Friday Email: 31 January 2014
Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:
It has been a tough time in the markets this past couple of weeks and the indices have actually given back some of their gains from last year. In general, valuations looked stretched towards the back end of 2013 and it is for that reason that we have been cautious throughout 2014 so far. Our emphasis has been on earnings because we know that the only way that dividends can keep rising is if the dividend cover remains strong. Throughout the past two years, in spite of decent earnings, dividend cover has been gently eroded across the board and for the income investor that is a worrying sign. So, we remain on earnings watch and we still lack enough evidence to strike out a really positive note yet for 2014. Our gut feeling is that the market will have another strong leg up and then you will really have to mind your eye.
Our small stock suggestions for the year have started to wake from their slumber in the past two weeks and our two most favoured stocks, Cathay International (CTI) and OPG Power Ventures (OPG) have both registered good moves up. They both look poised for an excellent 2014 regardless of what the market does. Imagination are all over the place. In the absence of news, the stock becomes very volatile and looks like a favourite for traders as you can trade in significant volume. Graphene Nanochem are a very 'blue sky' stock and have moved around wildly. Only buy the big dips, do not chase it up. Toumaz has not moved at all. Progress reports on the trials could be the catalyst.
The reporting season is now almost upon us and with the markets struggling, we expect to unveil some good opportunities over the coming weeks as we start up our 'dividends of the week' again. Falling markets equals rising yields and the FTSE 100 is down 300 points today from its January high.
The Friday email is delivered to over 20,000 subscriber’s every week, and remains a widely read run-down of recent events and what investors can expect in the week ahead written by our chief analyst Mark Riding.
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Read next: 24 January 2014
It has been an interesting start to the year so far and one which has reinforced our view that the markets are not going to be easy this year in spite of how bullish politicians are right now. Employment is falling apparently but I know far too many people who have not been working who have never troubled the employment statisticians. My feeling is that companies have drastically under invested over the past five years and as a result there will be some pain in the U.K as countries with longer term thinking and timescales such as the likes of Germany and China reap the rewards of long term investing and strategy. I hope that I am very wrong.
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