Hardboy
02 Jan 2018
Re: Top Picks for 2018? - My New Top Ten Thanks for the critique, Games. One reply to follow on the J Mat BB.
gamesinvestor
01 Jan 2018
Re: Top Picks for 2018? - My New Top Ten HB - Good list - I wonder if you have considered Terry Smith's emerging fund, as this is very India focussed and he tends to beat the crowded fund managers space.On the buiders, I've kept at arms length, mistakenly of course since 2008's recovery. But today I would be more uncomfortable with the valuations, and the stickiness of housing sales. Are we reaching a point where, despite demand, the affordability and credit is starting to dry up? The housing stock in the UK is pretty static over the years, yet valuations can and have swung wildly -- the P/E's of the builders look very low, but they could become very high if the E tap gets turned off - it tends to happen quickly and the dividend cover has shrunk dramatically across the whole sector. It could go on to defy gravity with May's desperate additional HTB crutch (it's completely wrong of course), but there's no room for sentiment, is there Bill?, if the logical path for the builders continues to be a free lunch from government. Looks like a house of cards to moi, but wtfdik eh?I did like the guy running Polar, as I met him at a seminar, and his fund is quite diverse -- could be a long term winner, but being a techy mesen, I like to select individual companies.In the tech field, it's Renishaw, Microsoft, Skyworks and Apple in my portfolio.I sold Johnson Matthey after a fairly long and patient hold. Could be a mistake, but I think the uptick in their share price recently was largely due to the announcement of a couple hundred million investment in battery development. It was a very late announcement in my view, given the years their management have been beaten up to do something more serious. I get the distinct impression that they have picked the wrong horse for the battery methodology, compared to the likes of Umicore with NMC technology. The switch also to hybrid's doesn't really help JMAT, given the petrol engine emmissions control (via CAT) is a lot less valuable than Diesel. The petrol engines in a hybrid are tiny and are solely for battery recharge purposes. JMAT's fuel cell division has yielded very little, the battery division is still loss making and the investment falls well short competition -- JMAT may have picked the wrong battery technology.This article describes it pretty well :- [link] could still be a winner, who knows, but they just seem to be going about it all in the wrong way maybe?Ultra is worth a 2nd look and I see your point on the reviving valuation - I dithered and didn't invest, unlike Next, WPP, AA and some others of late.Games
Hardboy
01 Jan 2018
Re: Top Picks for 2018? - My New Top Ten To join in the fun here are my 10. Conveniently all 3 of us have included WPP, so this is a good site to monitor & compare. As you will guess from my comments my selection is more international than Bill & Games. I've homed in on bigger companies to offer some security, most of which pay a good dividend, and like Bill I've focussed on value (still plenty to be found in international businesses.) Aberdeen New India Investment TrustBarratt DevelopmentsGlaxo SmithklineImperial BrandsJohnson MattheyPetrofacPolar Capital Technology TrustStandard AberdeenUltra ElectronicsWPPA brief word of explanation for each choice -ANII - Long Term India has to be the nation with the greatest growth potential; so the short term bet is exchange rates and internal developments work in its favourBDEV - My one bet on the UK, though not much of one. We still have a rising population, and a housing imbalance, and whatever Government is in power they are likely to support the sector. Barratts is my pick of the sector on what I know of the businesses & the fundamentals + they've already committed to pay a healthy special dividend this year. GSK - My view is the sector is oversold & GSK in particular. Elephants don't gallop, but they do wander around a bit; and at this share price their wandering is likely to take them up rather than down. IMPs - The tobacco sector does not necessarily have a long term future, but that means there are no new entrants to a profitable sector; and on current value terms IMPs looks more attractive then BAT.JMAT - Good solid international business in many areas, but I think the move to electric vehicles could be a great benefit to them, as I see the move being from Petrol, to hybrid to electric rather than missing out the middle step; and this gives JMAT the best of both worlds with their Catalytic Converter business and scope for batteries; and if Fuel Cells take off they'll be a winner too.PFC - shares more than halved when the SFO investigation was announced. This year is likely to see a resolution, which I doubt will be good for the company but it will remove uncertainty; and I suspect too much downside is built in already. Apart from that they work in the area which is likely to continue to prosper as long as the world needs oil & gas, they have a healthy backlog of work, and are a potential take over target. PCT - I'm a techno dodo so the chances of me picking the right winners and losers in the fast moving tech world is slightly less than 0. But it's obviously a hugely profitable sector; so I'll back the experts to pick the winners. SLA - When the merger was announced the financials were largely out of favour; and Aberdeen in particular. The share price is not so much higher than the merger price, and we have had NO significant updates on synergy savings or integration progress. I'm just hoping the merger goes well and when the updates come they will be ahead of expectations. I also suspect the Aberdeen side which focusses on overseas funds may see more inflows from UK shy investors. ULE - A defence company. They make clever things which send all sorts of useful data back from buoys and can spot submarines on sea beds from outer space; and all sorts of other mind blowing stuff. Their international business is going very nicely, but the good old MOD in the UK are dithering on spending whilst budgets get sorted out. This meant some major contracts have been postponed. This lead to a profit warning in the autumn and the departure of the CEO. He has been replaced (albeit on an interim basis) by his predecessor who knows the business inside out and has a good track record with the business. My view is the market over reacted to the profit warning (in so much as most of the business is going well) and the signs of recovery are already evident. WPP - Like my comrades, I think it's oversold, and Martin Sorrell who has a good record with the business thinks long
Bill1703
01 Jan 2018
Re: Top Picks for 2018? "... I didn't realise you had emotional interference with your investment decisions lol !!I don't read the Daily Mail, but then again I don't smoke and I have tobacco investments... less to do with the physical newspaper (although in itself profitable) and more to do with it's valuable share in ZPG and Euromoney..."Yes, fair point Games - no place for sentiment in business, and all that! And I hear what you say on the sum-of-the-parts story... so I am "disqualifying" DMGT from the 2018 Top 10 on "ethical investment" grounds, but I may take a sneaky look - not averse to holding my nose for a punt if the numbers stack up. I can add it to its close cousin Trinity Mirror on my watch list - been tempted by TNI for a while, sure it has its fundamental issues and structural challenges, but the valuaton metrics scream "opportunity" (albeit certainly not one for widow nor orphan). 2x actual P/E... 0.4x market cap/NAV... Around 30% FCF yields for last 2 FYs!! Something's gotta give, and probably in a big way... but could be in either direction, of course. "Dry January for me -- so DGE will definitely not come back into my portfolio any time soon."Yes, indeed... both close peers ULVR and RB gave back a fair chunk of their ill-gotten post-Brexit gains in 2017, and others likewise, yet Diageo sails serenely on to new highs? An outright SELL, the biggest in the market IMHO... I would be shorting it, if I was disposed to such things...
Bill1703
01 Jan 2018
Re: Top Picks for 2018? - My New Top Ten As foreshadowed on other relevant boards... 2018 trading from tomorrow, so time to repeat last year's "virtual portfolio" challenge. Same rules, as per the papers - equal weighted, valid for the whole year with no switching, full owning-up at year end! AACapitaConnect GroupGlaxoSmithKlineImperial BrandsITV Lloyds BankingMarks & SpencerStagecoachWPPI retain a bias toward UK exposure and 'Value' (the two closely related, obviously), with an expectation that the UK domestic outlook will clarify satisfactorily (if not wonderfully) this year. But it's no slam-dunk... and so hedged with a decent slug of overseas earnings and a general focus on "stock specific" stories - with LLOY the only real pure play on 'UK PLC' and associated sentiment. Ultimately, well aware that it's near-impossible to avoid losers as well as winners, I have asked the question - can I see 15% over 2018 (plus divis)? Without necessarily much help from the wider market. Four stocks stay in from 2017, with CPI, IMB, ITV and SGC still to justify their original inclusion and getting another chance (SGC was a close call). Bonmarche has done its job as "speculative" midcap retail play; VOD still looks fine to me but harder to see sufficient upside in either valuation or financial reporting; CARD and WTB were tougher choices, both still good for the long term IMHO but I see their respective attractions now more finely balanced against likely persisting near-term headwinds.I will doubtless be elaborating on the case for each of the "new" inclusions in the course of the year. FWIW stocks actively considered but failing to make the cut (as well as CARD and WTB): Braemar and SBRY (from my 2017 Top 10), then Aviva, BT, Debenhams, Gattaca, Merlin, Morrisons, Trinity Mirror.FYI I own 7 of the 10 stocks, with all of CPI (still!), WPP, GSK under active consideration (probably in that order). I'd be surprised if I didn't buy into at least one in the course of 2018.
Bill1703
31 Dec 2017
Re: Top Picks for 2018? "Whilst all may be good companies offering good dividends and good value at this time, personally I'm avoiding such companies till Brexit becomes far clearer..."But therein lies the opportunity, Hardboy... could well be too late to buy in, if valuations have already responded to the actuality, rather than hope, of the said clarity. As long as it does play out accordingly, of course - so not without risk... but then, holding onto (as many clearly currently prefer) a lot of expensive globally diversified blue-chips is not without risk, either. Albeit that risk is more one of mediocre returns, rather than something more seismic. FWIW I am with Games on ITV and WPP, and I think it safe to say both will feature in my "Top 10 for 2018". I have no intention of selling my real holding in CARD, but from where it finished the year, I think it more debatable as top pick for the next 12 months. I can see the case for Next, though it is now some way up from the lows, and I much prefer MKS - for both the medium term and, probably, as a 2018 pick too - on the grounds of all of valuation, financial structure and overall "story".RB was definitely in the frame for me - until recently, with the latest recovery back to £69 leaving little more to go for IMHO. Albeit more 'fair value' than expensive, unlike its market peers DGE and (still) ULVR ... And on IG, I'm with you Hardboy. However impressive its returns, I can see regulators of all colours coming back to it again and again, and its apparent licence to fleece 90% of its customers, no matter how financially savvy they suppose themselves to be - and if regulators don't come calling, there are plenty of current and potential new competitors (however dodgy) who will! I am increasingly pharma-agnostic, it's a "black box" sector for me - and if that is your bag, you might as well go for Life insurers, where at least you get cheap P/Es, prodigous cashflows and big divi yields. If I go for any pharmas it could well be GSK as the 'beaten up' play - and I may even be tempted to sell my real AZN position and put my money where my virtual Top Picks instinct is. Though I suspect that Shire could well be interesting too, and probably deserves a closer look than I've given it hitherto.And no matter how cheap DM> may be, I feel it would be disingenuous to "pick" it while continuing to voice my earnest wish that it goes horribly bust, as an appropriate fate for the pernicious purveyor of propaganda and lies and it's deeply distasteful and tax-dodging non-dom controlling shareholder....
gamesinvestor
31 Dec 2017
Re: Top Picks for 2018? HB - Good response -- couple of points to addThe two Pharma's combined constitute 6.5% of my overall portfolio, so not such a big exposure - I sold both AZN and GSK a while back.DMGT has worldwide exposure and is the largest ww news circular. Yes the physical newspaper is in decline, but the online is growing at 18% a year, as is ZPG and perhaps a little less so Euromoney. If you add up the capitalisation of DMGT's share of ZPG and Euromoney the newspaper is almost incidental -- but a very profitable incidental. It's not for everyone and I bought in right at the very low point so sitting on a 10% gain for starters.Card Factory I consider of such a status that I wouldn't give a monkey's if we joined up with Russia, (joking aside) let alone leaving the EU. It's not such a new holding, and it's showered me with dividends totalling close to the value of the 17% capital gain so far.Next is a value play on a possibly very oversold position and out of favour sector. Again the dividend payments to date have been akin to the 9% gain to date.ITV -- one I was a little more exposed to earlier (too early maybe) and at the current price I'm happy to retain the position -- in hindsight I may have been a little rash on the entry points.On the Sky activity, I'm a little exposed to this possibly via my investment in Walt Disney.On IGG -- I've been watching the regulatory shenanigans, but again the entry was at the collapse and panic stage so 35% up. I think the regulation issues will be resolved - the company has no debt, pension issues, no serious capital spend and literally gurges out cash - and it's a dominant player worldwide in it's field.RB -- I have reservations, but I'm gambling on the cost cutting and margin enhancement of the Mead Johnson acquisition -- could take a long time -- entering at 67XX seemed reasonable for a relatively modest 1.1% of my wad. It's marginally in profit.WPP -- Another gamble on an oversold position, but must admit to it being a rather kneejerk entry, not ever having studied it that much -- I'm guessing you guys know far more about WPP than I do or will.WPP is a lowly 0.65% of my wad - so far, pondering additions if it stays around or below 13XX.Games
Yee Wo
31 Dec 2017
Re: Top Picks for 2018? 41.29% - Jardine Lloyd Thompson29.15% - Diageo26.80% - Rolls Royce25.30% - Unilever 20.01% - RELX 17.59% - Vodafone16.75% - HSBC 13.62% - G4S 11.47% - Inchcape 9.85% - British Land8.59% - British American Tobacco6.56% - Royal Dutch Shell5.49% - Smith & Nephew2.57% - BP-15.33% - GlaxoSmithKline-26.16% - WPPAbove the 2017 SP performance, excluding dividends, of the 16 stocks I held throughout the year. GSK is 4% and WPP is 7.2% of my portfolio, so if I'm going to follow a "Dogs" strategy then on diversification grounds GSK is the way to go! I do hope WPP's issues are cyclical rather than structural. Any useful suggestions gratefully received!
Hardboy
31 Dec 2017
Re: Top Picks for 2018? Thanks Games, Always good to read other people's suggestions - specially someone who invests in fundamentals like me. I know all but the AIM co (though 10% small caps is a good balance IMHO) but haven't looked at most for a while. My "off the cuff" observations.2 Pharmas - 20% in one sector may be a bit much, but I think it's a fairly safe sector and one which is generally oversold at this time. Not looked at either in detail, so can't comment, but think it's a good sector. DM & GT, Card Factory, Next, ITV - all largely dependent on UK consumer spending. Whilst all may be good companies offering good dividends and good value at this time, personally I'm avoiding such companies till Brexit becomes far clearer. Once the SKY takeover is finally resolved one way or another I'm also avoiding the media sector - getting far too competitive & expensive for key content. IGG - I've been a fan of in the past, and done well investing in them, but some revelations about the way they do business during the year has put me off them, and I think there is a danger of a further clamp down on spread betting, so I'm avoiding it, but won't knock it as an investment choice. RB - I've always liked; whenever I've compared them I've always come out preferring them to Unilever. Great brands, good international spread, but probably come into the "Elephants don't gallop" category. Whenever I look at them they seem over priced, but that's what you get for quality. WPP - well we're both on this board for a reason. I feel the reaction to their profit warnings was overdone, and now is a great time to invest. World Cup years are usually good for the advertising sector. So overall - looks like a good spread. Personally I'd look for a greater weighting in international earnings specially for 2018, but won't knock any of the individual shares. Good luck
gamesinvestor
30 Dec 2017
Top Picks for 2018? Any ideas? -- here's a few I'm backing :-1. Alliance Pharma2. Daily Mail & GT - because it's beaten up & it's investment in ZPG and Euromoney3. WPP - of course - hoping the ad lean patch will reverse and it's not structural4. Next -- not a big fan per say, but the valuation is interesting having entered very low5. IDOX - small Aim company with a strong hold on public sector document mgmt6. Card Factory - Sticking with it, for it's cash generation7. IG Group -- already up 30% in 2017 but I think it's a runner despite regulatory issues8. ITV - despite taking a bath on this in 2017 capital wise (with divis I'm about flat)9. Shire -- underwater in 2017 -- think it's undervalued, highly cash generative 10. Reckitt Benckinser -- offers risk but possible upside here if sentiment adjustsOnly 2 of these in my top 10 but I'm looking for a good upside across all 10 (8 relatively new) - fingers crossed.2017 best performersBurberry - 70% -- sold due to change of management and strategyRenishaw - gone gang busters - keeping for Additive ManufacturingAdvanced Medical Solutions - keeping (massive potential)Britvic - + 30% -- on the fence at the momentUnilever - 25% -- long term hold - many view it as overvaluedVictrex - significant rise -- keeping for the long term - PEEK has promiseNovo Nordisk +55% -- long term holdPayPal + 50% -- a keeper for growthApple - lucky entry pointMicrosoft - long term hold (great growth in Cloud) - AI future possibilities.Estee Lauder + 50% - smells good to me.Games
gamesinvestor
30 Dec 2017
£ v Euro Just a thought to the £ versus Euro reality :-last word on this, but to put the impact of the vote into perspective, if you look at this chart over just 10 years, you will see that for large periods the £ was weaker against the Euro than since the vote to leave.[link] of 2009-10 was below or equal to where we are today. Similarly in 2012-13If you also look at the period in 2014-15 leading up to the vote, it's clear that sterling was at an unusually high peak and many considered the currency very much overvalued.Games
gamesinvestor
30 Dec 2017
Re: Brexcuse "Before the vote the £ v € was over 1.30, now it's around 1.13; so for the last 18 months we've been getting about 15% less for 50% of the country's exports and are paying 15% for (what 60%?) of our imports. "HB -- It always seems like a good point doesn't it, however, we are looking at a snapshot period in time. The importance of UK Independence is a looong term control over it's destination, and not a vassal element to a potentially failing and contrived EU Superstate.You only have to look at Joel Monet's statements to realise that the intention was always to sugjugate and control.""""“Europe’s nations should be guided towards the superstate without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.”""""It should also worry everyone on here that Mario Draghi was in control of Goldman Sachs' activities that contrived to falsely dress up Greece to sell it into the EU fold.The £ has traded at a wide range of values over the long term and it will oscillate back and forth, benefiting manufacturing exports at some juncture at the expense of import costs, and vice versa.What really (really) matters here is the UK breaks away from an insidious system that will cripple the economies of many of it's member countries whilst pandering to a few that are strong and benefit greatly from the imbalance in the strength of the Euro.In time I predict the Euro will weaken, but that's not a wish, it's most likely an outcome from structural weaknesses of the concept.It's a well known fact that you can not have a single currency without fiscal (and political) integration. The Euro does not have that and the only way it is achievable is via a totally integrated state.I don't think there is anyone on this board that believes Germany will ever allow this to happen -- so in essence the concept was dead from the get go -- it has to end.Unfortunately such failures are often bound for very long periods by misguided political ideology -- in time though they do fail and will break up.But like you HB -- I do hope we all do well in 2018 and sharing of ideas is a great way to help each other achieve this.Perhaps we should revert only to WPP's prospects and leave the EU to unfold in it's own way and time.Games
Hardboy
30 Dec 2017
Re: Brexcuse Bill & Games - I know you are on opposite sides of the fence re Brexit, and in case you didn't know I was a firm remainer like Bill. You both make good points, and we will never know who is right because we'll never know what would have happened if we'd stayed in, and I'm sure what ever deal we end up with all Brexiteers would have wanted something (if only subtly) different, so if we end up worse off they'll have a defence. I'll just take one point looking at the short term: "The fact that 50% of our trade is with the EU is also irrelevant in that as a net importer with the EU, and significantly so "Before the vote the £ v € was over 1.30, now it's around 1.13; so for the last 18 months we've been getting about 15% less for 50% of the country's exports and are paying 15% for (what 60%?) of our imports. That's a huge bash to the economy. Of course the exchange rate fluctuations will mean we should be able to sell more exports, and maybe we will import less from Europe; but where else do we go whose currency has been as weak as ours? Long term things may balance out, but we are certainly worse off in the short term because of the £ weakness.
gamesinvestor
30 Dec 2017
Re: Brexcuse Bill --"The short term view is always much more likely to be accurate, and indeed it doesn't look great "On what basis are you making this statement?I've yet to hear an argument about anything that the UK can not achieve as an independent nation, and without all the EU costs and restrictions.""Games - I'm not sure I'd hold out Sir James D as any paragon of prosperity """James Dyson is an excellent example of a UK company, as is JCB, that thrives on a world scale and doesn't need the EU, in fact he's had to fight blocking tactics by EU courts which discriminated against his company - as the the UK has never been considered an EU country from Brussels, despite the massive contribution from it. The fact that it manufactures abroad is meaningless as most large organisations must do so from an economic perspective. Mature nations all have around 12-20% in manufacturing, the rest is priced out to other nations - few exceptions here I'm afraid.WPP is not a manufacturing organisation so there isn't a real comparison. Dyson does, however, invest very heavily in R&D based in Malmesbury and other locations in the UK, and for that he must be lauded over many other companies."Lots of businesses (WPP being only one) are already "employing people from around the world" so I'm not sure whence the new opportunities (or indeed the EU restrictions?) there, and while 85% of the world is not in the EU, unfortunately 50% of our trade business is"Again Bill I can't see the relevance here, because the EU discriminates against non EU workers, for which the UK is currently bound by. Opening up equality here would be to the UK's advantage.The fact that 50% of our trade is with the EU is also irrelevant in that as a net importer with the EU, and significantly so, it's in the EU's interest to trade freely or the costs to the other 27 nations will be much higher on balance.I have nothing against Sorrel and his view is just one view -- it's not gospel and he has no evidence to suggest the UK will be better or worse in or out of the EU -- we haven't left yet. Also the opportunity for open trade with the 85% of the world that is not in the EU and growing at twice + the pace of the EU (which has declined every year in it's 44 year history compared to the rest of the world - due to protectionism and the econonic destruction of it's southern states employment levels) is what the UK should be striving for.As for the older generation I can think of one in the Tory camp that should be given a home, not a bus pass - namely Tarzan, the guy is a self serving and vindictive clown -- He tried to stab Thatcher and it effectively backfired on this bitter little man.Games
Hardboy
28 Dec 2017
Re: Brexcuse Hi Bill, Excellent post as usual. I'll just pick up one point: "It's not as if we produce or make that much" - The last stats I saw suggested the UK is the 8th biggest manufacturing nation. [link] interesting graphics in the article.) As the 5th biggest economy, manufacturing is obviously less significant than some other sectors, but it's still a major component. I think people tend to not think of the UK as a large manufacturer because what we make these days tends to be more small scale specialist stuff; which require much smaller factories than the traditional car and clothes makers. And on the subject of making things, we are pretty good in the entertainment business, which is not included in manufacturing. Films, TV programmes and franchises, music recordings, etc. must all bring in a fair chunk of Wonga to the old nation. Downton Abbey sold all over the world. And (the thing which attracted Louis B Meyer to the Film industry) the great thing about films, recordings, TV programmes etc. are you make them once and can sell them again and again. You can't do that with a BMW. One made, one sold.
