaming service Blinkbox and Tesco Broadband to TalkTalk.

Man Group’s turnaround in fortunes sees it hit The Share Centre’s ‘buy’ list

Otmane El Rhazi from Mindful Money » Shares.

The Share Centre has added hedge fund giant Man Group to its ‘buy’ list as better investment performance has resulted in increases in funds under management.

The stockbroker believes earnings at the group, which has endured a turbulent period over recent years, should recover well soon boosted by investor sentiment. The past 12 months alone has seen the FTSE 250 constituent’s stock jump by 91%.

Man Group was regarded as a bellwether for the hedge fund industry but the extreme volatility caused by the financial crisis led to a number of its funds to perform very poorly.

Looking ahead, Helal Miah, investment research analyst at The Share Centre, said: “We believe the long awaited turnaround in the fortunes of this business has begun and the shares have been creeping upwards on the more positive sentiment. Recent trading updates have shown positive signs with interim results in August reporting a 7% increase in funds under management.”

Furthermore, Miah highlighted that a trading update in October reported a 25% rise in third quarter funds under management to $72bn.

“While most of these are as a result of acquisitions, some of the key funds have demonstrated an increase in funds under management on the back of better investment performance,” he added.

“The shares are still a long way off from the time when hedge funds were sought after investments and the recovery in investor sentiment may be slow. The shares trade at roughly 17 times forward earnings, slightly above other big asset managers, however we believe the earnings should recover well soon.”

Brokers tip Dixons Carphone as one of 2015′s potential winners

Otmane El Rhazi from Mindful Money » Shares.

Brokers are tipping retailing giant Dixons Carphone as a potential winning share in 2015.

In August last year Dixons and Carphone Warehouse merged, and the newly created firm’s stock has been on the up, rising 42% share in the past six months and by 25% over three. Analysts are optimistic for further gains as the market consensus has the shares firmly labeled a ‘buy’ according to Digital Look.

December witnessed Citigroup, Deutsche and Investec Securities all reiterate positive recommendations on the Currys and PC World owner, while Ian Forrest, investment research analyst at brokerage The Share Centre, is calling Dixons Carphone his share of the week.

Forrest highlighted the stock’s 2015 price/earnings ratio of 20.5, which is described as “relatively high for the sector, but that reflects the strong earnings and dividend growth forecast by analysts for the next few years”.

He said: “Dixons Carphone has been added to our ‘buy’ list due to the company’s good performance since the merger. The first interim results from the combined group were very impressive and showed like-for-like sales growth. The 11% rise in the UK and Ireland was described as “barnstorming” by the chief executive, who added that he is comfortable with market expectations ahead of the crucial Christmas trading period.

“The scale and scope of the group’s consumer electronic products makes it ideally placed to benefit from the recent steady rise in consumer sentiment in the UK. As wages begin to outpace inflation and employment levels increase, the group looks set to benefit. Analysts have been raising their expectations rapidly since the merger and with the company outperforming, this trend may well continue. The attractive share price is based on strong sales growth, the potential boost to retailers from the fall in the oil price and the benefits of scale provided by the merger.”