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Friday Email: 05 September 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:

The FTSE 100 is up about 60 points this week and is currently about 30 points above the 6850 barrier. It will be interesting to see if the index can stay above this level and push on towards 7000.

Admiral sits at the top of the Optimizer and looks like a steal at these levels. Brokers have been downgrading the stock and the yield over the next 12 months or so exceeds 11%. Thats good by any standards and the first of the three dividends is available until Tuesday close of play (49.4p). I spoke to a pal of mine in the city yesterday and he reckons by their analysis £12.20 is a worst case scenario. When it goes ex dividend this coming Wednesday, it will be dangerously close to that level, so if he is correct, the downside is very limited from here.

The past week has been very quiet in terms of corporate news with Redrow following in the footsteps of the other housebuilders and increasing its dividend by 100%. Genus provided us with its usual 10% dividend increase and we had a surprise yesterday when Go-Ahead group increased its dividend for the first time since 2008. Easyjet produced good passenger numbers on Thursday and it has now recovered over a quid from its recent lows. It can go much higher and will produce solid dividend increases over the next few years.

The week ahead is quiet with the highlight being Next which has one of the best recent dividend track records in the FTSE 100. Its relentless share buyback programme puts a floor under the stock and we should see a revised buyback price with its interim results. The price at the moment is way ahead of what they are currently prepared to pay so expect another special dividend if the buyback price is not increased.

Cathay produced very good numbers last Friday, but the stock did not move as it is still relativley unknown and very tightly held in the UK. Over in Hong Kong, its biggest asset, Lansen Pharmaceuticals rose 15% on the Monday following the results. It has held that level and another decent rise in earnings at the full year stage could see a re-rating. Pharmaceutical companies are trading on huge multiples out there and Lansen trades on only 17x earnings. The only comparable stock in the UK, Huchison China Meditech trades on a forward PE of 111x.

Laura Ashley had impressive results today and they look like an intersting stock. They certainly have a very good yield and we are initiating coverage of this company today.

So, the week ahead is interesting as we look to see if the 6850 brick wall can be well and truly breached. In our view it will be tough, but we reiterate that we believe the FTSE 100 will be north of 7000 by the year end.

This email was originally sent on Friday 05 September 2014

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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