The Value Perspective
Andrew Lyddon
I joined Schroders as a graduate in 2005 and have spent most of my time in the business as part of the UK equities team. Between 2006 and 2010 I was a research analyst responsible for producing investment research on companies in the UK construction, business services and telecoms sectors. In mid 2010 I joined Kevin Murphy and Nick Kirrage on the UK value team which manages over £4bn of UK assets with a value investment style.
Kevin Murphy
I started at Schroders in 2000, initially working on the UK equity desk. I joined the Pan European research team in 2003, looking to further my analytical skills, initially covering the Housebuilding and Construction sectors. After three years, I moved back to the UK Fund management desk, taking on co-management of the Schroder Recovery Fund, a UK product with a 40 year track record of identifying and exploiting deeply out of favor investment opportunities, alongside Nick Kirrage. In 2010, Nick and I also took over management of the Schroder Income Fund, the UK equity team's flagship value product. Together with Nick and Andrew Lyddon, I form part of the value investment team, responsible for over £4bn of UK assets, managed in a disciplined value style.
Nick Kirrage
I have been at Schroders over 10 years, initially working as part of the Pan European research team proving insight and analysis on a broad range of sectors from Transport and Aerospace to Mining and Chemicals. In 2006, Kevin Murphy and I took over management of the Schroder Recovery Fund, a UK product with a 40 year track record of identifying and exploiting deeply out of favor investment opportunities. In 2010, Kevin and I also took over management of the Schroder Income Fund, the UK equity team’s flagship value product. Together with Kevin and Andrew Lyddon, I form part of the value investment team, responsible for over £4bn of UK assets, managed in a disciplined value style.
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NEWPincer movement
23 May 2012
In theory, value investors should be falling over themselves to own Nokia – or at least take a good look at it. The Finnish mobile phone manufacturer has been a poor performer in share-price terms for a significant period of time and, from a peak of €65 (£52) in June 2000, it now languishes around €2 a share.
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Emotional rollercoaster
18 May 2012
The primary reason for media companies' existence is not, as some people continue to believe, to provide information but, rather, to encourage us to buy their newspapers and magazines, visit their websites and so on.
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Chorus of mis-approval
17 May 2012
One of the more striking aspects about the potential billion-dollar acquisitions recently announced by UK drugs giants AstraZeneca and GlaxoSmithKline, which we discuss in more detail in Missed bargains, was the universally positive welcome they received from analysts and brokers – the so-called ‘sell-side community’.
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The core of the problem
15 May 2012
The market tends to take what it wants to from corporate results and nowhere is that more evident now than in the banking sector.
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The same boat
11 May 2012
Housebuilder Redrow's intention to issue new shares and raise £80m to fund its expansion plans raises a number of noteworthy points for investors - one relates to what the money is to be used for, which is to buy land in both the regions of the UK and in the capital.
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Every cloud
10 May 2012
A day can be a long time when it is raining solidly but the flood threats and general misery resulting from the wettest April since records began in 1910, have done much to obscure a broader fact.
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Missed bargains
4 May 2012
AstraZeneca and GlaxoSmithKline, the two giants of the UK pharmaceutical sector, recently announced details of a proposed billion-dollar deal each.
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Big Apple
3 May 2012
Despite ‘The NASDAQ’ traditionally being associated with the technology sector, the NASDAQ Composite index is home to more than 2,500 US-based and international stocks across a broad base of sectors and, by the claim of its owner, is “one of the most widely followed and quoted major market indices”.
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Default lines
27 Apr 2012
We are now five years on from the start of the financial crisis and, as such, can reasonably begin to form a judgement on the performance of companies and, in particular, on corporate default rates across the downturn.
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Tax benefit
25 Apr 2012
Company reporting season recently drew to a close, with full-year results for 2011 confirming strong dividend growth in the UK.
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The devil inside
20 Apr 2012
Talking to other investors we are often struck by all the different ways they have of defining risk. Many people like to be scientific and try to quantify risk, which is obviously a worthy aim but one that is made very difficult by the concurrent desire to keep things simple - to boil risk down to a nice single and preferably round number.
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The third element
13 Apr 2012
For many, investment is at heart about making money so it is understandable people often have their head turned by a company’s potential upside.
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Dialling down the excitement
12 Apr 2012
Investors – whether private, institutional or corporate – have a tendency to get very excited about the potential of the world’s emerging markets and that is precisely why the occasional cautionary tale about the associated risks never does any harm.
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Swan like
5 Apr 2012
It has become something of a cliché that income fund managers always look for solid and established businesses that not only pay a good yield but are also capable of steadily growing their dividend on a yearly basis, preferably at a nice, consistent rate above inflation.
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The non-negotiables
4 Apr 2012
According to Howard Marks, the chairman of US fund manager Oaktree Capital Management, there are three "non-negotiable" requirements for accurately assessing investment performance.
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In the right direction
3 Apr 2012
In Beyond the headlines and A tale of two businesses respectively, we have commented on the annual results from Barclays and Lloyds so let us now complete the set with a look at the latest numbers from Royal Bank of Scotland (RBS).
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Value drivers
30 Mar 2012
Autos manufacturers were unloved in 2008 as they wound down vehicle inventories. Now the sector has bounced back offering us another instructive value-oriented moral.
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Game theory
29 Mar 2012
When considering whether a company is in danger of going bust, most investors will tend to focus on its levels of debt.
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Home and away
26 Mar 2012
In recent years it has become fashionable for British companies to play down their domestic operations.
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Best laid plans
22 Mar 2012
In Downsizing dividends, we looked at the decision of recruitment company Hays to cut its dividend and how that was received positively by the market. This time we consider the opposite.
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Signals of intent
19 Mar 2012
As we go through results season, dividends on the whole continue to move in the right direction.
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A tale of two businesses
16 Mar 2012
Lloyds has published its 2011 results and, as we highlighted when we considered Barclays’ latest numbers in Beyond the headlines, it is crucial for investors to cut through the noise of the market’s initial reactions.
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Downsizing dividends
14 Mar 2012
Businesses must quickly and ruthlessly address unsustainable payouts
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Off and on
8 Mar 2012
Markets may now be polarising risk but basic investment tenets have not changed
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Delivering value
29 Feb 2012
A takeover deal can be more attractive if the bidding company bides its time
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Please release me
21 Feb 2012
Retailers will boost margins if they can only renegotiate unfavourable leases.
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Devil in the detail
20 Feb 2012
Income investors should cast their nets widely in the hunt for dividend payers.
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Profits without honour - The market hunts for growth but it can be blind to other considerations
10 Feb 2012
Can you name the three largest non-food retailers in the UK by market capitalisation? B&Q owner Kingfisher, Marks & Spencer and Next? Very good - now how about the fourth largest? No, it is not Home Retail Group, Dixons, Mothercare, French Connection or even Debenhams - all those big, well-established brands are still smaller than relative newcomer Asos, which has a market cap of £1.3bn.
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Deficit attention disorder - investors should not necessarily be put off by pension fund deficits
7 Feb 2012
Pension fund deficits have been back in the news again. The latest figures from the Pension Protection Fund showed the collective deficit of private sector final-salary pension schemes in the UK had again hit a record high while a survey of more than 200 schemes by consultant Aon Hewitt found almost 70% were looking to take less or no risk with both their assets and their liabilities.
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Correlationship counselling - the market cannot ignore company fundamentals indefinitely
6 Feb 2012
In Uncertainty principle and Safety at any price, we observed how correlations between and within asset classes - that is to say, the way investments move in relation to each other - are at all-time high. Further evidence of this can be found in the recent behaviour of the S&P 500.
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Snap! - yields and total returns from equities can only move in opposite directions for so long
2 Feb 2012
Over the course of 2011, company dividends across the UK market - if one excludes special payments and the distorting effects of BP's return to the register - rose by about 12% and yet the market fell 8%. Despite this rise you need to remember that past performance is not a guide to future performance and may not be repeated. When dividends head so decisively in one direction and share prices in the other, that is evidently telling us something. What exactly?
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Safety at any price - an investor who pays too much for stability, risks looking like a 'Saap'
1 Feb 2012
In Uncertainty principle, we looked at how investors are seeking stability in an unstable world and often instinctively - though, in our view, mistakenly - choosing bonds over equities. This argument can be taken a step further with the suggestion this flawed logic is happening not just across but also within asset classes.
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Uncertainty principle - investors now need to be very clear about why they are buying bonds
31 Jan 2012
Anyone looking for some light relief as the winter drags on would do well to avoid global economic headlines. To pick out a few concerns at random, there is the future of the euro, the potential for inflation, the pace of Chinese growth, the indebtedness of governments and consumers and the impact of austerity measures on countries' populations. Not many laughs to be had there.
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Repeat after me - a successful investment process is pointless unless it is demonstrably replicable
27 Jan 2012
Moneyball: The Art of Winning an Unfair Game is a 2003 book by Michael Lewis - and now a film starring Brad Pitt - that charts the phenomenal rise of the underdog Oakland A's baseball side under the management of Billy Beane, the pioneer of an analytical and statistics-based approach to building a competitive team known as 'Sabermetrics'. It has nothing and everything to do with investing.
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Cycle path - Tesco's recent fortunes illustrate how, like economies, companies move cyclically
26 Jan 2012
We have discussed in the past how the broader economy moves in cycles - and how value investing looks to exploit how the market responds to different points within those cycles. However, the recent profit warning issued by supermarket giant Tesco illustrates how individual industries and even individual companies can have cycles of their own.
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Olympic names - Sports fans remember winners and losers but investors must think differently
25 Jan 2012
If you were asked to name three famous non-British swimmers from recent Olympic Games, who would you pick? Michael Phelps and Ian "The Thorpedo" Thorpe might spring quickly to the mind of the casual sports follower but then... who? If the next name to pop into your head was Eric the Eel, you have just chosen two of the greatest competitive swimmers of all time - and one of the worst.
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By the numbers - understanding rolling investment performance
24 Jan 2012
The FSA, the financial regulator for the fund management industry, rightfully insist that fund managers provide performance figures for their funds over the most recent 1, 3 and 5 year periods (where they exist). This disclosure is an attempt to ensure transparency of both short and long term investment performance where clients are considering funds.
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Points of view - the 'value' of macroeconomic forecasting
20 Jan 2012
Regular visitors to The Value Perspective will know we are not universally complimentary about macroeconomic forecasts, but we are hardly alone in this. After all we did not come up with the line: "Economists have correctly predicted nine of the last five recessions", we just happen to think it's quite appropriate.
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Reverting to type - many aspects of investment eventually move back to their long-term average
19 Jan 2012
I recently saw the chart below, which shows US residential construction as a share of gross domestic product to be at post-war lows. That had some resonance for me simply because there was an echo of a 2008 chart showing that corporate profits in the UK were at post-war highs.
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Casual question - there are signs some businesses may be growing too relaxed about debt levels
18 Jan 2012
As companies have cut costs since the credit crisis hit, their profit margins have bounced back, which in turn means their levels of net debt to cashflow - more technically, their net debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) - are once again looking in good shape. As such, some experts are now suggesting the corporate sector is in rude health from a balance sheet perspective.
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Alternative thinking - income investors should benefit from challenging conventional wisdom
16 Jan 2012
There are many schools of thought when it comes to income investing but, within them, there are some elements of conventional wisdom that income-seekers would do well to challenge - the first of which is that large, high-yielding companies are safe.
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Smiling rise - There is a lesson in the identity of the best developed-world equity market of 2011
12 Jan 2012
Say, back at the start of last year, you had been asked to predict the developed-world stockmarket that would outperform all others over the course of 2011, which one would you have chosen? Maybe you would have gone for Germany or perhaps, given its solid record of positive performance in the third year of a presidential election cycle, the US.
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The third dimension - valuation is the dominant driver of investment returns at a company level
11 Jan 2012
The total return made on any equity investment can only come from three sources:
- from a company's dividends
- from a change in its share price, which stems from a change in its earnings per share (EPS)
- from a change in its share price, which stems from a change in the valuation multiple.
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The seesaw of sentiment - value investors are not miserable, they just enjoy difficult times
10 Jan 2012
The month of January is inevitably accompanied by a mass of forecasts as to how the economic environment will pan out over the coming 12 months. Setting aside our longstanding and oft-mentioned doubts about the worth of trying to predict macroeconomic factors, most forecasts this year have tended to be pretty bearish about the prospects for the UK, Europe and indeed the world.
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Rough guide - equity investors can make better returns after periods of elevated volatility
5 Jan 2012
There is no doubt markets are currently going through a heightened period of volatility but perhaps the chart below will provide you with some comfort. It looks at whether there is any relationship between volatility (as measured by the Vix index) and subsequent equity market returns.
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Mars Bar perspective - an alternative look at yield
4 Jan 2012
One aspect of 2011 that has attracted significant attention has been UK equities yielding more than gilts for the first time in 50 years. Some set ideas have sprung up around this issue but, here on The Value Perspective, we believe perceived wisdom should always be challenged to ensure it is robust.
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Lessons of history - is today an attractive time to invest in equities?
22 Dec 2011
In All in the price, we showed how the Graham & Dodd price/earnings (P/E) ratio, which uses a 10-year average of historic earnings, offers a powerful way to think about whether or not it is a good time to invest in equities. That being so, what is it telling us about the current market? Is today an attractive time to invest in equities?
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On the contrary - being different is rarely comfortable but often profitable
20 Dec 2011
In All in the price and Getting the picture, we put forward a few reasons why investors should not become too obsessed with macroeconomic forecasts but some people will counter that surely some forecasts simply reflect certain inexorable truths.
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Nothing lasts forever - even stockmarket and financial crises come to an end
16 Dec 2011
I recently read some interesting quotations from two generations of the same family of successful investors. The first was from US banker and philanthropist Shelby Cullom Davis, who noted: "You make most of your money in a bear market, you just don't realise it at the time." In other words, in a bear market you have the opportunity to buy assets while they are cheap and, although that may be uncomfortable at the time, ultimately they should turn out to be your most profitable investments.
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Probable cause - assessing probabilities does not come naturally to the human brain
14 Dec 2011
Behavioural finance experts have shown the human brain is often curiously ill-equipped to deal with probabilities. In tests, they would first ask a person to suggest the probability of, say, a company going bust and then, having walked the person through a particular scenario with steps as to how that company might go bust, again ask them to suggest the probability.
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Getting the picture - macroeconomics are hard to forecast and difficult to exploit
13 Dec 2011
The problem with macroeconomic factors - essentially the behaviour and performance of the broader national, regional or global economy - is that, while they are self-evidently important, they are hard to forecast and difficult to exploit. When you start thinking about investment in macroeconomic terms, you do not have to get one thing right but dozens of interrelated variables.
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Cook's tour - investors should try to understand how a company trades throughout the year
9 Dec 2011
The collapse in the share price of Thomas Cook at the end of November, which followed the travel operator's announcement it was talking to its banks about increasing its borrowings, provides an illuminating illustration of the potential dangers of a company taking on debt.
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No comment - macroeconomics do not form a big part of the value investment process
8 Dec 2011
With the Chancellor of the Exchequer delivering a gloomy Autumn Statement and the eurozone continuing to hover between salvation and disaster, last week was another week of screaming headlines and swinging markets. Newer visitors to The Value Perspective could be forgiven for wondering why we do not feel the need to comment on such matters in any detail.
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Simple minds - just because an idea is easy to understand does not necessarily make it right
7 Dec 2011
One element of psychological baggage most investors bring with them to the stockmarket is a fondness for thinking in terms of 'simple stories'. Rather than understanding the complex tapestry that is markets, valuations and economics, some prefer to reduce everything to simpler ideas with which they feel more comfortable.
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A fighting chance - a long-term approach to investing should enhance returns
30 Nov 2011
In the current environment of low growth and high inflation, these are obviously tough times for investors but, even before such factors are taken into consideration, many are not giving themselves the best possible chance of participating in any positive stockmarket performance.
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Fear of the new - there are a number of reasons IPOs should be approached with caution
25 Nov 2011
A distinctive feature of investors' recent fondness for social networking sites and other technology-oriented stocks, which some commentators have dubbed 'Tech Bubble 2.0', is the way many share prices have rocketed up in price on the first day of trading after their initial public offering (IPO) only to fall back dramatically in the weeks and months that follow.
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Ringing endorsement - Vodafone has done a good job of rebuilding trust in recent years
23 Nov 2011
While Vodafone's latest results were well-received by the market, it is more interesting from a value perspective to consider how the business has progressed since Vittorio Colao was appointed chief executive in July 2008. Back then the market was very wary of Vodafone and, in particular, frustrated about the way it had been allocating capital.
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Rate expectations - recent poor stock market returns do not necessitate projection rates being cut
11 Nov 2011
The generally poor performance of equities over the last dozen or so years has led to one or two articles appearing in the press recently that suggest standardised 'projection rates', which are used to give would-be purchasers of equity investment and pensions products an idea of how their money might grow in the future, are misleading and should be changed.
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Stealth tactics - AstraZeneca's share buyback programme has been adding value through 2011
8 Nov 2011
Over the course of 2011, AstraZeneca has been running a programme to buy back $5bn (£3bn) of its own shares.
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Calming influence - A long-term view should help ease investors nerves
7 Nov 2011
Market volatility, of which it hardly needs saying there is currently a great deal, tends to get investors very worked up. Shares are either rising 10% in a day, which excites people because it looks as if large gains can be made very quickly, or else they are falling 10% in a day, which is unnerving to say the least.
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Safety first - Shareholders scuppered G4S's takeover deal because of a perceived lack of value
4 Nov 2011
The decision by security firm G4S to abandon its proposed takeover of Danish outsourcer ISS is a relatively rare example of shareholders stopping a corporate action with which they felt uncomfortable. The deal fell through even before the G4S shareholder vote on 2 November because it became clear to the company's management that they would fail to get the 75% approval required.
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Percentage point - the increasing attractions of equity income
27 Oct 2011
With the yield on 30-year gilts recently having fallen below the 3.5% mark it seems appropriate to consider why it is investors are so willing to lend to the UK government for so long a period for so small a return. We'll do this by comparing the yield above with two other pertinent data points that have been released recently.
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Decision time - political posturing and inaction is increasing investment risk
26 Oct 2011
Time was when political risk was something only investors in emerging markets really needed to worry about and related to considerations such as corrupt governments, potential coups and whether a country's neighbour had a nuclear bomb. However, the travails of the governments of Europe and the US as they struggle to deal with their various debt crises means that is no longer the case.
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A bigger picture - examining underlying dividends in the UK market
25 Oct 2011
Taking a broad overview of dividends in the UK is not necessarily that revealing or instructive - after all, as we noted in A bigger pool, just 10 businesses are responsible for more than half the dividend income generated by the 700-odd companies that are listed in this country.
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The drawback of drawdown
20 Oct 2011
'Drawdown' is the term used in investment to describe the amount a share price has fallen from its peak over a given period and the reason it can resonate with investors is their perception of pain is in some respects driven by how far a share price has fallen from its high. Put simply, they are likely to have 'banked' that price high in their mind.
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Markets - Wall Street retreats as Apple falls
20 Oct 2011
By Ashley Wassall, FT Adviser - Investors and traders once again book profits after S&P peaks above 1,220, led by significant decline recorded technology giant Apple.
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Let valuation be your investment guide
19 Oct 2011
A client recently asked if, with the benefit of hindsight, we should have been braver with some of our stock purchases in late 2008, early 2009. His question came about as we ventured the opinion that whilst the equity market of 2011 is throwing up some interesting investment opportunities, today's equity market valuations are, in many cases, not nearly as compelling as they were two and a half years ago. However, the key to his question resides in seemingly innocuous additions of the phrase " with the benefit of hindsight".
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Be ready for the recovery
17 Oct 2011
By Richard Dunbar, Investment Adviser. Given the volatility we saw in the first half of the year, investors might have been forgiven for hoping for a calmer summer.
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What a difference a day makes to share prices
14 Oct 2011
At the start of October, Mothercare warned about a profits drop on the back of a marked deterioration in the UK side of its business. The baby and childrens' goods retailer has no debt, it remains profitable and it may even still pay its dividend - and yet the market reacted to the warning by wiping 40% off the company's value.
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Scars faced
13 Oct 2011
Financial crises can leave investors nursing many psychological scars and one of these is known by behavioural finance experts as the availability heuristic. That is a complicated-sounding term for the relatively straightforward idea that we tend to ascribe greater significance to more recent events - as anyone who has ever immediately slowed down after being surprised by a speed camera only to accelerate a few miles further down the road may recognise.
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Building for the future
12 Oct 2011
A number of articles on The Value Perspective have mentioned in passing the extent to which UK companies have improved their financial positions and balance sheets over the last three years but building and plumbing supplies giant Wolseley, which published preliminary results on 4 October, is an instructive case study into how that has actually come about.
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Whoops apocalypse
11 Oct 2011
As the technology boom of the late 1990s came to the boil, Cisco, Dell, Intel and Microsoft emerged as the four darlings of the market and by 1999 had even earned their own collective label - The Four Horsemen. To that point they had all handsomely rewarded investors but, between 1999 and 2006, each lived up to the more apocalyptic aspect of their nickname and at least halved in value.
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Get real
7 Oct 2011
Can US treasuries at present really be described as 'investments' in any meaningful way? The US government is currently able to go to the bond markets and borrow at 3% for 30 years, which means once inflation is taken into account an investor might expect at best to scrape a small positive return in real terms but, more likely, the real return will be zero or even negative.
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Twisting the knife
6 Oct 2011
Operation Twist is a creative attempt by the Federal Reserve, the US central bank, to stimulate the country's economy without actually spending any money - but could there be some unintended consequences?
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Flight to quality
5 Oct 2011
Flying to Berlin last weekend, I was struck by how different the experience after landing at Tegel Airport is to that at any of its UK counterparts. Rather than a long walk from the plane to a snaking queue at a communal customs, another slog to a huge baggage reclaim area with its many carousels and a final push to customs before the fight for a taxi begins, the Germans have an alternative take.
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A bigger pool
4 Oct 2011
Much attention is being directed towards how the UK market currently yields more than gilts - the bonds issued by the UK government - but let's approach the subject from a different angle. Rather than taking the yield of the UK market as a whole, the following chart shows the number of FTSE 100 companies that now yield more than gilts.
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Down on the pharma
30 Sep 2011
GlaxoSmithKline and AstraZeneca both posted their first-quarter results last week and, while three-month performance is not how we judge companies, the accompanying statements - not to mention recent guidance from US peers - offer a useful reminder of some attractive developments in the pharmaceutical sector that the wider market apparently still fails to appreciate.
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Ring of truth
30 Sep 2011
The usual suspects have been queuing up to point to UBS's billion-dollar losses from alleged rogue trading as further proof of the need to ring-fence banks' retail businesses away from their more speculative operations but is that really the case? With the exception of its high net worth arm, UBS has very little retail business but what if this had happened at, say, Barclays or Lloyds?
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Market view: Inflation 'almost irrelevant' to rate rise
27 Sep 2011
By Cara Waters, FTAdviser. With CPI figures static industry experts warn that the Bank of England's game of "Russian roulette" with the UK economy will continue.
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ICB missile?
27 Sep 2011
The recent publication of the report on the UK's banking system by the Independent Commission on Banking (ICB) has provoked a predictably mixed reaction, with some commentators arguing the proposed reforms do not go far enough and others suggesting it is yet another nail in the coffin of the already beleaguered sector. Reality, as tends to be the case, lies somewhere in between.
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Fence post
27 Sep 2011
One of the problems facing politicians, regulators and bankers in their attempts to avoid another banking crisis is that there is no silver bullet - no single action that could have been taken to prevent what happened in 2008. Vince Cable, for example, may continue to attack "casino banking" at every turn but even the most draconian of measures instituted in that area would have done nothing to prevent the collapse of the wholly retail-focused Northern Rock.
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Market forces
26 Sep 2011
When it comes to the stockmarket, people do not look at value in the same way as in every other area of their life. If Tesco has knocked 50% off a packet of pasta, people will see that as a bargain and may even buy more than they had originally intended or needed. Yet if a company share price is half what it was a couple of weeks before, people will assume there must be a catch.
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Nature of the beast
21 Sep 2011
If the proverbial alien had visited earth in March 2009 when the shares of Royal Bank of Scotland (RBS) were trading at about 12p, they might initially be impressed on returning today to find that price had since doubled. Such a sentiment would presumably be lessened, however, once they discovered that, while they were away travelling the galaxy, RBS's shares had at one point ventured up above 50p.
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Defensive line
15 Sep 2011
If you had to pick the stockmarket sector that was currently provoking the most pessimism amongst investors, you might well point to the banks or the retailers or perhaps property and construction companies. However, according to a recent survey by Bank of America of sell-side analysts, the sector holding the least appeal at present is telecoms.
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Still smiling
14 Sep 2011
Deutsche Telekom’s planned sale of its T-Mobile USA arm to rival telecoms giant AT&T for $39bn (£24bn) now lies in the balance after the US Justice Department’s bid to block the deal on competition grounds.
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Credit scarred
13 Sep 2011
Were you ever of a mind to place a bet on a celebrity dying, your local bookmaker would politely show you the door and, in a similar vein, you do not have to be Inspector Morse or Lieutenant Columbo to deduce why it is not possible to take out life insurance on a stranger. It is, however, currently legal to bet on the demise of a company and an increasingly popular way of doing so is through the credit default swap (CDS) market.
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Open season
9 Sep 2011
The big fall in the share prices of UK banks over August, which saw Barclays, Lloyds and Royal Bank of Scotland (RBS) all drop some 25% to 30% in value, raises two important questions for investors - why did this happen and is it justified? We will address both points over the course of two separate articles - the second one in Different time, different place.
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Vote of confidence
9 Sep 2011
The news Warren Buffett had invested $5bn (£3.1bn) into Bank of America at the end of August saw the hitherto beleaguered bank’s share price rise strongly. The share prices of other US banks and indeed those of other global banks also benefited from this apparent vote of confidence from the world’s best-known investor.
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Different time, different place
9 Sep 2011
In Open season, we considered why the share prices of Barclays, Lloyds and Royal Bank of Scotland (RBS) have fallen so dramatically over August yet, whatever the precise reasons may have been, a more important consideration now is whether the UK banks remain attractive investments.
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Bank raises concern over insurance contracts
1 Sep 2011
Bank of England director says insurance policies can fail to deliver because companies do not take into account how the financial system as a whole operates.
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The only weapon
1 Sep 2011
In the current environment, most investors fall into one of two broad groups – those who are becoming more nervous and want to sell up and move into cash and those who are suddenly defiantly contrarian and want to buy because of falling share prices.
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All in align
30 Aug 2011
The news UK software firm Autonomy has agreed to be bought by US giant Hewlett Packard affords an opportunity to discuss the importance we place on decision-makers within a company – particularly the senior ones, since they oversee the running of the business on a daily basis and their decisions on strategy and capital allocation can create or destroy large amounts of value.
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Beware the micro-managers
25 Aug 2011
High-frequency trading involves the use of sophisticated technology and computer algorithms to analyse market data and then buy and sell stocks and options according to set market strategies – all in the blink of an eye. Essentially, it is about trying to gain an edge by being faster than everybody else.
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Pensioner poverty
25 Aug 2011
By Hal Austin, Financial Adviser. There is something about pensions that has kept them in the limelight for the past decade and a half.
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After the storm
23 Aug 2011
Finding long-term data on market volatility can be tricky – for example, the commonly used Volatility Index or ‘VIX’ was only introduced in 1993 – so that makes the chart below doubly interesting. First, it charts the four-day, six-day and 20-day moving averages of the volatility of the US’s S&P 500 index, alongside its performance, dating all the way back to 1950.
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Actions speak louder
19 Aug 2011
Investors these days are nervous, and with the amount of dispiriting macroeconomic news being generated on the other side of the English Channel and indeed on the other side of the Atlantic, that is understandable.
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Spot the 'differents'
16 Aug 2011
'This time it's different' is often put forward in an effort to dismiss the relevance of value investing today. Critics argue that value investing is no longer applicable in a world of high-frequency trades and macro-obsessed markets. Yet the thinking behind "this time it's different" has one of the worst track records of any investment philosophy.
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Some rough with your smooth
10 Aug 2011
Firm as our convictions may be about the advantages of value investing, and which the academic evidence proves, we are still aware of some pitfalls that can catch out the unwary. For example, it is possible to buy a company too early – if we buy a business we think is valued too cheaply and it becomes cheaper still then, in the short term, we could be made to look silly. However, in the longer term, if the decision to buy that company was sound, it will ultimately have been the correct decision.
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The scheme of things
9 Aug 2011
In Eye of the beholder, we commented on the market’s shifting attitudes towards corporate pension fund deficits – but how, as value investors, do we calculate the value of a company’s pension scheme ourselves? Companies publish their pension schemes’ deficit (these days surpluses are in short supply) on a fairly regular basis and a number of analysts simply then insert that number into their valuation model as debt.
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Two sides of the coin
8 Aug 2011
In articles such as Capacity benefit and Between the sheets, we have argued that, despite the gloomy headlines about the high street, we believe there is a significant amount of potential upside in the UK retail sector. This view has been based on our assessment of particular businesses with strong balance sheets, but are the prospects for the sector as a whole really as desperate as investors would appear to believe.
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The right direction
5 Aug 2011
As value investors, we spend a huge amount of time poring over companies’ reports and accounts but we still meet with the managers of businesses we own or are thinking about buying. When we do, however, we always bear in mind that anybody who has made it to the top of their business is unlikely to have done so if they were not something of a salesman and unable to persuade anyone of the merits of their company if afforded the chance of an hour in a room with them.
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All in the planning
4 Aug 2011
In Stop me if you’ve heard this before, we considered how Taylor Wimpey looked set to benefit from the disposal of its US division but a less prominent issue affecting the house-builder, and indeed all its peers, is the current state of the UK’s planning system. This has been moving towards a state of limbo since the present government came to power as a result of its plans to overhaul a number of planning regulations.
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No country for old men
28 Jul 2011
By Mike Morrison, Financial Adviser. The question of when a state should provide a state pension is tied up with complex cultural factors.
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The debt penalty
28 Jul 2011
In 2006 and 2007, many publicly listed companies made the decision to take on large amounts of debt – debt, as we argued in ‘Between the sheets’, being more usefully viewed in broad terms to take in lease obligations as well as bank loans etc. The world, as you will be all too aware, then changed significantly and this debt became a problem for a lot of businesses.
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History buoys
27 Jul 2011
When a company’s share price is struggling, it is often instructive to look back to when it first hit the current level. In the case of Barclays, Lloyds and Royal Bank of Scotland (RBS), whose share prices have now been suffering collateral damage from the latest round of banking stress-tests, that was in the early part of 2009 and, despite the ongoing grim headlines concerning sovereign debt, it would still be fair to say the world today looks very different to how it did back then.
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Deadline + downside = deal
26 Jul 2011
With the debt troubles of both the US and the eurozone continuing to spook the markets, a question that is taking on ever greater significance is the extent to which we can rely on politicians and other policymakers to make the correct decisions. Do try not to laugh at the idea – this is getting serious.
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FPB urges greater trust in banks
21 Jul 2011
By Huaiyuan Lu, Financial Adviser. The Forum of Private Business has called for measures to restore trust in banks and alternative funding platforms.
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The wrong track
20 Jul 2011
Investors define risk in many different ways and given the multitude of definitions out there, who can really blame them? Take volatility, for example – investors are set up to think of volatility as risk, simply because there is a brand of financial mathematics that talks about standard deviation of returns, which in plain English is the extent to which a share price goes up or down.
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Your flexible friend
19 Jul 2011
It is a fact of value investment life that there will be times when the market throws up more reasons to sell existing holdings than buy new ones and a natural side-effect of that is ones portfolio cash position increases in size. To many observers that can seem like a straight active asset allocation decision but the reality is sometimes more subtle than that.
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Market view: IFAs welcome 'astonishing' TSC findings
16 Jul 2011
By Donia O'Loughlin and Cara Waters, FT Adviser. Many advisers in favour of proposals for delay to implementation and relaxation of grandfathering ban, but some suggest too much space given to "extreme views".
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Free your mind
13 Jul 2011
Suppose a friend tells you they have come across an investment - no clues as to what it is at first but, over the last 120 years, it has only been as cheap as it is now 13% of the time*. Presumably you would ask them to tell you more.
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Between the sheets
12 Jul 2011
In Capacity benefit, we made a strong case for there being a significant amount of potential upside in the UK retail sector. However, as we have seen over the past few weeks, a number of retailers – particularly privately owned ones – have gone bust and our upbeat long-term view is unlikely to be of much consolation to anyone who owned a stake in them.
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PwC predicts slow recovery for UK housing market
12 Jul 2011
By Jennifer Francis, FT Adviser. New report forecasts that house prices will remain subdued and are unlikely to fully recover to previous peak levels until 2020.
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The income irony
11 Jul 2011
You may imagine a high-yield income investment strategy would simply involve buying high-yield stocks but sometimes the clue is not wholly in the name. Income investors typically buy income funds for two main reasons; firstly an attractive yield and secondly the market outperformance which high yield strategies have shown over the long term.
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Netting returns
8 Jul 2011
Watching the Wimbledon men's final at the weekend, I had the distinct feeling I had seen these two players somewhere before – and that may of course have had something to do with them both reaching at least the semi-final of pretty much every grand slam tennis tournament for the last three years.
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Faster, higher, costlier
7 Jul 2011
Until recently, I tended towards the view that, while it was great London had won the right to stage next year’s Olympic Games, it was often better to travel than to arrive. Gradually, however, I came around to the idea this really was a once-in-a-lifetime opportunity and ventured onto the internet with the idea of maybe buying a ticket or two.
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World keeps a close look at RDR
7 Jul 2011
By Marc Shoffman, Financial Adviser. Advisers outside of the UK must prepare for change as international regulators increasingly monitor the success of the retail distribution review, Nick Cann has warned.
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KPMG wants a clear job description for banks
7 Jul 2011
By Simoney Girard, Financial Adviser. Broader objectives that reflect a bank’s role in the domestic and international economy need to be defined, Bill Michael has claimed.
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Capacity benefit
5 Jul 2011
The planned closure of most of its stores means Habitat is the latest in a line of high-profile high-street failures that started with Woolworths and has now taken in the likes of Focus, MFI, Moben and Oddbins. But while many investors would see this as yet another reason not to touch retailers, a reduction in a sector’s capacity - essentially its potential output - is sometimes a long-term positive sign.
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CBI survey reveals immense pressure on banks
4 Jul 2011
By Emma Ann Hughes, FT Adviser. Business volumes are up across all of the financial services sub-sectors, apart from banking and securities trading and insurance broking.
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Treasury committee chair says stop bashing banks
29 Jun 2011
By Emma Ann Hughes, FT Adviser. Bank bashing is not getting us anywhere, according to the chairman of the Treasury select committee.
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Dial M for merger
29 Jun 2011
The last fortnight has seen a flurry of merger and acquisition (M&A) activity, both in the UK and abroad. To highlight a few examples, Cooper Industries has made an approach for electronics group Laird, property developer Minerva has received an offer from a consortium of real estate investors, brewer SABMiller has made a move for Foster’s, Microsoft is to take over Skype and car hire firm Avis Budget is set to acquire Avis Europe. With the exception of Avis, all are billion dollar-plus deals.
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Private sector providing employment boost, TUC
28 Jun 2011
By Julia Bradshaw, FinancialAdviser. Labour market report shows increase in level and rate of employment in the UK, suggesting that the government's economic gamble might be paying off.
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Have they got no news for you
28 Jun 2011
The Greek debt crisis and the fate of the euro have been the big financial news stories for the last few weeks but to what extent is this really news? Greece has essentially been in crisis for more than a year now and yet the times when it has hit the headlines over this period have been fairly random and arguably more a function of media and public tastes than any changes to the basic facts.
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Letter: Hector Sant's eyes are wide shut
26 Jun 2011
By Simon Mansell, Financial Adviser. I recently met with a client who happened to be an optician and this sparked an interesting train of thought.
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When right looks wrong
24 Jun 2011
Here on The Value Perspective, one of our favourite valuation metrics is known as the ‘Graham & Dodd P/E’, a long-term price/earnings ratio that, rather than referring to only one year’s profit number, uses an average of 10 years to smooth out the inevitable peaks and troughs of profitability in order to paint a more representative picture than any one year could on its own.
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The big boys’ banking club
23 Jun 2011
By Hal Austin, Financial Adviser. The revelation by the chancellor that the government was preparing to sell its share in Northern Rock should not blind us to the main cause of that former building society running in to trouble.
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Dome-ward bound?
22 Jun 2011
Much is made of how around half the profits of UK companies are currently generated overseas and, by extension, how a significant portion of these profits may be attributable in some form to the present engine of global growth: China. However, investment matters are rarely so clear cut and, as ever, we would suggest the consensus be treated with a degree of caution.
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Treasury brands rumours of tax relief scrap 'rubbish'
21 Jun 2011
By Donia O'Loughlin, FT Adviser. Reports in the media that the Treasury was seeking to adopt Lib Dem policy and abolish higher rate tax relief on pensions have been rejected as "utter rubbish".
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Pondering future inconvenience
17 Jun 2011
The private finance initiative (PFI) is back in the news as the Public Accounts Committee seeks to establish how effective it has been as a way of funding public sector projects. In many ways, PFI is a lot like the Government taking out a loan in that it passes the upfront costs of building, say, a new school or road onto a private sector company and repays these costs in instalments over a period of maybe 20 or 30 years.
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Outside the box
16 Jun 2011
By Justin Urquhart Stewart, Financial Adviser. Although uncertainty often comes with equity income funds, the risk may just pay off.
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'Out of favour' companies offer the greatest potential for capital and dividend growth
16 Jun 2011
So far the events of 2011, both inside and outside the financial markets, have been dramatic – highlighting what an uncertain and unpredictable place the world can be. Resulting volatility serves as a reminder of the difficulties of attempting to forecast investor sentiment or economic developments. Instead of striving to predict factors that are inherently unknowable, as disciplined value investors we focus on those factors we can understand. By placing emphasis on cash-generative businesses with robust balance sheets, strong management teams, and cheap valuations, we believe we can recognise the long-term potential for sustainable capital and dividend growth.
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Too much information
14 Jun 2011
It may be counter-intuitive to say so but more information does not necessarily lead to better decisions. The methods by which financial news is communicated in the modern world are growing increasingly convoluted and, with the internet, television, press agencies and papers all clamouring and competing for more information, companies feel under pressure to meet this demand.
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Balance of probabilities
13 Jun 2011
The history of investment is littered with high-profile companies that have gone bust because of the debt they have taken on, but there are also plenty of businesses for which large amounts of debt don’t cause bankruptcy but do nonetheless cause shareholders considerable pain. It is just another reason why we tend to invest in companies with strong balance sheets.
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Writing in the margin
10 Jun 2011
We are often asked why we seek out businesses with an upside of 50% or 100% as investments rather than buying those that are maybe 15% or 20% cheaper than they should be but, be warned, the reason may come as a shock. Please do not hold this against us but it all stems from an underlying acknowledgement that fund managers have been known to make mistakes.
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Slow recovery
9 Jun 2011
By Andrew Webb, Financial Adviser. The Bank of England is under mounting pressure to increase rates as inflation rises above its 2 per cent target.
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Paper view
8 Jun 2011
The Greek debt crisis continues to generate some pretty bleak and occasionally apocalyptic headlines. While the inherent problem may be simply stated - Greece has too much debt - a solution is proving a good deal harder to find and the process has been complicated by the involvement of many different parties and their many different interests.
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Hope springs maternal
3 Jun 2011
What do investment and childbirth have in common? No, don’t worry, that is not the set-up for an off-colour joke but rather a way of reflecting on the how short human memory can be. For childbirth is universally described as the worst pain imaginable and yet in time the memory of that pain dulls sufficiently for a mother to contemplate going through it again.
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Paths of glory
2 Jun 2011
By Tony Vine-Lott, Financial Adviser. Setting straight our poor savings culture requires effort from individuals, industry and government.
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Ringing the changes
31 May 2011
Isn't it interesting how investors' perceptions can change? Take UK telecoms giants, BT and Vodafone, which have both posted results in recent weeks. Only two years ago, many commentators were dismissing BT as a business in terminal decline. They pointed to its loss-making Global Services arm and massive pension deficit, and argued it would continue to lose out to the likes of Sky and TalkTalk in the battle for a share of the UK broadband market.
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Rhetoric and reality
27 May 2011
Sometimes it feels as if the only way the banks could be more in the headlines would be if they took out a super-injunction. This month alone has seen the developments on payment protection insurance (PPI), pronouncements on dividend payments and the future sale of State-owned stakes in Lloyds and Royal Bank of Scotland (RBS) and a ratings agency threatening to downgrade 14 banks.
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Com again?
26 May 2011
Human nature does not change, meaning humans tend to make the same errors over and over – though we are usually clever enough to learn from experience and not make exactly the same mistakes twice. What then should we make of the market frenzy that has greeted recent initial public offerings (IPOs) such as Renren and Yandex – respectively the 'Chinese Facebook' and 'Russian Google'?
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FSA should give 'adequate explanation' for RBS failure
25 May 2011
By Cara Waters, FT Adviser. The Treasury Select Committee has launched its review of the Financial Services Authority's report on RBS, saying that it will demand to know "what the FSA were doing" at the time of its collapse.
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Smoke and mirrors
23 May 2011
Some interesting and, to the value investor, instructive parallels can be drawn between the pharmaceutical sector today and tobacco companies 15 years or so ago. Back then, investors looked at tobacco and saw companies that were overshadowed by litigation issues – not to mention killing their clients, which is not an obvious route to commercial success. Investors saw them as low-growth or no-growth businesses that were going nowhere and concluded they should not own them.
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Value manifesto
23 May 2011
From time to time it does no harm to revisit the basics of value investing – to restate, as it were, our 'Value Manifesto'. Plenty of people believe they have grand ways to beat the market but value investors are simple folk. We use a tried and tested method that has been around for a long time and all we try and do is buy cheap businesses and hold them while they go through the cycle until they are more expensive – and then we rotate the money back into other cheap businesses.
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Global Opportunites: UK economy - This old house is gettin' shaky
23 May 2011
By Nick Reeve, Investment Adviser. Making an investment case for the UK is a little like trying to sell a rundown house: it is not so much what is immediately under the roof which will attract buyers, as much as it is the easy access routes to international markets.
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The good, the bad and the long-term view
19 May 2011
Last week, in Just a flesh wound, we considered the implications of the billions of pounds now earmarked by the UK’s high street banks to cover the potential cost of payment protection insurance (PPI) mis-selling claims. This includes the near £1bn provision made by Royal Bank of Scotland (RBS), which last week announced its first-quarter results.
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More fuel on the fire
19 May 2011
By Simoney Girard, FinancialAdviser. As figures from the Financial Ombudsman Service reveal that four of the UK's largest banks were responsible for more than 50 per cent of all disputes, the issue of disproportionate regulatory fees raises its head again.
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FTA In Depth: RDR to 'shape reform around the world'
17 May 2011
By Donia O'Loughlin, FT Adviser. Industry experts say that certain aspects of the Retail Distribution Review (RDR) could be implemented globally as regulators wait to see its impact on the UK.
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Floating voters
13 May 2011
With commodities trader Glencore, US internet stock LinkedIn and Renren, the 'Chinese Facebook', all preparing to float, initial public offerings (IPOs) would appear to be back in fashion. However, as value investors, there are a number of reasons why we tend to get less excited about them than the wider market.
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Bankers 'broke the world' with debt
12 May 2011
By Fiona Nicolson in Edinburgh, Financial Adviser. The recent financial crisis was not only the worst since the Great Depression, according to author Liaquat Ahamed, but should have been on the radar of senior bankers.
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Just a flesh wound
11 May 2011
The British Banking Association's decision not to pursue further legal action over payment protection insurance (PPI) has led to plenty of headlines focusing on the sums of money earmarked by the high street banks to cover the potential cost of mis-selling claims.
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Credit where it's due
6 May 2011
From the wheel to the worldwide web, human history is marked at regular intervals by inventions that have completely changed the way we live. If anything, those intervals are growing shorter as technology allows us to be ever more creative – so why are many investors unwilling to consider what other life-changing innovations may be just around the corner?
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The circle of life
4 May 2011
The UK market as a whole is only 10% off its 2007 peak but clearly, within this, some sectors have done better than others. The Value Perspective usually focuses on the laggards, where significant opportunities to make money exist - however, there are also lessons to be gleaned from the sectors that have done well already. A case in point is the FTSE 350 Industrial Engineering sector, which is now almost 90% above its previous high of four years ago.
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Morningstar forecaster 'no replacement' for advice
3 May 2011
By Cara Waters, FT Adviser. Research firm says new forecasting and planning tool can be used by individual investors but "is no replacement for having a conversation with a financial adviser".
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Snickering echoes
28 Apr 2011
By Simon Lovegrove, Financial Adviser. Some in the market have commented that the banks were quietly pleased with the proposals of the Independent Commission on Banking's interim report, as it did not advocate a wholesale break-up of the banking system.
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Masterful inactivity
28 Apr 2011
Investors at all levels have it within them, quite literally, to be their own worst enemy. Deeply engrained behavioural biases and personal psychologies can be so difficult to resist they end up making investment decisions that benefit them in no way other than perhaps inducing a feeling of satisfaction at having done something.
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Write in the margin
27 Apr 2011
Anyone who needs reminding what an unpredictable place the world can be, both inside financial markets and out, has only to think back to the first three months of 2011. As investors we can do nothing to change the past, nor can we foresee all the potential problems that might befall economies or companies in the future, but we can build in some protection against uncertainty by ensuring all our investments have an adequate 'margin of safety'.
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On a high horse
21 Apr 2011
By Richard Everett, Financial Adviser. The ICB finally set out its current thinking of how the UK banking sector can become more competitive.
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Eye of the beholder
21 Apr 2011
Once upon a time, not so long ago, final salary pension schemes were seen as sexy. That may sound an odd thing to say about the pot of assets a company holds to pay its pensioners yet, in 2007, large schemes were seen as so attractive entire companies - particularly those with projected shortfalls or 'deficits', such as technology services provider Telent - were bought just so an investment manager could run those pots of assets.
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Clearer thinking
21 Apr 2011
Over the last week or so, the casual reader of the financial pages may have gained the impression share buybacks are universally bad but of course it is rarely so black and white. Like so many things, it all depends on how they are used - holding a bread knife by its handle or its blade is the difference between a sandwich and a trip to hospital.
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A fistful of dollars
20 Apr 2011
Monday saw ratings agency Standard & Poor's (S&P) cut its outlook on the US government's debt to 'negative' - a move that theoretically threatens the country’s triple-A status if its legislators are unable to agree the best way to deal with their debt.
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High street, low expectations
19 Apr 2011
The latest set of retail sales figures are the worst since records began - though that is not quite as bad as it sounds as that was only 16 years ago. Some commentators have pointed to Easter falling late this year as a mitigating factor as the boost it tends to give, for example, DIY stores and garden centres has yet to happen but, even so, it should come as no surprise retailers are having a tough time.
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Focus: Equity Income - Maintaining strategies
18 Apr 2011
By Ian Lance, Investment Adviser. While high dividend yield strategies can be shown empirically to deliver excess returns in the long run, and the IMA UK Equity Income sector has a very good track record, in more recent years this has not been the case.
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Stop me if you've heard this before
18 Apr 2011
We are investors in an unfashionable business that is selling a US asset for a surprisingly good price and … yes, I know I have already written about Deutsche Telekom doing precisely that with its T-Mobile USA arm in Nothing lasts for ever. This is a different company and a different sector - albeit a reassuringly similar scenario - with Taylor Wimpey in the process of disposing of its US division.
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One step closer
15 Apr 2011
Sooner or later banks need to be seen as 'normal' companies again rather than as political footballs or media demons. So how does the interim report of the Independent Commission on Banking (ICB), which was published on Monday, fit in along the sector's road to rehabilitation?
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Long-term track record delivers results
11 Apr 2011
By Matthew McKelvey, Investment Adviser. With most traditional 'lower risk' assets currently offering very low yields, and many market commentators forecasting that this is likely to continue for some time, investors are caught between a rock and a hard place.
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That's Life
8 Apr 2011
Irish Life & Permanent is a relatively small bank with associated life insurance and general insurance businesses. With no exposure to commercial risk, it escaped most of the woes surrounding the Irish property market and has so far managed to survive without any rights issues or capital injections of note. It has also been paid the compliment of being deemed a "systemically important financial institution" but that is a compliment it could have done without.
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Creative destruction
7 Apr 2011
When it recently announced its preliminary results for 2010, Severfield Rowen observed on more than one occasion how its market share has more than doubled since 2007 - and yet, over the same period, the construction company, which specialises in structural steelwork, has seen sales fall by a third.
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Dixons in the dock
6 Apr 2011
Little more than a quarter of the year has passed, yet Dixons has already issued two profits warnings and the electrical retailer's share price has dropped some 40% to around 12p - only a couple of pence above its 2008 all-time low. Equity investors are running scared and, on the face of it, they may have some reason to do so.
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UK Banks - the Marmite factor
5 Apr 2011
Vilified by the press - critics argue that banks are overburdened with debt, surviving on life support, and teetering on the edge of oblivion. Such alarmist opinions may score political points, but as value investors it is our job to consider investments without emotion by analysing the long-term potential of businesses. By our metrics selected UK banks tick all the right boxes: cheap valuations, improving balance sheets, growing profits and, crucially, significant potential to grow dividends.
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Price projection risk to growth
4 Apr 2011
By Nick Reeve, InvestmentAdviser. If oil and food prices continue to rise faster than the overall rate of UK inflation, the nation's economic growth is at risk, according to the Office for Budget Responsibility (OBR).
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Good copper, bad copper routine
1 Apr 2011
Mean reversion is a powerful force in investment markets and tells us that in many instances investment returns tend to oscillate around a long term average – periodically ‘reverting to the mean’ – an idea that is neatly encapsulated in this chart. It shows real (i.e after inflation) 10-year returns from buying copper over the last 150 years and you will notice good 10-year returns are, more often than not, followed by poor 10-year returns – a mean-reverting phenomenon.
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Cleaning up afterwards
31 Mar 2011
By Charles Lewington, Financial Adviser. Advisers must make sure the Treasury is fully aware of the unintended consequences the Budget could have.
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Next’s big thing
31 Mar 2011
How a company uses the cash it generates from its business is a key consideration for value investors and helps explain why Next is a company we hold in high regard. First and foremost, the retailer uses its free cashflow to fund a dividend for shareholders and then, on a fairly consistent basis, uses it to buy back its own shares.
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Hair today, gone tomorrow
30 Mar 2011
The Chancellor of the Exchequer himself may have declared last week’s Budget to be “for growth” but one aspect should certainly have caught the attention of value investors. The Chancellor confirmed the main corporate tax rate, which stood at 30% only 3 years ago, will this April fall to 26% and to 23% by 2014/15.
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Three watchdogs come together to spot trouble
28 Mar 2011
By Emma Ann Hughes, FT Adviser. Financial Services Authority (FSA), the Office of Fair Trading and the Financial Ombudsman Service are pushing ahead with plans to form a committee to spot a future financial crisis.
The three organisations confirmed today (28 March) specialists from the bodies would spot emerging risks.
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Solvency abuse
28 Mar 2011
Why do companies often confuse liquidity and solvency? Liquidity refers to the short term cash a business has to allow it to run day-to-day while solvency is a measure of a company’s ability to manage its debts and continue operating over the longer term. Recently, however, a number of management teams have been talking about reducing their debt when really they would just be improving their short-term cash levels.
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Gearing up to measure debt
25 Mar 2011
Video (2:16 mins) - Nick Kirrage on gearing up to measure debt
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Turn on the tap
24 Mar 2011
By Melanie Tringham, Financial Adviser. Investors facing the challenges of looking for income-generating opportunities can rest assured that there are plenty opportunities for those who look around
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Nothing lasts for ever
24 Mar 2011
Deutsche Telekom’s sale of its T-Mobile USA arm to rival telecoms giant AT&T for $39bn (£24bn) on Monday ought to bring a smile to the face of any value investor. Many market watchers had been bearish on Deutsche Telekom for a number of reasons – not least that it owned a supposedly structurally flawed business in the US that would cost a fortune to fix and nobody would want to buy.
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Deutsche Telekom
21 Mar 2011
Exciting developments for Deutsche Telekom which today announced the sale of its disliked US mobile business. The exit isn’t a massive surprise, but the price certainly is, with AT&T paying Deutsche almost $40bn for the division.
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Focus: Searching for growth
21 Mar 2011
By Chris White, Investment Adviser. UK Equity Income funds have struggled to keep up with growth funds over the past few years with the average fund lagging over both one and three years. However, future prospects look stronger for a number of reasons.
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Running for cover
18 Mar 2011
For reasons that need no explanation, the insurance sector has over the last week or so come under the microscope but the two main elements – that is, economic and human – which make up the insurance cycle continue to receive little analysis.
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Back to the bad old ways
17 Mar 2011
By Hal Austin, Financial Adviser. Banking and the behaviour of bankers bring out the best and the worst in most of us. The best when they are lending us money to buy a home or some other important item, and the worst when they seem oblivious to the concerns of the wider public.
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Mirror, Mirror on the fall
17 Mar 2011
On 3rd March 2011, newspaper group Trinity Mirror revealed its 2010 profits were well up on the year before and promptly saw its share price all but halve. Extrapolating weak short-term advertising trends into the future, the market has evidently concluded the company’s prospects look bleak yet true value investors will not be so quick to write off Trinity – and indeed newspaper as a whole – just yet.
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Fear factor
16 Mar 2011
Much has already been written following the disasters that have befallen Japan and, beyond offering our sympathies to those directly affected, we do not plan to add to that. However, from an investment perspective, the earthquake and its aftermath have once again highlighted the irrational way in which markets can react to this sort of shock event.
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Focus: Dividend yield - Looking beyond the dividend
15 Mar 2011
By Kevin Murphy, Investment Adviser. A focus on dividend yield has proved to be a successful method of generating exceptional returns for investors, both over time and across most regions globally.
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Too many lifeboats
15 Mar 2011
When, 99 years ago next month, the Titanic sank with the loss of 1,517 lives, numerous investigations were undertaken into how and why, yet very little legislation came about as a result. One exception was a regulation requiring every vessel to carry sufficient lifeboats to evacuate all passengers and crew – an issue that, even if it contributed to the loss of life, hardly led to the Titanic colliding with the iceberg.
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High yield on the high street
14 Mar 2011
Video (1:53 mins) - Nick Kirrage on High yield on the high street
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No barrel of laughs
11 Mar 2011
As the oil price continues to rise as a result of the turmoil in North Africa and the Middle East, what are the wider implications for investors?
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Confidence trick
10 Mar 2011
Recent numbers from the Office for National Statistics show merger and acquisition (M&A) activity involving UK companies reached its lowest level for 16 years in 2010. This is interesting because, when the stockmarket is high, you tend to see a lot of M&A and, when it is low, you tend to see very little – and yet the UK market ended the year within 10% of its all-time high.
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Staying ahead of the pack
10 Mar 2011
By Hal Austin, Financial Adviser. Once again the knives are out for Mervyn King, the governor of the Bank of England. And once more it is for making us aware of the single most important lesson to come out of the 2008 banking crisis: that we must reverse the Bill Clinton decision to repeal the Glass-Steagall legislation, allowing wholesale and retail banks to merge.
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Corporate governance behind the headlines
9 Mar 2011
Video (1:52 mins) - Kevin Murphy on Corporate governance behind the headlines.
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Focus: Equity Income - Equities well on the road to strong recovery
7 Mar 2011
With the tax year-end approaching, investors are increasingly focusing on investment vehicles and tax wrappers, especially when inflation is eroding real returns on capital wealth.
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Is the recovery play over?
4 Mar 2011
Video (1:12 mins) - Nick Kirrage on Is the recovery play over?
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Analyst: Herd instinct leads in equity income
28 Feb 2011
At 102 funds, the IMA UK Equity Income sector is among the largest, but it is far from diversified.
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Hidden dividends
16 Feb 2011
A focus on dividend yield has proved to be a successful method of generating exceptional returns for investors, both over time and across most regions globally. We are confident a high-yield strategy can continue to outperform over the medium term but would highlight some unique factors to this cycle, which means investors need to tread carefully.
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Hard act to follow
10 Feb 2011
Dividends are often overlooked by investors but there are options available that merit further examination. For active investors dividends are often considered the poor relation of the shareholding deal as the potential for a capital gain is what sets the juices flowing with the 'divi' a 'nice to have' on top.
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Emerging Profits. Why domestic banks are set to deliver
9 Feb 2011
The cult of the equity peaked in 2000. The stock market performed well through the late ’90s and as usually happens, money flowed into the hottest asset class. The flows into equities peaked with the peak of the equity market in 2000, and have never got close to those levels since. Some might argue that the credit crunch finally killed off any infatuation with equities. The downturn certainly sparked a huge rush for bonds – with bonds becoming the hot asset class of the moment with demand even higher than for equities at the height of the technology bubble.
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Taking a look overseas for income
7 Feb 2011
Inflation has not been good; unemployment has risen, while consumer confidence has fallen; the budget deficit remains high; and then there was the shock 0.5 per cent fall in fourth quarter GDP. Some of it may have been down to the effect of snow, but the Office for National Statistics reckons activity would have been at best, flat without the unusual weather.
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Outlook for 2011 - too many outlooks
20 Jan 2011
This time of year, we are always struck by the sheer volume of investment outlooks hitting our desks – with tome after tome predicting where the best returns will be found in 2011.
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The lost decade
24 Nov 2010
Several fund groups are highlighting that today is a generational opportunity to invest in equity income funds. This call on equities is largely based on the fact that dividend yields have moved ahead of gilt yields for the first time since the 1950s.
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Bond boost for European fixed income
22 Nov 2010
By Nick Reeve, InvestmentAdviser. European fixed income is receiving a boost as some companies in the region are buying back their bonds at a premium, according to Axa Investment Managers' Julie Lamirel.
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Focus: Ambitious easing could cost us dear
22 Nov 2010
The global economic outlook remains profoundly uncertain. Recent business survey data provides room for some modest optimism in the near term but the medium to longer-term outlook remains fraught with problems.
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What is Recovery investing?
18 Nov 2010
While the definition of recovery differs between managers, with some managers using the term interchangeably with special situations, our definition has always been well defined and specific.
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Spending cuts: is it all bad?
16 Nov 2010
Video (1:07 mins) - Nick Kirrage on spending cuts: is it all bad
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Mining stocks
9 Nov 2010
Mining stocks represent a major allocation in many UK equity funds but we have been out of the sector for over three years now, avoiding popular companies like Rio Tinto, Xstrata and BHP Billiton.
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CBI survey finds UK has lost ground
8 Nov 2010
By Oliver Haill, Investment Adviser. The UK is seen as a better place to invest than continental Europe and Russia, and it is on a par with Brazil and most Asian countries, but less attractive than North America, China and India, a survey has found.
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Perceived safety of bonds has left equities in the shade
3 Nov 2010
There is no such thing as an asset that is always safe, or indeed an asset that is always risky. There are only assets that are cheap, and assets that are expensive. Riskiness stems from valuation; assets that are expensive are risky for your wealth, and assets that are cheap should protect your capital. Today, many investors are obsessed with macro-economics. The market seems driven by daily economic data points, be they interest rate decisions, GDP data, employment numbers or the ruminations of the central banks.
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Market watch: Foreign exchange war has no winners
1 Nov 2010
By Neil Dwanel, Investment Adviser. Some two years on from the financial crisis the UK economy is still failing to show signs of any substantial recovery. As a result it is no major surprise that the Bank of England has stated that it is considering a second round of quantitative easing (QE2).
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The problem with macro investing
1 Nov 2010
Recent stronger than expected estimates for third quarter GDP growth in the UK minus 0.8% against a predicted 0.4% highlight the problems of orienting a portfolio to fit short-term macroeconomic figures.
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Stockpicking in uncertain times
28 Oct 2010
Video (1:50 mins) - Nick Kirrage on stockpicking in uncertain times
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Identifying and avoiding value traps
27 Oct 2010
As value investors, we look to buy companies cheaply and often focus on unpopular stocks and sectors. But while we always ask how cheap a share has to get before it becomes attractive, there are some situations in the market that are value traps.
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Light that never goes out
21 Oct 2010
Once again we publish our list of the Top 100 financial advisory firms, and again the figures speak for themselves.
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Good companies and good investments
20 Oct 2010
The utilities sector is one that usually plays a central part across a number of yield-focussed portfolios. Taking a contrarian stance, we believe that a focus on the sector may not always be the best approach.
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The first step is the easiest one to forget
14 Oct 2010
By Karen Coneely, Financial Adviser. Merger and acquisition activity may be on the up, but for many organisations now looking for a buyer maximising value is a major challenge. And while cash rich companies are keen to expand where possible, no organisation wants to acquire a business that is likely to need unexpected investment.
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Market ignoring improved-risk side of banking picture
13 Oct 2010
We were encouraged by the recent Basel III proposals on bank capital, which highlighted that the major domestic UK players Barclays, Lloyds and RBS have strong balance sheets in the context of the new rules. The proposals included an increase in capital reserves to almost three times current levels and look stringent compared with recent history.
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A view on shorted companies: building value into the picture
12 Oct 2010
Looking at the most shorted stocks in the UK market, one is struck by the absence of Connaught, the disgraced building firm. Analysing the list, it appears the crucial determinant for investors to short a business is not question marks over accounting or whether the franchise is fundamentally overvalued, but concern over the next three months’ trading. While this may superficially sound sensible, it explains why many investors struggle to make money shorting companies.
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Exploiting market myopia: long-term thinking for long-term gain
12 Oct 2010
We have seen many good examples of this voting machine in action over the last 18 months, with the stock market myopically focussed on short term profits, rather than long term value. A case in point is Collins Stewart, the stock broker and private client business.
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News Analysis: RDR trains lens on fee-charging models
11 Oct 2010
By Shaun Crawford, Investment Adviser. No one reading this magazine will need to have the significance of the Retail Dist-ribution Review (RDR) explained to them. The good news is that the RDR has the potential to complete investment advisers’ transformation into fee-charging professionals, but there are clearly a number of advisers and providers who are a significant way away from responding to the reality of what this transformation will mean to their current business models.
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UK's next recession is around the corner: Schroders
7 Oct 2010
By Fiona Nicholson, Finanacial Adviser. Advisers should beware that the next recession could be closer than anticipated, according to Keith Wade, chief economist for Schroders, who believes a new cycle for the world economy is beginning.
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Leader: Normal? Far from it
27 Sep 2010
By Anna Lawlor, Investment Adviser. While the authorities have thrown all the firepower at their disposal to tackle the Great Recession of 2007-09, they have failed to give an honest appraisal of when the debt hangover will end.
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Spotting M&A opportunities
21 Sep 2010
Video (1:02 mins) - Kevin Murphy on spotting M&A opportunities
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Profits recovery has barely begun
21 Sep 2010
Across Europe in the last 40 years, there is not a single profit recovery which has taken less than five years to run its course. Some have taken nearly a decade.
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Five things BP teaches us about risk
20 Sep 2010
Big stocks aren't necessarily safe stocks. he benchmark is a bad way to measure risk. Buying stocks with big yields doesn't provide capital protection. Investment safety is driven by balance sheet strength, not company size. Knowledge isn’t safety.
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Market Watch: Feel the rhythm of the markets
13 Sep 2010
By Roger Nightingale, Investment Adviser. Governments may come and go, fiscal and monetary policy chop and change, but the business cycle goes on forever.
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Unearthing future dividends
8 Sep 2010
Video (1:39 mins) - Nick Kirrage on unearthing future dividends
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How do you distinguish between a 'good' or 'bad' value stock?
5 Aug 2010
When considering any stock, we carry out a lot of in-depth research in order to come up with a conservative estimate of 'normalised' earnings potential. In other words, accepting that there could be peaks and troughs in the cycle, what level of profit could a company reasonably be expected to generate on a long-term basis.
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Connaught Shows Why Cash Must Always be King
3 Aug 2010
The near collapse of Connaught in recent weeks has taken many investors by surprise. A little under a year ago Connaught shares hit all time highs of >440p putting them on a rich PE multiple of ¬¬19x and were 330p as recently as early April. By the end of last week the shares had fallen to 35p as the company announced it was in serious financial trouble and in discussions with its lenders.
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BP ignites the dividend debate
29 Jul 2010
Video (1:56 mins) - Nick Kirrage on BP ignites the dividend debate
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The crux of value
20 Jul 2010
Value investing aims to generate excess long-term returns by exploiting two inefficiencies within equity markets - the susceptibility of share prices to short-term sentiment, and the tendency for investors to extrapolate trends and ground their future expectations in what has happened in the recent past.
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Change in direction puts the spark back into Telecoms
16 Jul 2010
The telecoms sector is one of the least loved in the stock market today and trades at low valuations. One might have thought that in such uncertain economic times investors would be attracted to the sector's defensive qualities and strong cash generation but this isn't the case for two principal reasons.
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Inflation down in May, but still well above 2% target
16 Jul 2010
By Samantha Downes, FT Adviser. Annual inflation fell from 3.4 per cent to 3.2 per cent in May, according to the Office for National Statistics.
The Consumer Price Index, which is used by the government as the main indication of inflationary pressure, was still above the Bank of England's 2 per cent target.
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Why income stocks right now?
5 Jul 2010
The outlook for income-generating stocks remains positive, not only because high yielding stocks have been shown to outperform low yielding stocks over time, but because of last year's rush by companies to preserve cash. The slashing of dividends took place given the nature of the economic downturn - a financial crisis, which made borrowing difficult - and, as a result, dividend yields fell far quicker than earnings.
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June update: Another negative month for UK equities
30 Jun 2010
June was another negative month for UK equities. The coalition government's emergency budget helped boost market confidence after healthy corporate results, fuelling a mid-month rally. Markets sold off heavily late on, following weak US data and the FTSE 100 index hit a new low for the year as double-dip concerns gripped global stock markets.
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Take a reality check on UK companies
28 Jun 2010
Stockmarkets often react poorly to uncertainty and fear, with the result that shares prices tend to diverge quite significantly from the intrinsic value of the underlying businesses. Whilst unsettling at the time, these periods of market stress can create some very attractive opportunities for long-term value investors like ourselves.
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Human behaviour generates value
15 Jun 2010
Sentiment plays a key role in the generation of value because human nature brings emotion into investing, and this emotion makes share prices far more volatile than the underlying fundamentals of the business often justify.
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No more safe havens?
9 Jun 2010
By Sam Shaw, Investment Adviser. Income investors must be running out of safe havens in which to seek their dividends. Following the Deepwater Horizon accident in the Gulf of Mexico, a sword of Damocles may now be hanging over BP’s robustness as a dividend provider.
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Managers warn over narrow stock focus
7 Jun 2010
By John Kenchington, Investment Adviser. Advisers and fund managers have warned that the problems at BP underline the risky concentration on a handful of UK stocks by many UK income funds in the wake of the banking crisis.
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BP, it's all in the price
4 Jun 2010
The question we always ask ourselves when analysing companies is, on today's valuation, what are we being asked to believe? In the case of BP, the question we ask specifically is what level of fine would be required to put the BP balance sheet in jeopardy? A reasonable estimate for the total costs of this environment disaster is c.$15bn. However, we believe in excess of $50bn would be required to put moderate stress on the balance sheet. The market clearly disagrees and has already removed more than $60bn from the company's capitalisation.
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Signet - what a difference a year makes
1 Jun 2010
With most companies now having reported their 2009 results, some interesting trends are emerging. Many investors characterised the stock market rally of 2009 as the 'dash for trash', but we can now see it was actually the 'dash for cash', with many businesses reporting cash profits significantly ahead of expectations. Nowhere is this more evident than in high street jewellery retailer, Signet.
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Eight lessons to learn from 'The Crisis'
1 Jun 2010
Over the past 18 months we have seen unprecedented economic events, but I believe the fundamentals of equity investing remain unscathed and investors should take eight key learnings from this crisis.
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May update: Sell in May and go away?
29 May 2010
Further evidence of a corporate recovery was overshadowed again in May by the ongoing sovereign debt crisis in the Eurozone. Renewed concerns that problems in Greece could affect other European countries drove the FTSE All-Share lower.
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UK's yields higher
10 May 2010
By Rob Langston, Investment Adviser. Investors who seek income should look to the UK, as research from Financial Express highlights the yield gap between the UK Equity Income and Global Equity Income sectors.
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UK election
7 May 2010
For global financial markets, the UK election has been a sideshow when compared to the sovereign debt crisis that has recently emerged in Europe. In the week running up to the election, the yield on two-year Greek bonds blew out to over 18%. As our polling booths were closing, the Dow Jones index in the US was in the process of losing 1000 points, albeit to recover later in the day.
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Ratings agencies - graded D
5 May 2010
Warren Buffett famously said 'it's only when the tide goes out that you realise who has been swimming naked'. The credit crunch revealed conclusively that the ratings agencies had not only been swimming naked, but had been urinating in the pool.
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The folly of forecasting
4 May 2010
Video (1:28 mins) - Kevin Murphy discusses the folly of forecasting
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The dash for cash not trash
26 Apr 2010
Video (1:05 mins) - Nick Kirrage on the dash for cash not trash
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The cost of the volcanic chaos
20 Apr 2010
While we have seen some falls in the share prices of UK and European airlines since Thursday, the sector has not been the victim of any large-scale sell-off, mainly because company fundamentals remain unchanged.
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Past performance is not an indication of future performance
19 Apr 2010
Investors have a habit of assuming that what is happening right now will always be the case i.e. that high growth companies generating high returns on capital will always do so, whereas firms that are currently having difficulties or are proving unexciting will never experience any improvement.
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White Paper: Value Investing
15 Apr 2010
As the Value Perspective team, we are (as the name would suggest) unabashed value investors. Yet, we are very aware that the term 'value investing', while frequently heard, is often poorly understood. With this in mind, the following paper aims to get to the very heart of this proven investment style, examining the concepts behind value investing, its meaning and the implications it has for the way we manage our funds.
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The attractions of China and what it will cost you
13 Apr 2010
Video (2:08 mins) - Nick Kirrage on the attractions of China and what it will cost you
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Market watch: Why green really is this season's colour
12 Apr 2010
By Stephen Barber is an academic who advises Selftrade on markets and investments. An under-reported announcement in Alistair Darling's pre-election Budget was a hefty £2bn commitment to green technology. It is a sector in which investors have shown a growing interest for some time and now seems to be central to any sort of government-sponsored industrial revival.
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Coggan: Time for a history lesson on debt
12 Apr 2010
By Philip Coggan, Buttonwood columnist at The Economist - Sovereign debt is often regarded as risk-free, even though the history of governments defaulting on their debts goes back thousands of years.
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Times are tough, but don't give up
7 Apr 2010
The past couple of years have undoubtedly earned their place in the stockmarket history books. Indeed, investors have been taken on an unprecedented rollercoaster ride since October 2008, with the world economy sliding into recession (and perhaps narrowly avoiding depression), the credit crisis bringing down some of the most widely recognised names in the financial world and the value of risk assets declining precipitously before staging a remarkable recovery.
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Bust or boom? - Weighing up the balance of risk and reward
7 Apr 2010
Companies where solvency is in question can trade at extreme discounts to their intrinsic value. This is for two main reasons. First, the investment outcome is often seen as binary - the company either survives or it doesn't, and investors fear such polar opposite events.
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Glencore
1 Apr 2010
We recently met with the management of Glencore, a mining trading business that would appear to desire a listing on the UK stockmarket. Whilst not commenting on the attractiveness or otherwise of the company, it is a perfect example of how the perception of risk has changed in the course of 24 months.
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Coggan: The lost decade was not worth finding
30 Mar 2010
By Philip Coggan, journalist - Perhaps the most astonishing thing about the 'lost decade' for equity markets - as some dubbed the noughties - is that, even at the end of it, equities are not that attractively valued.
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Focus: Financial crisis - History repeating
22 Mar 2010
By Anthony Beachey, freelance journalist - If you think economic straits are dire now, spare a thought for those who lived through the 1970s, when Britain edged towards a political and financial abyss.
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Internal action yielding results
19 Mar 2010
Despite the continued volatility and question marks about the potential speed and sustainability of the economic recovery, the recent corporate results season has been very reassuring. We have been encouraged, in particular, by the significant improvements in operational performance amongst 'recovery' stocks as internal action focused on cost-cutting and cash generation has yielded some strong results.
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Luminar - light at the end of the tunnel?
18 Mar 2010
We continue to keep a close eye on the market, looking out for any strong three to five-year opportunities that appear amidst the volatility. One recent example is Luminar - a manager of UK bars and nightclubs.
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Reaping the rewards of volatility
11 Mar 2010
Focusing efforts on small sectors, where the solvency of companies may also be in question, provides a great starting point for recovery investors.
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Where's the value now?
8 Mar 2010
We continue to see pockets of good value within UK equities. For instance, we still see long-term attractions amongst the domestic banks and financials, but also in areas such as pharmaceuticals, telecoms and domestic cyclicals, where many names continue to trade at substantial discounts to their normalised profit potential.
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M&G warns against picking stocks on dividends alone
7 Mar 2010
By John Kenchington, Investment Adviser - M&G's global equity income manager Stuart Rhodes has warned selecting stocks purely based on their dividend yields could be "suicide" for investors. The manager of the M&G Global Dividend fund said rival investors who chased high yields in 2008 and 2009 suffered most as the banking sector plummeted.
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Outside edge: A road to nowhere?
1 Mar 2010
By Martin Wood, research consultant at Financial Express Research - Arguably, this is a sector that struggles to justify a place in well constructed investment portfolios, so let us get the immediate question out of the way first: why would investors who seek exposure to European markets choose a route that takes in the UK as well?
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Sector comment: Getting left out in the cold
1 Mar 2010
By Anna Lawlor, Investment Adviser - In investment circles, the mantra of the moment is undeniably 'overseas earnings'. Investing in a UK, European, North American or almost any ostensibly western-focused retail fund is increasingly being treated as a play on the narrow band of countries expected to produce decent - as in, relative to anaemic or flat - GDP growth.
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Coggan: Boomers show old age really is a burden
1 Mar 2010
Philip Coggan, Buttonwood columnist for The Economist - Do demographics drive markets?
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Market Watch: We should be wary of the Bank's bubbles
1 Mar 2010
By Stephen Barber, Investment Adviser - The governor of the Bank of England gave a characteristically self-assured response to chancellor Alistair Darling following January's 3.5 per cent inflation figures.
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Opportunities in life and non-life
1 Mar 2010
We continue to see value within the insurance sector, feeling that Old Mutual and Legal & General are trading at too large a discount to embedded value, whilst RSA remains undervalued and high yielding.
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No longer a dead cert
25 Feb 2010
By Mike Kerley, director of pan-Asian equities for Henderson Global Investors - When it comes to delivering positive returns down the years, the UK equity income sector has earned for itself a reputation as something of a thoroughbred.
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Unlocking wealth
25 Feb 2010
By Phil Doel, F&C UK Equity Team - The credit crunch and subsequent recession has had a devastating effect on many companies, large and small, which have been forced to cut or pass their dividend payments after years of "progressive dividend policies", particularly within the financial, resources and other cyclical sectors.
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Small sectors don't necessarily mean small opportunities
25 Feb 2010
In tough times, investors gravitate towards larger stocks and tend to ignore small sectors, particularly those exposed to negative macro trends. The reason for this is that, for benchmark-focused fund managers, a rally in a small sector they do not own should have a limited impact on relative performance, whereas declines in small sectors in which they are heavily invested could significantly hamper performance.
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Astronomical profits belie a loss of faith
25 Feb 2010
By Jeff Prestridge, personal finance editor of Financial Mail on Sunday - Last week, Barclays kicked off the banks' reporting season by announcing a colossal - some would say obscene – 92 per cent rise in profits for 2009 of £11.6bn.
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Search for income
25 Feb 2010
By Hal Austin, editor of Financial Adviser - Trying to generate an income from your assets is a frequent request from clients.
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Turn on the tap
15 Feb 2010
By Danny Cox, chartered financial planner for Hargreaves Lansdown - Income is at the heart of the vast majority of investment decisions: either income is needed now, or income will be required later.
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Focus: Safe on solid ground
8 Feb 2010
By Kate Hughes, freelance journalist - It's official: the UK has finally clawed its way out of recession - but only just, and it is the last major global economy to do so.
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The views and opinions displayed on this website are those of Kevin Murphy, Nick Kirrage and Andrew Lyddon, members of the Schroder UK Specialist Value Team (the Value Perspective Team), and other independent commentators where stated. They do not necessarily represent views expressed or reflected in other Schroders' communications, strategies or funds. The Team has expressed its own views and opinions on this website and these may change. This item is intended to be for information purposes only and it is not intended as promotional material in any respect. Reliance should not be placed on the views and information on the website when taking individual investment and/or strategic decisions.
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