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Friday Email: 24 October 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 markets have staged a fair bit of a recovery with the FTSE 100 just shy of 6400 after hitting 6070 last week; The Dow is 16655 after dipping below 16000 briefly.

The past week saw Tesco reveal the depth of its woes and this brought with it a savage reduction in the dividend. There will be an opportunity there in the future but you cannot tell if they are value at the moment as there cannot be clarity on earnings and they gave no forward guidance to help the market. Buying them now is in my view just a punt and with very little support from the dividend. Mind you, if you could see the Tesco Metro in Brockenhurst you would be filling your boots. One for the watchlist.

All the doom surrounding Glaxo also suddenly lifted and they were a much more obvious case for a buy as they did have support from the dividend and they had already told the market they were going to return another £4 billion to shareholders following the Novartis transaction. Thats about 82p per share via a B share scheme on top of your 80p dividend. Not bad when the price was £13.24 ahead of the results. Then EPS also came in better than expected.

Debenhams look good to me as well. Their numbers yesterday were not brilliant for the full year but they had a disastrous first half. In the second half they did much better. There is a 2.4p dividend on offer, going ex on the 4th December. If they can carry their second half performance into next year, then the shares, at 61p on a PE of under 8 look very good value. (supported by a yield of 9% on the Optimizer, with very good cover of 2.2). I'm not sure what Sports Direct and Mike Ashley are up to, but via a put option and a recent market purchase of over 4% of the company, they effectively own 11% of Debenhams.  

The week ahead looks very quiet with hardly any companies that we cover reporting, so we will be driven by the US earnings season and Geo-political issues. The UK market still seems very very nervous and October is not over yet. I still think we will hit 7000 by year end.

This email was originally sent on Friday 24 October 2014

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