YEAR SINCE THE MARKET CRASH - Shares Magazine
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VOL 23 / ISSUE 06 / 18 FEBRUARY 2021 / £4.49
1 YEAR SINCE
THE MARKET CRASH
What’s changed
and are there
any bargain
stocks left?
VACCINE BOOST CAN MOONPIG FUNDS WHICH
FOR MARKETS AS CONTINUE TO PAY DIVIDENDS
REOPENING EYED FLY HIGHER? EVERY MONTH
BAILLIE
GIFFORD
MANAGED
FUND
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Actual Investors
Baillie Gifford & Co Limited is the Authorised Corporate Director of the Baillie Gifford ICVCs. Baillie Gifford & Co Limited is wholly owned
by Baillie Gifford & Co. Both companies are authorised and regulated by the Financial Conduct Authority.
EDITOR’S VIEW
Why we should be fearful
of zombies Begbies Tray
nor Q4 2020
Recovery could be constrained by Red Flag rep
o rt shows
companies kept afloat thanks to state
support 13% increase in UK
firms in sign
ificant
T
hey may not be too busy just yet distress
but insolvency specialists are feeling
fairly confident about their near-term
prospects which, on the flipside, is bad news for
UK businesses.
On 12 February the recently-listed insolvency and
business advisory firm FRP (FRP:AIM) signalled its
confidence in the future with plans to pay quarterly
dividends while also pointing to a ‘positive’ outlook.
Fellow practitioner Begbies Traynor’s (BEG:AIM)
latest quarterly Red Flag Alert Report (covering
the three months to 31 December 2020) identified
630,000 businesses in significant distress – a 13% Government to step in and support them.
increase quarter-on-quarter and figure described However, what the UK will be desperate to
as the ‘tip of a very large iceberg’, with executive avoid is a situation where there are lots of zombie
chairman Ric Trayor commenting that there are companies, i.e. heavily indebted firms being kept
‘many zombie businesses which have been hanging afloat by a mixture of bank and state lending
on by a thread for years before this pandemic’. which could hamper the economic recovery from
In short, based on what they are seeing, both the pandemic.
Begbies and FRP reckon the Covid impact has Or in other words Sunak will not want a repeat
merely been delayed rather than averted by the of the situation in Japan where companies caught
various support packages brought through by out by the bubble bursting in the late 1980s were
chancellor Rishi Sunak. kept on life support and contributed to a ‘lost
Analyst Rachel May at FRP’s house broker Shore decade’ for the Japanese economy in the 1990s.
Capital said: ‘Whilst it is too early to call whether From an investor perspective it is extremely
it is the start of an emerging trend, the latest important to pay close attention to the balance
insolvency statistics for December 2020 reported sheets of your holdings of individual stocks,
a 9% increase in company insolvency volumes, particularly if they operate in a sector which is being
marking the first monthly year-on-year increase heavily impacted by Covid-19.
since the start of the pandemic.’ And in this context the latest and immediately
preceding entries in our First Time Investor
TURNING JAPANESE series should prove very useful as they help
A lot of the affected businesses will be privately- with getting to grips with the fundamentals of a
owned small and medium-sized enterprises but balance sheet.
there will be listed small caps (and large caps in
fairness) which will be under considerable pressure,
particularly as state funding is scaled back. By Tom Sieber Deputy Editor
Many otherwise viable businesses have been hit
hard by the pandemic and it made sense for the
18 February 2021 | SHARES | 3
Contents CFA UK
Publication of
the Year
CFA UK
Journalism
Awards 2019
News
Provider
of the Year
(Highly Commended)
CFA UK
Journalism
Awards 2020
EDITOR’S
03 VIEW Why we should be fearful of zombies
Vaccine optimism builds as firms seek clear Covid-19 exit plan / Oil surge
helps revive Shell after strategy concerns / Coupang targeting $50 billion
06 NEWS IPO / Global stocks see largest ever week of buying / Cordiant Digital
first of new breed of investment trust to IPO
GREAT New: Elementis / Helios
10 IDEAS Updates: RWS / BHP
UNDER THE
16 BONNET Moonpig shares: not cheap but a very interesting business
1 year since the market crash: What’s changed and are there any bargain
20 FEATURE stocks left?
30 RUSS MOULD Blame game won’t stop the next Gamestop
34 FEATURE Creating a plan to invest cash saved during lockdown
38 FUNDS Funds, investment trusts and ETFs that pay dividends every month
42 ASK TOM How will changes to the pension age impact me?
MONEY
43 MATTERS Are annuities still relevant to investors and how much could you get?
FIRST-TIME
46 INVESTOR More tricks and tips for analysing company financial statements
50 INDEX Shares, funds, ETFs and investment trusts in this issue
securities, derivatives or positions with spread betting organisations that they
DISCLAIMER have an interest in should first clear their writing with the editor. If the editor
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4 | SHARES | 18 February 2021
SCOTTISH
MORTGAGE
INVESTMENT
TRUST
Successful investing
is as much about what
you don’t know.
So, we never stop
learning.
What’s next? It’s a question we ask ourselves every day. So, we speak to academia,
to authors, to people who think differently, to help us imagine the future. This helps us
seek out those genuinely innovative businesses which are providing new solutions,
and disrupting existing industries. As actual investors we believe it’s our task to find
these companies, and make sure they reach your portfolio. Over the last five years the
Scottish Mortgage Investment Trust has delivered a total return of 351.7% compared
to 96.8% for the index*. And Scottish Mortgage is low-cost with an ongoing charges
figure of just 0.36%**.
Standardised past performance to 31 December* 2016 2017 2018 2019 2020
SCOTTISH MORTGAGE 16.5% 41.1% 4.6% 24.8% 110.5%
FTSE ALL-WORLD INDEX 29.6% 13.8% -3.4% 22.3% 13.0%
Past performance is not a guide to future returns. Please remember that changing stock
market conditions and currency exchange rates will affect the value of the investment
in the fund and any income from it. Investors may not get back the amount invested.
Find out more by watching our film at scottishmortgageit.com
A Key Information Document is available. Call 0800 917 2112.
Actual Investors
*Source: Morningstar, share price, total return in sterling as at 31.12.20. **Ongoing charges as at 31.03.20 calculated in accordance with AIC recommendations.
Details of other costs can be found in the Key Information Document. Your call may be recorded for training or monitoring purposes. Issued and approved
by Baillie Gifford & Co Limited, whose registered address is at Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, United Kingdom. Baillie Gifford & Co
Limited is the authorised Alternative Investment Fund Manager and Company Secretary of the Trust. Baillie Gifford & Co Limited is authorised and regulated
by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies and are not authorised
and regulated by the Financial Conduct Authority.
NEWS
Vaccine optimism
builds as firms seek
clear Covid-19 exit plan
Cumulative number of global vaccinations has overtaken number of infections
T
he UK government hitting its target to secure extra funding arguably in a better position
vaccinate all vulnerable groups by 15 to take advantage.
February and the virus replication rate Data from Australia which reopened in the
falling below one is helping the market get very Autumn suggests people are twice as likely to want
excited about the prospect of the economy to eat out compared with before the pandemic,
being unlocked as ‘reopening trades’ in the pointing to strong pent-up demand.
travel and leisure sector regain their popularity The opportunity to pick up market share from
with investors. weaker operators while benefitting from strong
The onus is now on Boris Johnson to articulate demand means some companies could get back to
a clear Covid-19 exit strategy with an update profitability faster than anticipated.
scheduled for 22 February. In addition, there has been significant capacity
The government’s prior reluctance to provide reduction over the last 12 months which has
a clear plan has prompted some firms in the positive implications for margins. However, the
hospitality sector to tap shareholders for a second potential for a strong growth hasn’t been lost on
time in order to secure extra funding and provide trade and private equity buyers.
headroom in the case of further slippage. Pubs group Marston’s (MARS) turned down
Pub operator JD Wetherspoon (JDW) raised (4 February) an offer from US private equity firm
£93.7 million on 20 January at a 5% discount to its Platinum Equity. Meanwhile, former chief Greene
prior closing price, and on 25 February Mitchell’s King chief Rooney Anand has raised £200 million
& Butlers (MAB) which owns All Bar One and from investors including US investor Oaktree
Nichols announced a heavily discounted (36%) Capital to invest in the sector.
£350 million rights issue. In the event that overseas travel remains off the
According to Numis analysts Wagamama owner agenda due to the risk of importing new strains of
Restaurant Group (RTN) and catering firm SSP the virus, pubs and restaurants could get a much
(SSPG) are also likely to raise new money given the needed shot in the arm. [MG]
relatively tight headroom of their banking facilities. Vaccine doses per 100 people in countries
The extra funds come on top of the sector with the highest total vaccinations
raising £400 million of cash from shareholders in
2020 as well as accessing £500 million of funding 80 74.4
through the governments various coronavirus 70
loan schemes. 60
51.1
Numis reckons that most hospitality firms are 50
working on the assumption that they won’t be able
United Arab Emirates
40
to reopen until the second quarter which implies, 30
Germany
23.4
they will miss out on the boost that Easter trading
Turkey
Russia
20 16
China
Brazil
would provide.
India
10
Israel
4.9 4.5
This means an earlier opening than currently 2.8 2.7 2.5
UK
US
0.6
0
expected would have a positive impact on
hospitality shares, with those that moved early to Source: Our World Data 09:30 GMT 15 Feb 2021
6 | SHARES | 18 February 2021
NEWS
Oil surge helps revive Shell
after strategy concerns
Crude prices rally amid hopes for demand recovery and supply disruption
N
ew threats to supply and recovery of the recent GameStop phenomenon,
hopes pegged on vaccine Other which could provide another leg to the
roll-outs and US stimulus are commodities oil price rally.
helping oil prices extend their stunning are surging too This rally has helped Shell to recover
start to 2021. with copper hitting its losses after investors gave the
As we write this is contributing to thumbs down to its 11 February
big gains for the FTSE 100 thanks to its highest levels strategy update with Berenberg
the heavyweight status of BP (BP.) and since 2012 noting that for all the talk on the energy
Royal Dutch Shell (RDSB) on the index. transition the renewables arm ‘remains
While the demand recovery story is a the division with the lowest return target for
medium-term one, the problems on the supply the company’. [TS]
side, other than the planned quotas imposed
64
by producers’ cartel OPEC and Russia, appear to 62
Crude Oil BFO M1 Europe FOB $/BBl
be more short term in nature. 60
The freezing temperatures in Texas which have 58
disrupted oil production are starting to ease and 56
tensions in the Middle East seem to have simmered 54
52
down for now. 50
Though there are apparent signs of speculators 4 11 18 25 1 8 15
moving into the oil market, following in the wake JAN FEB
Coupang targeting $50 billion IPO $12 billion with losses narrowing
to $475 million.
BlackRock, Bill Ackman and RIT Capital Partners are Exposure to the Coupang story
among the Korean e-commerce disruptor’s backers is possible through investment
trust RIT Capital Partners (RCP),
SOFTBANK-BACKED COUPANG Founded in 2010 by Bom Kim, which invested in the company in
has filed to go public in the US, Coupang is feared and admired by April 2018. Coupang represented
with reports suggesting the South competitors in equal measure and 2.4% of RIT’s net assets as of
Korean e-commerce giant is aiming is regarded as a rival to Amazon the end of June 2020 and a
for a valuation of around $50 billion in South Korea, where its ‘Rocket successful IPO could see the value
as it aims to tap into voracious Delivery’ service, which promises of its stake increase.
investor appetite for high-growth delivery within 24 hours, has shaken RIT has an objective of long-term
tech stocks. up the market. capital growth while preserving
This would make Coupang Also backed by Sequoia Capital, shareholders’ money through
the biggest IPO in New York by a asset management behemoth market cycles and invests in a
company based outside of the US BlackRock and billionaire investor diversified, international portfolio
since Jack Ma’s Alibaba came to Bill Ackman, Coupang’s sales for across a range of asset classes,
market in 2014. 2020 nearly doubled to nigh-on both quoted and unquoted. [JC]
18 February 2021 | SHARES | 7
NEWS
Global stocks see largest
ever week of buying
Technology still ‘hot’ but the market may be at risk of over-heating
T
he opening week of February saw the BofA Bull & Bear indicator
largest ever weekly inflow of cash into
global shares, according to Bank of Up to 7.7 from 7.5 this week
America’s global research team, as well as the
largest ever inflow into technology stocks. 7.7
Of the total inflow of $58.1 billion into equities,
some $25.1 billion or close to half flowed into US
large-cap stocks, the second-highest figure on 4 6
record, while $5.6 billion flowed into US small-cap 2 8
stocks, the third highest figure on record. Buy Sell
Technology stocks posted their best ever week
of inflows at $5.4 billion, while flows into bonds Extreme 0 10 Extreme
Bearish Bullish
reached $13.1bn, pushing the yield on US ‘junk’
or sub-investment grade loans to below 4% for Source: BofA
the first time in history, despite a 33% increase in Analysts warned that as more people are
issuance compared with 2020. vaccinated and the US reopens, the ‘velocity’ of
Part of these inflows were financed by investors money through the economy will lead to a spike in
taking $10.6 billion out of their cash holdings, inflation as consumers go on a spending spree.
with Bank of America noting it saw the biggest At the same time, companies are likely to use the
drawdown of cash by its own private clients since reopening to lift prices, as seen in the latest small
September 2019. business survey which showed plans to raise prices
Investors also withdrew $800 million from gold in the next three months were at the highest level
funds, marking the first month of net outflows in in two years.
two months. In that scenario, analysts believe, real assets
Private client asset allocation at the bank marked such as commodities, real estate and ‘collectibles’
a new high for equities at 63.1%, while bonds made including art, fine wine and luxury goods are
up 19.1% and cash was reduced to 11.7%. likely to outperform financial assets like stocks
and bonds, which have a poor track record during
Weekly global equity flows ($bn) periods of sharply rising inflation and interest rates.
At the same time, the bank flagged that its Bull
50 & Bear equity market indicator had moved another
notch towards ‘Sell’ territory, from 7.5 to 7.7, with
30 a reminder that the last time the indicator gave a
‘contrarian’ Sell signal was 30 January 2018.
10
The median three-month return from a
-10 ‘Sell’ signal, of which there have been 12 since
2000, is minus 9% for global stocks and minus
-30 45 basis points or 0.45% for the US 10-year
-50 ‘02
Treasury yield, as investors dump stocks for the
‘04 ‘06 ‘08 ‘10 ‘12 ‘14 ‘16 ‘18 ‘20 ‘22 safety of US government bonds (bond yields fall
Source: BofA Global Investment Strategy, EPFR Global as prices rise). [IC]
8 | SHARES | 18 February 2021
NEWS
Cordiant Digital first of
new breed of investment
trust to IPO Cordiant Digital
smashes initial target to raise
The UK’s first digital infrastructure
investment trust has floated and £370 million
another hopes to follow suit
I
nvestor appetite for all things digital and
technology related has started to become
apparent as a new breed of investment trust
has launched on the London market.
The UK’s first digital infrastructure investment
trust, Cordiant Digital Infrastructure (CORD),
floated this week after raising £370 million,
smashing its initial target of £300 million.
Hoping to follow in its footsteps is another trust
of the same ilk, Digital 9 Infrastructure, which is
seeking to raise £400 million.
Cordiant Digital, which targets a 9% total return
a year on net assets, will invest across the UK, investors ‘give feedback that they like the idea’ of
Europe and North America in what it calls the a trust, but will back it in the second fundraising
core infrastructure of the digital economy, or ‘the round and adds: ‘We believe this reflects the higher
plumbing of the internet’, comprised mostly of data due diligence requirements on an IPO and the
centres, mobile towers and fiberoptic networks. potential wasted time and reputational risk if it fails
It plans to capitalise on the ‘surging growth to get away.
in data consumption and traffic’, and thinks ‘As a result, many IPOs struggle to get away and
consumption trends and traffic patterns, as well we have also seen a number of IPOs coming back
as the adoption of 5G technology, will provide to the market and raising capital relatively shortly
‘an economic tailwind’ that could last for over after launch.’
a decade. In the case of Cordiant, it’s also worth
Digital 9 Infrastructure will invest in similar highlighting it has issued subscription shares as
assets to Cordiant but also subsea cables. It’s been part of its IPO, which could’ve boosted demand as
reported 98% of the world’s data is carried by these have been used in the past to give a ‘kicker’
subsea cables, and clients include almost all of the to IPO investors.
world’s big technology companies. Cordiant has issued subscription shares on a one-
The fact Cordiant actually managed to float, let for-eight basis, which could lead to issuance of up
alone beat its target, demonstrates the demand to 12.5% of share capital, exercisable if the shares
from investors for differentiated ways to play the trade on a premium in the first six months or if the
ongoing digitisation of the economy, and brokers share price total return exceeds the target return
Numis call it a ‘strong result’ for the trust, given over the first five years.
the fact investors are ‘typically highly reluctant’ to Numis warns the cost of holding subscription
participate in IPOs. shares for retail investors on platforms ‘can be
Numis bemoans that ‘a frustrating number’ of significant compared to their value’. [YF]
18 February 2021 | SHARES | 9
Profit from the reopening
with FTSE 250 chemicals
firm Elementis
The stock is cheap compared to peers but analysts think earnings could recover
rapidly and ‘positively surprise’ the market
F
TSE 250 chemicals firm
Elementis (ELM) ticks all ELEMENTIS
the boxes for an investor BUY
looking for an overlooked and (ELM) 125.9p
undervalued stock set to benefit
from the reopening of society Market cap: £731 million
and the economy.
Elementis has the right mix
of sales divisions to benefit
from both economic activity
picking up again and society
reopening, and at a bargain
price-to-book value of just
1.2 times, compared to a (used for the industrial and CHEAP VS PEERS
much higher 9.45 times for construction sectors), Talc He thinks close to 50% of
peers like Croda International (used in paper, paint, plastics, Elementis’ earnings in 2020 will
(CRDA), we believe the firm has polyester, ceramics and even likely come from coatings – an
been unfairly overlooked by food) and Chromium, with 80% industry that has been quick to
the market. of its earnings now coming from recover from the coronavirus
the first three aforementioned crisis, and argues that Elementis
BUSINESS OVERVIEW divisions according to its 2019 trades cheaply versus peers
Elementis’ four main divisions annual report. because of this. He also points
are Personal Care (chemicals Berenberg analyst Sebastien out the balance of supply and
for deodorants, soap, skin Bray says Elementis has been demand in talc may also tighten
care products, etc), Coatings marked down by the market long term, which could add more
in the past over its Chromium than 10% to the firm’s earnings
Chromium returns at
trough levels division, with chromium prices before interest and taxes.
generally having been weak This viewed is echoed by
for years. analysts at Morgan Stanley, who
Bray says analysts ‘have think the strength and speed of
spent so much of the past five Elementis’ earnings recovery in
years cutting numbers for this 2021 could ‘positively surprise,
segment that we suspect many given the company’s gearing to
are instinctively reluctant to cyclical end markets (c.55% of
model a return of pricing growth sales), as well as the reopening
and operating leverage, even if trade (15-20% of sales)’.
all macro indicators suggest this Meanwhile both Bray and
Source: Elementis could emerge from H2 2021’. analysts at Morgan Stanley sees
10 | SHARES | 18 February 2021the firm’s deleveraging story
as potentially adding to the
share price.
Morgan Stanley analysts
believe management’s
continuing delivery on its
objective to pay down debt
could add ‘5% to equity value
per year’, while Bray says the
dividend cut and covenant
extension in 2020 have ‘removed
immediate danger and that the
business’s high levels of cash
generation should drive leverage
down thereafter’.
The firm’s net debt in recent period in 2019 has led analysts over the last three years, with
years has ballooned to almost at Jefferies to estimate net debt its medium term group adjusted
$500 million, compared to a net could be cut by $45 million in the operating profit margin objective
cash position of $77.5 million in second half of 2020. being 17%.
2016, something which has also Relative weakness in the Elementis also argues that
weighed on its share price. company’s share price has also specialty chemicals companies
seen it become a takeover with margins in the range of
GETTING DEBT UNDER target, with US rival Mineral 14% to 17% currently trade
CONTROL Technologies seeing three at 17 times to 19 times 2021
But the company said in offers, the last worth 130p per EV/EBITA (enterprise value to
September it was on track to share, rejected with Elementis earnings before interest, tax and
deliver a ‘significant’ reduction arguing the offers ‘significantly amortisation), and that applying
in net debt in the second half of undervalued’ the business this range to average operating
2020. That and the fact net debt and ignored the firm’s ‘clear profit for the Personal Care,
remained at the same level in strategy to create value for its Coatings and Talc businesses
the first half of 2020 as the same shareholders’. over the last three years implies
Detailing the reasons why it a valuation of 163p to 190p per
thinks it is worth 200p per share Elementis share.
when it rejected the last takeover The company adds that
offer in December, Elementis this excludes its Chromium
points to the fact it is the owner business, which could be valued
of ‘differentiated resources with at an additional 35p per share,
high scarcity value’, including the implying a group valuation of
world’s only commercially viable 200p or more per share as the
high-quality rheology grade firm ‘delivers on its medium
hectorite mine. term objectives’.
It also highlights the fact
over 80% of earnings are now 140 ELEMENTIS
from Personal Care, Coatings 100
and Talc, which benefit from
‘fundamentally attractive’ 60
margins and GDP growth,
with the divisions achieving 20
an average adjusted operating
2020 2020
profit margin of around 15%
18 February 2021 | SHARES | 11Lloyd’s insurance investor
Helios is set for big gains
A hardening of rates means potential for significant profit growth
H
elios Underwriting the year ahead’ thanks to the
(HUW:AIM) is unique HELIOS UNDERWRITING ‘favourable rate environment’,
as an acquirer and BUY while Lancashire (LRE) boss
consolidator of Lloyd’s insurance (HUW:AIM) 187p Alex Maloney cited ‘positive
market underwriters. So pricing trends across most of our
far the firm has bought 43 Market cap: £63 million business lines’.
limited liability vehicles or The last few years have been
LLVs, including some of the the third.’ tough for the insurers as a wave
best Lloyd’s Names as they Having raised £20 million of of non-traditional investors
were formerly known, as their equity capital last November, piled the market, throwing
owners age or decide to exit and having protected itself from money at the business in a
the business. Covid claims, the firm is set to desperate attempt to generate
Commercial insurance rates underwrite £110 million of risk returns and depressing rates in
have soared in the last year as a this year, an increase of 60% on the process.
result of coronavirus, meaning the size of the portfolio at the Having been hit with
that those who are prepared start of last year. losses, those investors are
to put up capital can earn More significantly, it will only now withdrawing from the
significantly higher returns in reinsure slightly more risk than market. Meanwhile, by keeping
the next few years. it did last year which means the its head down and steadily
For chief executive Nigel amount of retained business will adding capacity, Helios was
Hanbury, the current market jump from just over £20 million able to weather the storm and
represents a golden opportunity to almost £60 million. now finds itself with a strong
for Helios. ‘I have seen three Hanbury’s enthusiasm is following wind and the ability to
“hard markets” in my 40 echoed by others in the market. deploy significantly more capital
years in the business’, he Andrew Horton, chief executive to capture higher rates.
says. ‘The last was almost 20 of Beazley (BEZ), described As well as generating capital
years ago, after 9/11. This is himself as ‘very positive about growth, Helios is aiming to
pay out a rising proportion of
Consolidation of Private Capital at Lloyds earnings in dividends, with
Helios’ model exploits a unique window as private capital evolves analysts estimating a 50%
payout ratio within a couple
Business Private Capital £2bn of Capacity of years, which would make it
an attractive stock for income
investors too.
Policyholder 220
Lloyds’ Market Members HELIOS UNDERWRITING
Brokers £36bn of Capacity (c.1,500/c.£1m)
Coverholders £27bn of Underwriting Capital 180
Helios
40 Members 140
£69m of Capacity
100
2020 2021
Source: Lloyd’s & Members’ Agents Website
12 | SHARES | 18 February 2021TIME FOR VALUE?
Temple Bar Investment Trust Plc is a
well-established investment company,
with a new portfolio management team
at the helm. RWC’s UK Equity Income
team, was appointed to manage the
trust in November 2020. Led by Nick
Purves and Ian Lance, the team
employs a disciplined, value-oriented
investment approach.
Value investing has a very long history
of outperformance, but it has struggled
in the growth-dominated markets of
the last decade. Recent market
behaviour suggests this may be
beginning to change.
The Temple Bar Investment Trust is well
placed to benefit should this rotation
into UK value stocks continue.
For further information, please visit
templebarinvestments.co.uk
“In my 30-year career as a fund manager, there have been
two occasions in which a market dislocation has created an
opportunity for investors to potentially make very attractive,
outsized returns. The 2000 dotcom boom, and in 2009
following the global financial crisis. I believe we are now
witnessing a third.”
Ian Lance, Portfolio Manager
No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment. Investments can go up and
down in value and you may not get back the full amount invested. RWC Asset Management LLP is the appointed portfolio manager to the Temple Bar
Investment Trust Plc and this is issued by RWC Partners Limited. Both firms are authorised and regulated by the Financial Conduct Authority.RWS BHP
TOP TOP
(RWS:AIM) 619p STOCKS (BHP) £22.71 STOCKS
FOR FOR
Gain to date: 15.9% 2021 Gain to date: 14.5% 2021
Original entry point: Original entry point:
Buy at 534p, 23 December 2020 Buy at £19.83, 23 December 2020
LANGUAGE TRANSLATION AS EXPECTED mining giant BHP (BHP) has felt
technology firm RWS the benefit of soaring iron ore prices and has
(RWS:AIM) signaled to the decided to reward shareholders with a record
market this month that $5.1 billion, or $1.01 per share, first half dividend
trading in its core business in – a 55% year-on-year hike.
the first quarter to the end BHP makes half its money from iron ore
of December had been ‘excellent’, with pre-tax currently, and the world’s largest miner has been
profit up by double digits. a big beneficiary of an upswing in prices, which
At the same time, in its first two months as have risen 85% in the past year and peaked at
part of the group, new acquisition SDL delivered $185 per tonne in December, mainly due to
results in line with the previous year and the demand from China, the world’s biggest iron
integration process is well on track, with new ore consumer.
management already in place and ‘significant To put the impact into context, miners,
synergies already starting to be realised’. including rivals like Anglo American (AAL) and
The firm held off from raising its full year Rio Tinto (RIO), can dig iron ore out of the ground
forecasts and instead flagged the strength of profitably at prices around $15 per tonne.
sterling against the US dollar as providing ‘an In its half-year results to 31 December, BHP
unwelcome headwind’, but the strong start reported a 16% jump in underlying attributable
suggests there could be broker upgrades in profit – the measure used by analysts and
the pipeline. investors – to just over $6 billion on revenue of
Moreover, given RWS has no net debt, $25.7 billion. Net debt, also closely watched,
chairman Andrew Brode hinted at more deals to dropped 7% to $11.8 billion.
come, calling the firm ‘well-positioned to take If iron ore and copper prices – another key
advantage of further acquisition opportunities in commodity for BHP – remain at current levels in
a rapidly consolidating market segment’. the first half of the year analysts think it can cut
Numis sees the stock as ‘good value’ given the net debt significantly, which could pave the way
encouraging trading update and especially the for another big shareholder payout.
potential for higher than expected synergies to
come from the SDL acquisition. 2400
800 RWS 1800
650
1200
BHP
500 2020 2021
2020 2021
SHARES SAYS:
There’s increasing talk we’re in for a commodities
SHARES SAYS: super-cycle this decade. BHP would be a big
Keep buying. [IC] beneficiary. [YF]
14 | SHARES | 18 February 2021ADVERTISING FEATURE
SEARCHING FOR INNOVATIVE
HEALTHCARE INVESTING?
THAT’S WHAT WE DO.
BBH Total Return % (assuming reinvestment of dividends in security)
Period ending 31.01.2021 1 Year 3 Years Since launch
BBH Share Price +30.2 +70.6 +102.6
BBH NAV +33.1 +76.0 +100.9
MSCI World Heathcare Index (GBP) +12.6 +44.3 +66.9
Source Bloomberg/Bellevue Asset Management
More details are available via the Trust’s prospectus, factsheets and videos that can be found on our website:
www.bbhealthcaretrust.com
BB Healthcare Trust PLC (the “Company”) is a UK investment trust listed on LSE. Launched 02.12.2016. Past
performance is not a guide to future performance. The value of an investment and income from it may fall as well
as rise and is not guaranteed. An investor may not get back the original amount invested. This document is for
information purposes only and does not constitute an offer or invitation to purchase shares in the Company and
has not been prepared in connection with any such offer or invitation. This communication has been prepared by
Bellevue Asset Management (UK) Ltd., which is authorised and regulated by the FCA in UK. The views expressed
herein do not constitute investment or any other advice and are subject to change.Moonpig shares:
not cheap but a very
interesting business
We think they are worth buying for the clear growth opportunity and clever
techniques to drive sales
S
hares in £1.4 billion
company Moonpig
(MOON) have flown 21%
higher to 423.8p since the online
greeting cards retailer joined
the stock market on 2 February
at 350p. While its valuation
is certainly not cheap, we’re
inclined to believe the share
price has further to rise.
Analysts think the company
has been overly conservative
with earnings guidance in order mean people are far more likely This habit could stick once
not to disappoint in its first year to order a card online than lockdown restrictions ease,
as a listed business. bother going to one of the few particularly when people
Ongoing lockdown conditions shops open. experience the ability to put
someone’s name inside a card
design, which is nice personalised
touch, and not have the added
hassle of buying stamps. Being
able to do everything from your
phone or computer is so much
more convenient.
While online greeting cards
retail is a competitive space,
Moonpig is one of the best-
known brands and widespread
media coverage of its successful
IPO (initial public offering) will
FORECASTS - £m work in its favour in terms of
Years to Adj PBT further raising brand awareness.
Sales (£m) EPS (p) PE
April (£m)
2020 173.1 31.8 9 47.1 CLEVER MOVE
2021 300.1 55.5 13.7 30.9 We note that Moonpig was only
2022 284.5 38.1 9 47.1
taking orders via its app rather
than the website in the run up
2023 316.4 53.6 12.6 33.6
to Valentine’s Day, citing high
Source: Peel Hunt, Moonpig, PE based on 423.8p share price
demand. This may or may not
16 | SHARES | 18 February 2021be a savvy ploy to get people
to download the app so that its
Attachment rate of gifts to cards is high in the wider market
brand is front of mind the next
time they need to send a card or
a gift.
Once the app is on a >95% >95% >95%
customer’s phone, push 90%
notifications act as a powerful
way to increase order frequency
and average order value through 72%
nudges and personalised
recommendations. All
very clever.
Moonpig’s management
team, led by chief executive
Nickyl Raithatha and finance
director Andy MacKinnon and
with former WH Smith (SMWH)
chief executive Kate Swann in 16%
the chair, has sold Moonpig Moonpig Total Birthdays Valentine’s Father’s Mother’s
to investors as a technology UK card Day Day Day
play rather than as a plain market
vanilla retailer.
The company uses customer Source: Moonpig data
data and predictive technology
to remind people of key events the UK online greetings cards It says approximately 70%
and suggest add-on gifts. market. That is four times bigger of cards are ultimately sent
Getting people to buy more than the number two player, with a present (which is likely
than just a card is key to the Funky Pigeon which is owned by to have been bought from
growth story because gifting WH Smith. another retailer), yet only 16% of
is 10 times the size of the Broker Peel Hunt describes Moonpig’s transactions involve
cards market. For example, for Moonpig as ‘a very impressive, an add-on product and only a
Valentine’s Day, Moongpig’s ground-breaking business’, with small proportion of customers
website was plastered with a strong position in an online come to Moonpig solely for a
bundles such as a card with market that is growing. gift, so there is significant scope
flowers or a big balloon. Visitors to grow this part of the business.
were also being incentivised ‘Moonpig may have a large
to set up reminders for future share of the online card market,
card-giving dates with money- but its share of the cards sent in
off deals. the UK and Holland can grow. At
last count, it had 12 million active
NOT JUST ABOUT THE UK ‘A very impressive, ground-
breaking business, with a customers out of a potential pool
The company trades as Moonpig strong position in an online of 53 million. Those customers
in the UK and under the Greetz market that is growing.’ use Moonpig for three of their
brand in the Netherlands, having Peel Hunt 23 annual cards: that can rise
made Holland’s market leader its too,’ it adds, arguing that the
first acquisition in 2019. group’s customer relationship
The web-based business management and data crunching
boasts a powerful market abilities are ‘game changers’.
position with a 60% share of
18 February 2021 | SHARES | 17HALLMARKS OF QUALITY
In the documents accompanying
its stock market debut,
Moonpig insisted it is a highly
cash generative business due
to its high margins, negative
working capital profile and
relatively low capital expenditure
requirements.
For the six months to October
2020, revenue grew 135% to
£155.9 million, with £120.8
million contributed by the
core Moonpig business and
the balance by Greetz, where
margins have expanded under
Moonpig’s ownership.
Peel Hunt’s retail experts
believe the Moonpig model pandemic, the broker forecasts normalises. Peel Hunt forecasts
can be exported internationally 75% jump in adjusted pre-tax a surge back to £53.6 million on
too. The shift towards gifting profit to £55.5 million on £300.1 £316.4 million of sales in 2023.
solutions should help the million of sales. These estimates Based on the broker’s 2023
company to grow on the could prove conservative earnings estimate of 12.6p,
continent, where Europeans if, as is likely with brick and Moonpig’s shares trade on 33.6
tend to send less cards than mortar stores shut, Moonpig times earnings. That is similar
the Brits. Moonpig already has enjoys bumper business to what ASOS (ASC:AIM) trades
a small operation in the US too around the major card-sending on for the next 12 months’
and Peel Hunt says it would events of Valentine’s Day and expected earnings.
not be surprised if this became Mother’s Day. ‘(Moonpig’s) growth rate,
more material in time, either Pre-tax profits of £38.1 million the “category killer” nature, the
organically or via acquisitions. are on the cards for 2022 on opportunity to move into the
For the financial year to April £284.5 million of revenues gifting market, and the extremely
2021, with a tailwind from the as the boost from lockdowns compelling data on customer
retention, make this a highly
prized asset, and we would be
surprised if the valuation did not
ultimately reflect that,’ concludes
Peel Hunt.
SHARES SAYS: Though the high
valuation means the company is
priced for perfection, Moonpig
430 has a clear growth path as part
of a structural shift in its part of
400 the retail sector. Buy at 423.8p.
370
By James Crux
MOONPIG Funds and Investment
340
1 2 3 4 5 FEB 8 9 10 11 12 Trusts Editor
18 | SHARES | 18 February 2021THIS IS AN ADVERTORIAL
Why Japan is well placed to
perform in a global recovery
with already high standards. We also look for companies
that are implementing real change and improving their
governance. This is particularly relevant in the mid/small-
cap space where third party coverage is limited and simple
Nicholas Price disclosure, especially in English, is often limited. When the
Fidelity Japan Trust PLC efforts of these companies are recognised by the market,
AS THE VACCINE rollout begins in earnest and economic share prices may rise.
data starts tentatively to improve, positioning for recovery is Recently, we engaged with a diversified chemicals
becoming a priority for many investors. As a cyclical market company that we hold in the trust. The quality of its
dependent on global growth, Japan should be well-placed business and products was not fully reflected in its share
to perform in the post-pandemic environment. It also brings price due to ESG-related issues. We discussed this with
opportunities in long-term growth trends such as digital the management team, who accepted that this stemmed
transformation and environmental efficiency. primarily from poor disclosure on chemical safety and
The Covid-19 pandemic clearly still poses risks, as new carbon emissions, as well as their reluctance to engage with
variants of the virus and rising infection rates across the shareholders.
globe push governments to reimpose or extend restrictions. The company committed to dealing with these issues
However, the gradual roll out of vaccines and continued in line with best practice, setting medium-term financial
monetary and fiscal policy stimulus are positive for the targets, producing an integrated report and a detailed
global growth outlook and should be supportive of ESG data book. It implemented a reduction plan for CO2
Japanese equities. emissions and established of a procurement policy that
Within this broadly supportive environment, a number encompasses environmental and human rights issues. This
of themes present themselves. Clean energy and has since been reflected in share price performance.
environmental efficiency are areas where Japan has
competitive companies that can supply solutions globally. Future growth
Covid-19 has also accelerated trends in e-commerce and With the Fidelity Japan Trust PLC, we look for companies
digital transformation. As profits recover, companies with a long runway of growth and competitive advantages
will prioritise those areas. Both these trends are well- in a growing addressable market. With this in mind, fertile
represented in the portfolio. hunting grounds include energy efficiency solutions,
However, we are also widening the net and looking for medical technology, Asian consumption and digital
companies with recovery potential in areas such as leisure transformation providers. There are also a lot of exciting
and travel. As we start to see better performance, there will under-researched mid-cap companies in Japan that are
be an opportunity to pick up companies that are returning creating new markets. Being on the ground in Japan means
to growth. that we see these ideas first-hand, meeting with pre-IPO
companies to identify the most attractive opportunities.
The ESG opportunity We continue to look for early-stage ideas and nascent
High standards of corporate responsibility make good disruptors, particularly among fast-growing services and
business sense and at Fidelity, ESG (environmental, social internet-based companies, as well as innovative med-tech
and governance) analysis is integral to our investment names. Japan offers many compelling options to benefit
decisions. However, it’s not just about buying companies from the building economic recovery.
Important information
The value of investments and the income from them can go down as well as up so you may get back less than you
invest. Investors should note that the views expressed may no longer be current and may have already been acted
upon. Changes in currency exchange rates may affect the value of an investment in overseas markets. The shares in
this investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. The
investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. This
trust invests more heavily than others in smaller companies, which can carry a higher risk because their share prices
may be more volatile than those of larger companies and the securities are often less liquid. This information is not
a personal recommendation for any particular investment. If you are unsure about the suitability of an investment
you should speak to an authorised financial adviser. The latest annual reports, key information document (KID) and
factsheets can be obtained from our website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus
may also be obtained from Fidelity. Fidelity Investment Trusts are managed by FIL Investments International. Issued by
Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity
International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0221/33162/CSO10291/0821.1 YEAR SINCE
THE MARKET CRASH
By Ian Conway
Senior reporter
What’s changed
and are there
any bargain
stocks left?
D
espite all the upheaval of the past year, In the UK the FTSE 100 and FTSE 250 are still in
anyone glancing at the financial markets negative territory since February 2020 although the
today might find it hard to believe losses aren’t nearly as extreme as they were when
investors were in the throes of despair the pandemic first took hold.
12 months ago. Markets have been fuelled by support from
Following the global markets crash in February central bank and government stimulus measures,
2020, the recovery has been spectacular. The US low interest rates and optimism over the pace
Nasdaq 100 and S&P 500 indices are at all-time of economic recovery thanks to the creation of
highs, Japan’s Nikkei index is at a multi-decade Covid vaccines.
high, China’s Shanghai index is at a multi-year high Risk appetite is alive and well as shown by
and the MSCI All Countries World Index is at a the surge in crypto currencies, the volume of
record high. investment grade bonds now trading with negative
20 | SHARES | 18 February 2021Change in major indices since 2020 market crash looking to downsize while those which were
planning to expand have realised they can increase
Index Change their staff numbers while staying in the same office
NASDAQ Composite (US) 44.8% and rotating their teams.
CSI 300 (China) 43.1% Those with several smaller regional offices
Nikkei 225 (Japan) 29.7%
may look to do away with them altogether and
concentrate on making the working from home
S&P BSE 100 (India) 28.0%
experience more fulfilling for their staff.
S&P 500 (US) 16.8%
Bus and rail firms, which will have budgeted for
Hang Seng (Hong Kong) 9.6% a given level of revenue before the pandemic, now
DAX Xetra (Germany) 3.1% have to go back to the drawing board and rethink
FTSE 250 (UK) -1.2% their plans, not least for capital spending, given
CAC 40 (France) -4.5% they are likely to see far fewer passengers using
FTSE 100 (UK) -8.5% their services in the future.
Source: Sharepad, Google Finance, Shares
Date range: 18 Feb 2020 market close to 15 Feb 2021 market close (12 Feb 2021 for
US indices, 11 Feb 2021 for CSI 300)
PERSONAL FINANCIAL
yields (bond yields fall when prices rise), herd
behaviour on social networks regarding stocks, HABITS HAVE CHANGED
the deluge of cash shells to acquire businesses,
the warm reception for new stock market listings The pandemic has brought behavioural changes,
and the race by private equity firms to deploy their too. Ian Mattioli, co-founder and chief executive
mountains of cash through acquisitions. of wealth manager Mattioli Woods (MTW:AIM),
Later in this article we look for cheap stocks says his firm has found that many people who,
that have still to play catch-up. prior to last year, thought nothing of spending their
First, we explore what’s changed in terms of disposable income on two or three holidays a
how companies do business and how we manage year, are now saving the bulk of their surplus
our money. wages to give themselves a buffer in case they lose
their jobs.
Recent announcements by holiday companies
STRUCTURAL CHANGES such as TUI (TUI) confirm that holidaymakers are
being more selective. The ‘return to normal’ has
It almost seems as though nothing has changed; failed to happen so far, with TUI reporting a 44%
in fact, everything has changed. Much of what reduction in summer bookings compared with
might be called ‘new’ isn’t new at all – many of pre-pandemic (2019) levels, well short of its earlier
the biggest trends to emerge in 2020 had been expectation for a 20% drop.
waiting in the wings for several years, the pandemic
just brought them centre stage much earlier
than expected.
The greatest change has been the shift to
remote working (see When will we return to the
office - if at all?), which had always existed on the
fringe but had never been considered viable on a
large scale. The surprise for many business owners
was how off-the-shelf technology enabled them to
quickly move to remote working without a hitch.
Moreover, remote working has brought
benefits to many firms including cost savings, and
it has improved the work/life balance for their
employees. The flip side is that it is bad news for
owners of city centre offices, transport companies
and anyone who relies on either – or worse, both.
Companies with large central offices are mostly
18 February 2021 | SHARES | 21We are also becoming more discerning when
WHEN WILL WE RETURN it comes to shopping online for fashion. Gone it
seems is the habit of picking six dresses for an
TO THE OFFICE (IF AT ALL)? event and sending five back, with retailers such
as ASOS (ASC:AIM) noting a steady decline in the
THE LATEST ALPHAWISE survey from volume of returns throughout the past year.
investment bank Morgan Stanley makes
sobering reading for those hoping for a
reopening of the economy by Easter.
According to the bank’s monthly telephone
survey of 12,500 European office workers,
despite the rollout of vaccines since its previous
survey, employees’ expectations of when
they can return to work have slipped from
April to June.
As the survey says, ‘Clearly, this will not only
impact office utilisation in 2021, but also leisure
and retail property that depends upon the If we aren’t getting dressed up and going out, or
return to normal commuting patterns.’ planning several trips to foreign climes, what are
Across Europe, 73% of office workers have we spending our money on?
been working remotely compared with half that The latest Barclaycard study shows overall
proportion pre-Covid. Of these, 80% would like UK consumer spending fell 16% between
to work from home more in the future, with 25 December and 22 January. Spending on
51% happy to work out of the office one or two essentials was up roughly 4%, with supermarket
days a week, 29% three to four days a week and spending up 17% and online grocery spending up
14% every day of the week. 127%, which is positive news for companies such
as Ocado (OCDO).
Spending on non-essentials fell almost 25%, with
health and beauty sales down 27% and clothing
sales down 25%. With restaurants closed, takeaway
and delivery sales jumped 33%, the highest growth
on record for the category.
Total online spending was up 73% on the
same period a year earlier and now accounts for
a remarkable 55% of all retail sales, a genuine
paradigm shift for the retail sector which has
struggled to keep up with changing demand.
Moreover, most consumers believe they will
Chris Herd, founder and chief executive stick with online shopping once vaccinations are
of remote infrastructure firm Firstbase, commonplace as they now prefer the experience
says remote work is ‘the biggest workplace of ordering via their phone or computer and having
revolution in history, and nothing will deliver their items delivered rather than schlepping to the
a higher quality of life increase in the next shops in all weathers.
decade than this’.
Herd believes new companies will be
‘remote first’, without the need for a corporate A SHRINKING
headquarters. Aside from the obvious cost
savings, this allows them to hire the best people HIGH STREET
wherever they are in the world, not just within
a certain radius. At the same time, companies Sadly, the flip side of this shift to online shopping
which want to retain their staff will have to offer is the high street as we knew it becoming a thing
remote working as an option or risk losing them. of the past. Footfall in January 2021 was down
a staggering 77%, according to the British Retail
22 | SHARES | 18 February 2021Consortium, and the outlook for February is not JD Wetherspoon (JDW), Marks & Spencer (MKS),
particularly encouraging. Next (NXT), Primark-owner Associated British
Few chains look to have the right financial Foods (ABF), Sports Direct-owner Fraser (FRAS)
strength and proposition to sustain a town centre and WH Smith (SMWH).
presence long-term, with the list of likely survivors And, where previously an empty shop might
(among companies whose shares trade on the have been turned into a café, bar or restaurant, the
UK market) more or less measurable in single decimation of the hospitality industry means there
figures, principally Greggs (GRG), JD Sports (JD.), are few players with the financial wherewithal to
step in and take up the space, especially if footfall is
permanently reduced.
According to the Coffer Peach Business Tracker
survey, turnover for the hospitality industry was
down 54% last year from £133.5 billion to just
£61.7 billion. If anything, the fourth quarter trend
was worse than the annual average, down 57%
from £33 billion to just £14.3 billion.
All of this bodes poorly for commercial property
companies for the next few years. Strong retailers
will have their pick of the best sites and will likely
demand low rents with much of the responsibility
for upkeep passed onto the property owners.
MSCI AC WORLD U$ - PRICE INDEX 21 Feb: Global stock
MSCI AC WORLD U$ - PRICE INDEX
600
600 market crash begins
550
550 23 Mar: Fed reveals
economic support
500 23 Jan: Wuhan measures, market
500
quarantined crash bottoms
450
450 17 Jan: Hong Kong stocks start to fall
400
400
11 Jan: China reports first known virus death
350
350 JAN FEB MAR APR
2020 JAN FEB MAR APR
700 MSCI AC WORLD U$ - PRICE INDEX
700 MSCI AC WORLD U$ - PRICE INDEX
650
650 18 May: Positive trial update on
600 Moderna Coronavirus vaccine
600
550
550 8 Dec: First person
500 in UK receives
500 Pfizer vaccine
450
450
400
9 Nov: Pfizer/BioNTech
400 say their vaccine has
350 90% efficacy
350 2020 2021
2020 2021
18 February 2021 | SHARES | 23You can also read
