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Friday Email: 24 April 2015

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 pretty much where it began the week having pushed over 7100 in early trading on Tuesday.

It has been a very interesting week in the light of events on Thursday when Pace became the second company in our 2015 model portfolio to receive a takeover bid from a U.S. company. First came Rexam, which is showing a gain on the year of 28% and now Pace which is up 29%. This brings the performance of the model portfolio as a whole to up 12.14% (excluding dividends) whilst the FTSE 100 has risen from 6547 to 7053, up 7.7%. It is looking like another year of significant outperformance for the model portfolio is on the cards.

Members will know that we highlighted Pace on the 14th October last year and also as recently as the 23rd March in our feature on the best dividend increases from the reporting season. Personally, I don't think the Americans are paying enough as they are only paying a couple of years free cash flow that would be generated by Pace as the cash element of the deal. That said, you will be getting shares in a company that will immediately enhance their earnings with this acquisition. My thinking is that we will see more of this as the Americans use their over inflated paper and the strong dollar to pick up competitors that are quoted over here at much lower prices. To give you some idea of what the American market thought of the deal, Arris (the bidder) shares traded up 22% on the first day of trading after the bid, valuing Pace at roughly £5.

The past week was again very quiet as Tesco completed its humiliation with the confirmation of a final dividend of zero. Associated British Foods which trades on a forward PE of 28 times earnings and yields 1.3% managed a paltry 3% increase in their dividend. We won't be seeing that in the model portfolio any time soon.

The week ahead remains quiet although we do get final results from Whitbread and Home Retail. Thursday sees model portfolio constituent, Saga produce its final results and also it will be interesting to see how Globo are getting on with their US expansion when they report, also on Thursday.


This email was originally sent on Friday 24 April 2015

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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