Friday Email: 22 January 2016
Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:
You do not need me to tell you that the UK stock market has had a terrible week when fear took over investors and share prices slumped as a result. The FTSE 100 fell from 5918 to 5640 at the low point on Wednesday; down almost 5% on the week, and that after the previous two weeks of falling prices. Yields are rapidly on the rise and Pearson showed yesterday that the doom brigade who were saying that they must cut their dividend were very much wrong in their assertions. Pearson has a long history of a progressive dividend and by saying yesterday that they would maintain the final dividend at 34p, there will be an overall 2% increase for 2015. The shares rose by over 17% on the day and it is now the leading riser in the model portfolio with a rise since the new year of over 7%. That is why I said last week that I was looking forward to the reporting season. There is so much misery priced into the market that even moderately good or bad news relative to very low expectations results in a sharp increase in the share price. The model portfolio now has four gainers and sixteen losers since the start of the year, so nothing to shout from the rooftops about (yet). The other gainers are Glaxo, Pennon, and Diageo.
Meanwhile the market is showing some signs of recovery spurred on by the price of oil which seems to be the key factor in determining the direction of stock markets globally right now.
Also, UBS said yesterday that BHP Billiton would reduce its dividend by 50% which is in line with our forecasts and still provides a yield of over 5%. (The company has not confirmed this yet and it is possible that they will do a Pearson, but less likely in our view)
The past week was quiet with only IG Group, Unilever, Chemring and NCC group reporting to the market. No particular surprises with IG Group and Unilever producing flat dividends and NCC group produced a 15% dividend increase.
The week ahead sees a gradual pick up in announcements as we move towards the reporting season.
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.
It’s included as part of the free DividendMax trial.
Read next: 15 January 2016
The past week saw the FTSE 100 hit a low of 5834 on Thursday as the markets continued with their irrational misery. Quite a number of the big investment houses are telling clients to sell into any strength. I cannot see why they would say that now when they were not saying it when the market was over 7000. Overall, the market looks fair value to me on fundamentals with some stocks in the resources sector looking very good value indeed on a medium term view of two to three years. The model portfolio is underperforming slightly at this stage as you would expect with what we have seen so far this year.
