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Hot off the digital press - Download the November edition of Spreadbet Magazine



Wednesday's Stock Market report featuring United Utilities, Bunzl, Thomas Cook, Britvic and Norcon

The Markets

The Confederation of British Industry expects that this Christmas will be a chilly one for the UK retail sector as profits face a squeeze due to intense competition and tight household budgets. Across the private sector as a whole, sentiment is more positive, with the CBI’s survey of 130 businesses suggesting that many companies are planning on increasing employment and investment over the next three months. However, Barry Williams, Chief Food Merchandising Officer at Asda, said that, “with prices under pressure and more firms adopting US-style Black Friday offers, retailers are expecting a festive boost next month and are certainly doing their best to put smiles on customers’faces and make it easy on their pockets”.

The price of oil has fallen once again ahead of the meeting of the Organisation of the Petroleum Exporting Countries (OPEC) tomorrow, with the price of Brent Crude dropping a further 0.8% this morning. There is dissent within the cartel as to how falling prices should be handled, with Venezuela and Iraq pushing for output to be cut to drive up prices, which have dropped by 30% since June. Indications suggest that Saudi Arabia, Russia and the United Arab Emirates would oppose such a move, with the UAE Oil Minister Suhail bin Mohammed al-Mazroui commenting that, “the market will fix itself ultimately”.

At the London close the Dow Jones had decreased by 5.23 points to 17,809.71 and the Nasdaq had grown by 17.72 points to 4,305.95.

In London the FTSE 100 closed down by 1.97 points at 6,729.17 and the FTSE 250 fell by 43.12 points to 15,788.43. The FTSE All-Share decreased by 2.29 points to 3,593.62 while the FTSE AIM Index shrank by 1.39 points to 728.45.

Broker Notes

Westhouse Securities has rated Amlin (AML) as a “buy” after the reinsurance firm provided further details on its move to increase its holding Leadenhall Capital Partners from 40% to 75%, for a consideration of $29.1 million dollars (18.4 million pounds). The broker believes that the plan benefits Amlin financially, adding substantially to assets under management, and can help the firm remain near the forefront of the industry. The shares fell by 0.9p to 436.2p.

Shore Capital has downgraded Bunzl (BNZL) to a “hold” rating with a target price of 1,770p due to the firm’s strong recent performance having met all of the broker’s expectations. Shore believes that the company will continue to perform well across its verticals, but thinks that it has now reached a price reflective of its true value, even taking into account the improved outlook for next year and potential new acquisitions. The shares fell by 11p to 1,759p.

Numis Securities has reduced its rating on Renew Holdings (RNWH) from “buy” to “add” after sustained outperformance of its peers has caused the firm’s share price to soar. The broker maintains a positive view of the stock and Renew’s future development but the recent strength of the engineering services division has meant that the company has exceeded expectations relative to other firms in the sector. Numis feels that the share price, which today moved downwards by 9.5p to 283.5p, reflects this.

Broker expects renewed growth

Blue Chips.

Water giant United Utilities (UU.) saw revenues for the six months ended 30th September rise by 1.6% to 859.4 million pounds, which has lead the firm to announce an interim dividend of 12.56 pence per share for the period. Management have announced 280 million pounds of new investment that will be funded by the recent outperformance. The board believe that this programme will bring the company closer to achieving long-term targets and sustained dividend growth. The shares dropped by 6p to 908.5p.

Plumbing supplies outfit Wolseley (WOS) grew sales for the three months to 31st October by 5.2% to 3.5 billion pounds, with the improvement being driven by a string performance in US and UK markets. The United States now contributes 55% of revenues, with regional sales rising by over 10% during the period. Management expect that full year results will be in line with expectations. Shares in the company fell by 33p to 3,531p.

Catering firm Compass (CPG) struggled with the strength of sterling during the year ended 30th September, but still delivered 4.1% revenue growth, driven by new contract wins and good business retention rates. Conditions in Europe and Japan continued to improve, with margins rising by 40 basis points. Management have increased full year dividends by 10.5% to 26.5p per share. Shore Capital and Numis Securities reiterated “hold” ratings on the stock, which declined by 14p to 1,060p.

Compass on course, despite currency complications

Mid Caps

Full year revenues for the 12 months ended 30th September fell by 8% to 8.5 billion pounds at holiday operator Thomas Cook (TCG). This was due to foreign exchange movements, unit disposals and lower demand for Egyptian holidays. However, underlying EBIT for 2014 on a like-for-like basis was up by 44% at 323 million pounds. Despite the rise in profits Thomas Cook shares sank by 24.4p to 113.5p after the markets focussed on the news that CEO Harriet Green has stepped down and been replaced by Chief Operating Officer, Peter Fankhauser, with immediate effect. The two years of Green’s reign saw the shares rise almost tenfold, from a low of 14p.

Property company Daejan Holdings (DJAN) increased pre-tax profits for the six months to 30th September to 134.5 million pounds from 76.5 million pounds for the same period in the prior year. This came due to a net valuation gain on the firm’s UK and US property portfolios in excess of 60 million pounds. Rental incomes also grew, from 56 million pounds to 66 million over the course of the year. The shares rose by 145p to 5,125p.

Soft drinks firm Britvic (BVIC) saw profits before taxation rise by 22.9% to 132.9 million over the year ended 28th September as it made targeted efforts to improve its operating margins, including the closure of four UK facilities. Management expect further growth during the coming year as Britvic launches its Fruit Shoot products in the United States and expands production capacity by investing in a new high speed bottling line. The shares declined by 41.5p to 655p.

Britvic deliver something sweet, but market not convinced

Small Caps

Shares in Security Research Group (SRG) dropped precipitously after management announced plans to de-list from the AIM market. After a strategic review of the business, it has been concluded that the best course of action for shareholders is to dispose of the firm’s three operating business and return capital to shareholders. The shares plummeted by 17.5p to 42.5p.

Shares in enterprise software developer K3 Business Technology (KBT) edged up by 0.5p to 221.5p after saying at its AGM that trading in the new financial year to date has been in line with expectations. Demand for the firm’s new flagship Microsoft Dynamics “ax|is” solution is said to be “encouraging” and its recent accreditation of membership of Microsoft’s Global Independent Software Vendor programme highlights the product’s global potential. As in previous years, cash generation in the first half will benefit from SYSPRO licence and support contract renewals, and the company’s net debt position at 31st December 2014 is expected to be in line with management expectations, tracking normal seasonal patterns.

Exploration outfit Kalimantan Gold Corporation (KMG) has reached an agreement to purchase a 40% stake in the Indonesian Beutong Copper-Gold Project from Tiger Realm Copper. The deal is share based and Tigers will also provide Kalimantan with an interest free loan to provide working capital during the due diligence period. Management believe that this asset compliments the firm’s existing holding and will help the company establish a strong prospective portfolio near major markets. The shares grew by 0.55p to 2.35p.

Housebuilder Telford Homes (TEF) has hinted at positive future results, saying that its London-centered development pipeline has a value in excess of 1 billion pounds. Completions dropped in the six months ended 30th September due to the timing of projects, but costs also fell and stronger margins meant that profits rose to 9.4 million pounds before tax despite a drop in top-line revenues. The shares rose by 5.25p to 364.75p.

Outsourcing specialist Norcon (NCON) has seen its performance improve in the second half of the year and is trading in line with management expectations for the current period. Margins have strengthened and the board now believe that the full year target of revenues around 5% below those for 2013 and flat pre-tax earning will be met. This decline is due to a number of delayed projects. The shares ended the day flat at 19.75p.

Profits for the six months ended 30th September fell by more than 66% to 1.5 million pounds at onshore hydrocarbon producer Igas (IGAS). This was due to a non-recurring foreign exchange gain during the comparable period of 2013 and the negative effects of the strong pound on trading. The company has protected itself so far from recent price volatility via a hedging arrangement covering 517 barrels of oil at a blended rate of $87.7 (55.5 pounds) per barrel. Igas shares rose by 1.75p to 58p.

Igas plans to weather oil price storm


Zak Mir Video Blog On Bulletin Board Heroes: Mosman Oil & Gas, Mwana Africa, Scancell and Snoozebox



Spreadbet Magazine editor Zak Mir takes a look at the technical position of some of the bulletin board stocks of the moment amongst private investors.

Here are the key points from today’s video:

Mosman Oil & Gas (MSMN)

The shares have delivered a higher November support zone versus October and above the 10p level.

An end of day close back above the 50 day moving average at 16p could lead to the 2014 price channel top at 30p.

Only well below the 10p zone would turn this situation outright bearish.

Mwana Africa (MWA)

After an extended consolidation around the 200 day moving average, now at 2.18p, the shares have continued to rise in near vertical fashion.

The latest price action could mean a move towards the December price channel top at 3.5p over the next 2-4 weeks.

Only cautious traders would wait on any dips towards the 200 day moving average before taking the plunge on the long side.

Scancell (SCLP)

Scancell shares are continuing to build after the October gap fill failure this month and rebound off the 200 day moving average at 34p.

The best way forward now is probably to look to buy into any weakness towards the 200 day moving average / bull flag floor.

Only cautious traders would wait on a clearance of the November 40p resistance line as a momentum buy signal before going long.

Snoozebox (ZZZ)

We have a V shaped bull flag resting above the bull flag at 9.17p appears to a robust setup.

While above the 200 day moving average there is the chance of a decent tally towards the 15p plus 2014 resistance.

The favoured scenario is that there will be a relatively sharp break to the upside over the next 2-3 weeks.


The morning news update with Compass Group, Thomas Cook and First Property

FTSE 100

United Utilities (UU.) - underlying operating profits up by 1% at £343.1 million in the six months to September, dividend up by 4.6%.

Compass Group (CPG) - underlying pre-tax profits up by 5.4% at £1.159 billion in the year to September, dividend up by 10.5% at 26.5p per share.

Wolseley (WOS) - posts a trading profit for the ongoing businesses of £235 million in the three months to October 13.5% ahead of last year at constant FX rates

FTSE 250

Britvic (BVIC) - Group EBIT of £158.1 million for the 52 weeks to 28th September, up 17.6% on last year and ahead of previous guidance. Full year dividend of 20.9p, up 13.6%.

Thomas Cook (TCG) - Underlying EBIT on a like-for-like basis was up by 44% at £323 million in the 12 months to September. Chief Executive, Harriet Green, has stepped down from the business and will be replaced by Chief Operating Officer, Peter Fankhauser, who will take over with immediate effect.

Kier (KIE) - has successfully raised £120m via the US private placement market.

Small caps

K3 Business Technology (KBT) - Trading in the new financial year to date has been in line with management expectations.

Omega Diagnostics (ODX) - adjusted profit before tax up 32% to £0.56 million in the six months to September.

First Property (FPO) - pre-tax profits up by 184% at £5.42 million in the six months to September, dividend up by 6% at 0.35p per share.

Minoan (MIN) - has agreed to issue three-year unsecured convertible loan notes up to a maximum amount of £1.5 million with a coupon of 10% per annum. 

Anglesey Mining (AYM) - posts a loss of £878,908 for the six months to September,


Tuesday's Stock Market report featuring Petra Diamonds, Kingfisher, Zoopla, Accumuli and Hardide

The Markets

The US economy grew at an annualised rate of 3.9% between July and September according to the latest figures from the Bureau of Economic Analysis. This was an upgrade from the 3.5% level that the government body had initially estimated. The largest driver of the improvement was consumer spending, which grew 40 basis point faster than had been initially believed and contributes 70% to US GDP. While future prospects remain uncertain, the US has shaken off its slow start to 2014 and produced its best two consecutive quarters in the last ten years.

The Organisation for Economic Cooperation and Development has said that the UK’s economic recovery will continue into 2015 and 2016. The thinktank believes that consumer spending and private investment will continue to improve as uncertainties diminish, although the OECD did warn that the rate is likely to fall over that period and that “robust productivity is an essential condition for strong and sustainable growth, and uncertainty over its recovery is a major risk to the projection. Labour market pressures could disconnect real wage growth from productivity and lead to cost-push inflation”.

At the London close the Dow Jones had increased by 8.51 points to 17,826.41 and the Nasdaq had risen by 41.98 points to 4,293.30.

In London the FTSE 100 closed up by 1.35 points at 6,731.14 and the FTSE 250 rose by 121.49 points to 15,831.55. The FTSE All-Share increased by 4.92 points to 3,595.91 while the FTSE AIM Index grew by 2.35 points to 729.84.

Broker Notes

Northland Capital has reiterated that it views AdEPT Telecom (ADT) as a “buy” after the company won its first NHS Trust contract. The broker says that acquiring more public sector business has been one of the firm’s core aims in the last year and the firm has brought more than 20 councils onboard, with the NHS representing an exciting new growth opportunity. The shares, on which Northland has a 175p target, fell by 1p to 130p.

Life sciences firm Horizon Discovery (HZD) has kept its “speculative buy” rating from Beaufort Securities after it entered into a licensing and distribution deal with Adarza Biosystems to supply new immunoassay technology. The broker believes this set of products will be attractive to researchers and complement Horizon’s existing range. helping to maintain recent upbeat financial developments. The shares ended the day flat at 153.5p.

Sparkling stone miner Petra Diamonds (PDL) has had its “buy” rating reiterated by Westhouse Securities after its successfully refinanced loans related to its purchase of two mines from DeBeers, under new terms that will allow the loan to be settled 3-4 years earlier than under the prior arrangement. Westhouse feels that this materially strengthens Petra’s balance sheet and will allow the commencement of dividends within the current financial year. Petra Diamonds shares grew by 11.7p to 206.3p.

Broker says case for Petra still crystal

Blue Chips

Utilities firm Severn Trent (SVT) increased revenues by 2.7% to 947.6 million pounds for the six months ended 30th September despite having the lowest combined average bill in the UK. Profits before taxation dropped from 191.2 million pounds to 138.2 million, due to movements in financial instruments held by the firm, but underlying profits rose by 10.3% to 155.8 million pounds. The shares fell by 7p to 2,055p.

Difficult conditions in French markets and foreign exchange have restricted profits at Kingfisher (KGF), whose retail earnings posted an 11.8% decline to 225 million pounds in the quarter to 1st November. Volume sales rose in other overseas markets but this growth was outweighed by rising development costs and the stronger pound. Management retain a cautious outlook and are focused on improving margins and the implementation of cost initiatives. The shares fell by 12.5p to 291.3p.

Is Kingfisher about to dive?

Mid Caps

Consumer finance provider Paragon Group (PAG) recorded profits before taxation of 122.8 million pounds for the year ended 30th September, a 17.2% increase over the prior year caused by an 82.5% increase in Buy-to-Let completions and an increased range of operations at Paragon Bank. Management said that the company’s pipeline remains strong and that further diversification will underpin sustainable growth. The shares rose by 29p to 406.9p.

Online property portal Zoopla (ZPLA) saw revenues rise by 24% to 80.2 million pounds over the year ending 30th September after visitor numbers rose by a third to 513 million. The firm was bullish on its future prospects, despite the launch of a new rival platform backed by estate agent groups. Broader movements in the property market are also cause for concern, but management say that trading in the post-period to date has been encouraging. The shares dropped by 11.4p to 178.6p.

Pub and restaurant operator Mitchells & Butlers (MAB) increased revenues for the year ended 27th September by 4% to 1.97 billion pounds, as it returned to growth in food after the prior year’s volume decline. The firm also increased its site count via new openings and the 173 pubs purchased from Orchid Group. Management are pleased with the current performance and the firm’s market leading position, but believe that there is additional room for growth. The share price increased by 27.1p to 376.1p.

Cheering results for Mitchells and Butlers

Small Caps

Shares in Chamberlin (CMH) edged up by 2.5p to 107.5p after the engineering firm reported a return to profit for the six months to September. Underlying pre-tax profits for the year were 0.4 million pounds, up from a 0.6 million loss. This came after revenues grew by 8.2% to 21.1 million pounds and as management took action to address the cost base. The firm expects full year results to be in line with expectations. Further good news has been seen following the period end with Chamberlin signing a €6.7 million, four year deal with a leading European automotive business for the supply of turbo charger bearing housings. Last week a similar but larger €26 million, eight year contract was announced. Broker Charles Stanley has a 120p target price on the shares.

Indian online retailer Koovs (KOOV) doubled its sales to INR 95.4 million (0.98 million pounds over the six months ended 30th September by adding more, well-known international brands to its platform while improving its own label offerings. However, the loss before taxation deepened to INR 359.5 million (4.08 million pounds) as costs of sales rocketed upwards by more that 800%. The shares climbed up by 9p to 160p.

IT security outfit Accumuli (ACM) saw its statutory loss before taxation for the six months to 30th September widen to 0.48 million pounds from 0.21 million pounds in the prior year despite posting substantial improvement to revenues, due to costs and provisions involved in the acquisition of information risk management firm ArmstrongAdams in June. Management expect revenues to strengthen further in the next six months and is confident of a good outcome for the full year to March. Shares in Accumuli fell by 0.625p to 23.5p.

Adhesive and bonding manufacturer Scapa (SCPA) increased revenues by 2.8% to 114.7 million pounds in the six months to September despite the impact of the strong pound on international sales. North American income was up by 14.8% in local currency terms due to strong sales of industrial products and destocking of consumer-targeted products, such as hockey tape, during the prior period. Shares in the company rose by 3.5p to 131.75p.

Metal coating specialist Hardide (HDD) made record revenues of 3.03 million pounds over the year ended 30th September after the company won a major contract with General Electric worth a minimum of $1.3 million (0.83 million pounds) for each of the next two years. While the uncertain global economic outlook is a cause for concern, management report that they have seen no softening of demand in current trading. The shares grew by 0.1p to 1.75p.

Revenues at quarrying and concrete specialist Breedon Aggregates (BREE) have beaten forecasts and increased by 10% to 226 million pounds for the 10 months to 31st October. If weather conditions for the remainder of the year are favourable, then Breedon’s full year results are likely to exceed current market expectations as EBITDA margins have also improved in both English and Scottish operations. The shares rose by 1.75p to 43.25p.

Gravel firm remains on track to beat forecasts


The world's greatest investors - Philip Fisher, the second mentor of Warren Buffett

by Frederik Vanhaverbeke

In the latest of a new series for SBM Frederik Vanhaverbeke, author of Excess Returns: A comparative study of the methods of the world’s greatest investors, looks at how some of the world’s greatest investors are so successful.

The percentage of investors who own 25 or more different stocks is appalling. It is not this number of 25 or more which itself is appalling. Rather it is that in the great majority of instances only a small percentage of such holdings is in attractive stocks about which the investor has a high degree of knowledge.

—-Philip Fisher

Philip Fisher was a reclusive American who managed the money of a selective group of investors between 1931 and 1999. He became famous as the man who had the second-largest impact on Warren Buffett’s investment style. Although Fisher had valuable insights on all facets of investing, Buffett was especially impressed by Fisher’s publication (almost 60 years ago) of his ideas about the factors that contribute to the success of corporations. Even nowadays, the way Buffett performs his qualitative analyses of stocks is still inspired by Fisher’s ideas.

The least one can say is that Fisher’s business views were visionary and way ahead of their time.

Even more, in my analysis of recent business literature on best corporate practices and management success factors I was amazed that this literature praises the very characteristics that Fisher had identified as critical more than half a century ago. In this article I briefly highlight some of these factors. For those readers who are interested in a more thorough discussion on due diligence please see my book Excess Returns: a comparative study of the method’s of the world’s greatest investors.


To ensure that he covered every relevant business aspect and to avoid being seduced by promotional companies that promise a lot but that have yet to deliver, Fisher designed a framework for the analysis of companies. This framework consists of a list of fifteen points that he systematically tried to answer for every potential investment. In summary:

  • His first concern was with the company’s sales. Fisher wanted to make sure that there was sufficient sales potential for the company’s product (or service) portfolio. He, therefore, checked whether there was true demand for the company’s current products or services, whether the company’s innovation and R&D were above par to ensure a string of new future products, and whether the company’s sales and marketing efforts were superior to those of competitors. Fisher was primarily impressed by companies that managed to grow sales at rates (far) above the industry’s average.

  • Second, Fisher was only interested in profitable growth. His preference for long-term investments went to companies with higher profit margins than their peers (indicating stronger pricing power), and to companies that were likely to increase their profit margins over the next years.

  • Next, Fisher paid an extraordinary amount of attention to management. Fisher invested only in companies with managers of unquestionable integrity, who talk freely about problems and failures, and who promote people based on merits. He stressed that management should be careful to maintain outstanding relations with all employees (e.g., through decent salaries and delegation of power) as this leads to higher productivity. He expected management to manage the business for the long-term, since a short-term focus (e.g., under pressure of Wall Street) often reduces the creation of value over the long-term. Fisher also highly valued a razor-sharp focus on cost control. He also argued that outstanding top executives nurture a pool of talented managers that are ready to take their place when they leave.

  • Finally, Fisher looked for peculiar aspects of the business. He was partial to companies that did things differently from their rivals, and that thought outside the box.

Once he had finished his analysis Fisher’s final step was a so-called “scuttlebutt” double check. Fisher walked into stores to check out the companies’ products, and talk to vendors. He grilled managers to challenge them and to sort out uncertainties. He interrogated employees and ex-employees about the company. He asked the opinion of competitors (e.g., management or the sales force) and suppliers on the company. And so on. According to Fisher, the thorough (first) analysis combined with the scuttlebutt check revealed an enormous amount of unique information that put him at a clear advantage in the market.

Fisher stated that since it is very hard to find an outstanding business that meets all your requirements and that trades at an interesting price, one should try to make the most out of one’s best ideas. He advocated a concentrated portfolio and dismissed the conventional wisdom that one should reduce risk through wide diversification.

Fisher’s portfolio seldom consisted of more than ten stocks, and he was not afraid to have three quarters of his portfolio in three to four stocks. In addition, once he found an outstanding business Fisher preferred to hold on to it for a very long time and as long as the company continued to deliver. Motorola is an example of a stock that stayed in his portfolio for many decades.

In the same logic, market timing was wasted on him. Fisher argues that one should buy and sell based on fundamental considerations (about which the investor should have a lot of knowledge) and ignore one’s subjective gut feel about the market direction (which is largely based on guessing).

Fisher’s investment wisdom had a huge impact on the investment world, and has been instrumental in the way great investors identify excellent businesses. In my next article I discuss another pioneer of investing: Benjamin Graham.

Read more about Philip Fisher’s investment recommendations in Frederik Vanhaverbeke’s new book Excess Returns: A comparative study of the methods of the world’s greatest investors, published by Harriman House.