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Friday Email: 08 July 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:

They say every cloud has a silver lining and that's what has happened with DividendMax this week. We have had the most sign ups for paying members in a single day and the most in a week since our inception in 2011. Many people seeking yield opted for property which was a little overheated and the perception that Brexit was bad for property caused a run on property funds leading to a suspension in trading at some of them. Now these funds may have to sell properties in order to meet the redemptions and this will take months rather than weeks. Money will move into equities for yield and as we said last week, the safest place is in the big dollar earners.

Meanwhile in the stock market, the price of property related stocks has become very interesting for those willing to take risks. Top of the optimizer for UK stocks is Galliford Try, which has been very well run for a long time and the upshot of the property related panic is that their shares have now fallen by over 50% this year. That puts them on an optimized 3 dividend yield of almost 15%. As you know when that happens on the Optimizer, it can only mean one of two things. 1) Wrong price, 2) Dividend reduction. Their cover is ok, but not super safe at 1.7x. However, when you look at their track record, when other housebuilders were on the brink in 2008/9, they were increasing their dividends. In fact their dividend has grown from 2.5p in 2006 to a forecast 81p this financial year. Added to that, the directors were buying last week and when the Chairman wades in for almost £700,000, I don't think he reckons its a bad buy. Add to that, interest rates are headed to zero and strong housing fundamantals remain intact for now.

Back to Brexit and what is going to happen. I am no political expert, but I would be very interested to see how a 52-48 percentage vote translates across parliament. It is unclear, but it would seem that parliament may have to ratify the invocation of article 50. How will this work? Will all MP's be told they must follow the will of the people and vote it in? If I were an MP, I would vote exactly as per my constituents. If they voted anything over 50% one way or the other, then that is what I would do in the house. Represent my constituents. Meanwhile, Michael Gove has been eliminated from the race to be Prime Minister and it is certain that the next Prime Minister will be a woman.

The past week saw the FTSE 100 moving in a relatively narrow range and it looks like it will end the week roughly as it started. Corporate news was thin on the ground and this looks set to continue for the next two weeks.

This email was originally sent on Friday 08 July 2016

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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