The end is nigh – Amazon is coming

Miranda Wadham
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The end is nigh – Amazon is coming
Today, Amazon turns 20. When it first started out, stories of large companies taking over the world via the internet were the stuff of sci-fi movies, with a ‘Back to the Future’ kind of unbelievability – 20 years on, however, they are alarmingly close to the truth. Nicknamed the ‘Gang of Four’, Amazon, Google, Facebook and Apple have spread their tentacles further than anyone could have imagined. Google log everything you are curious about, Apple know your location every minute of the day and Facebook knows exactly who your ex’s new girlfriend is, because you’ve stalked her so often that they are now suggesting you add her as a friend. Yet still, these companies are continuing to expand. Not content with being the leading e-retailer in the US, specialising in media and electronics, Amazon has now decided to expand into food delivery. From a consumer’s point of view, this may seem like a good thing – who wouldn’t want to One-Click order a curry at the same time as buying their husband’s birthday present? However, Amazon’s decision will be met with fear by many smaller companies. Much like a large predator encroaching on their turf, for many small businesses, it could mean death. One such company is Just Eat, who have thrived since floating on the London Stock Exchange last year. Just Eat is based on the idea of helping independent restaurants thrive in a world dominated by chain restaurants – in order to stay competitive against the big chains, they willing to give up a chunk of their revenue to a tech-savvy middleman who can channel more food orders. Sadly, however, it seems that Just Eat’s time in the limelight is unlikely to last in the face of growing big company dominance; if Amazon and Google decide to expand into an industry, there simply isn’t room for anyone else. “Just Eat is riding high on a theme that has now fully run its course,” said Cyrus Mewawalla, a London-based analyst at CM Research, who recommends selling the stock and ranks it the 6th most expensive among 41 e-commerce companies his firm tracks globally. “Within five years you’ll be able to order a hamburger through Amazon and have it delivered to your front door.” To me, this seems a shame. Just Eat has gone from a Danish basement startup to the London Stock Exchange over the past decade; only to be shot down by a larger company as it gets into its stride. Amazon has a history of gaining control of industries that it moves into; it has already used its vast influence to almost annihilate the publishing industry, paying authors so little for their books that they are forced to turn to crowdfunding sites like Unbound just to make a living. Clearly, the same can be expected of takeaway food. Amazon will use their influence to drive down prices at participating restaurants so that they barely break even; but with the potential of Amazon’s large customer base, they just can’t afford not to take part. Having a world market dominated by a select few companies, we risk creating a monopoly that crushes entrepreneurial spirit and kills competition needed for a healthy economy. Who in their right mind would set up a business to compete against Amazon, with their impossibly low costs and impressive logistics? No one, I should imagine; and therein lies the problem. If things continue as they are, it is no exaggeration to say that the ‘Gang of Four’ may well have the opportunity to rule the world.   Miranda Wadham

Ten Stock Analysis Ratios used by the pros

UK Investor Magazine
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Ten Stock Analysis Ratios used by the pros

Are you going far enough in the analysis of your stocks?

Gain access to these 10 key ratios that are used by investment professionals day in, day out.

To give yourself an edge against the market you must dig deeper into the balance sheets, income statements and cash flows of companies to discover which ones are cheap and which ones are overvalued.

You will gain insight into vital indications of:

  • Valuation

  • Solvency

  • Leverage

  • Cash Flow

The guide you receive will detail how the 10 ratios are implemented and the formulas needed to calculate the ratios.

Each ratio has an explanation of the investment decision process and how you can interpret the ratios. These ratios will give you the ability to sift out the overvalued companies in a sector and those carrying an alarming amount of debt.

We have made a clear and concise PDF version available, you can request it to be emailed to you on the next page. Print this and keep it to hand, ready for the next time you review your portfolio.

 

View the 10 Ratios now:

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Terms & Conditions: Please view the full terms and conditions of the UK Investor Magazine before reading this guide. This guide was compiled along side investment professionals to give you the best educational experience. The document you will receive is designed to increase your knowledge and understanding but is not specific investment advice. All investments carry risk. By submitting your details you agree to be contacted by UK Investor Magazine and our partners in relation to financial information and educational tools. We accept not responsibility and will not be held liable for any losses arising from submitting your details and receiving this guide.

Janet Yellen confirms US central bank are on track to raise rates

Miranda Wadham
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0
Janet Yellen confirms US central bank are on track to raise rates
Federal Reserve Chair Janet Yellen has announced today that the U.S. central bank remains on track to raise interest rates this year. Her semi-annual testimony stated that with labour markets expected to steadily improve and turmoil abroad unlikely to throw the U.S. economy off track. However, she went on to say that measures “continue to indicate that there is still some slack in labor markets. For example, too many people are not searching for a job but would likely do so if the labor market was stronger. Although there are tentative signs that wage growth has picked up, it continues to be relatively subdued, consistent with other indications of slack. Thus, while labor market conditions have improved substantially, they are, in the FOMC’s judgment, not yet consistent with maximum employment.” She concluded that inflation continues run lower than the Fed’s objective, but “we continue to anticipate that it will be appropriate to raise the target range for the federal funds rate when the Committee has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.” Her written statement to the committee is to be followed by a hearing later.

Should I invest in fracking?

Miranda Wadham
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1
Should I invest in fracking?
As the world’s resources of oil continue to decline, fracking is the the word on everyone’s lips. However, hydraulic fracturing – the process of using water, sand and chemicals to release deep deposits of oil and gas – does not come without its difficulties. Whilst the fracking industry has taken off in the US over the past few years, here in the UK concerns over the safety and environmental effects of the process have prevented it getting the go ahead. In a report released today, it was announced that fracking could potentially be done safely in the UK under “rigorous regulation”, but it is too early to say whether it would be “a good idea”. However, the unavoidable fact is time to find newer energy resources is running out. Green energy such as wind and solar are all very well – until the wind stops blowing and the sun stops shining, as it is prone to do in England. It’s becoming clear that, with most oil plants in the North Sea set to close in under ten years, there is little other choice. The UK government backs it, the Environment Agency has granted energy firm Cuadrilla permits for exploratory fracking at two sites in Lancashire, and an attempt by a group of MPs to impose a moratorium on fracking was recently defeated. If fracking goes ahead, as it appears it might have to, Britain’s reserves of gas and oil trapped within layers of shale rock could be worth billions of pounds; generating handsome returns for early investors. But, given the uncertainty of its future, is it worth taking the risk? So far, the only company with a permit to dig in the UK is Cuadrilla, an alternative energy company that is privately owned, meaning shares cannot be bought. One of the few with shares you can buy is iGas Energy, which is listed on the Alternative Investment Market (Aim) for small start-ups. iGas is currently working on a five-year plan to develop shale gas sites in the North West and East Midlands, after a £170million deal was made with petrochemicals giant Ineos to join together in a number of shale projects. Egdon Resources is a small fish in the UK gas sea, but its intentions for growth are clear. The company nearly doubled its UK shale gas acreage by acquiring Alkane Energy’s licences in a deal funded by a £6.4m share placing. Given the difficulty finding public companies that are actually carrying out the fracking, it may be worth considering those in industries that are intrinsically linked with it. Alkane Energy has technology that could benefit from a growth of British fracking. The company has developed a generator than can convert gas into electricity; the generators are currently in operation converting methane from disused coal mines to power, but they can be transported by lorry and deployed on site at low cost. Similarly, Scottish-based engineering company Weir Group provides pumps for the US shale industry and would be well placed to supply to UK sites. The best method when investing in any area is to spread the risk – investing in funds who cover a range of companies is a good way to go. John Dodd, manager of the relatively new £80m Artemis Global Energy fund, has half of his fund in the US, including a large weighting to fracking companies including Pioneer. Jason Hollands, managing director of financial adviser Bestinvest, says: “Fracking is the big story in energy at the moment — and it’s already had a major impact in the U.S. Undoubtedly, it could become a real growth area in the UK, and that will whet the appetites of investors who like to take risks.” However, the collapse of shale gas prospects in Poland shows how unstable the industry can be. Wells were drilled and gas flowed, but the fractures in the rock quickly closed, causing gas flow to reduce to a trickle and calling a halt to operations. Without a doubt, investing in fracking at this stage is far from safe. However, the British Geological Survey estimates that there are 1,300 trillion cubic feet of natural gas trapped in shale rock beneath northern England in the Bowland shale region; if just a fraction of those gas resources are realised at today’s prices, they would be worth more than £1 trillion. Clearly, there’s real potential; if you’re prepared to take the risk, there’s a chance it could really pay off.

Royal Academy launches first crowdfunding campaign

Miranda Wadham
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Royal Academy launches first crowdfunding campaign
The Royal Academy of the Arts is set to launch its first crowdfunding campaign, in the hope that it will raise enough to bring eight ancient trees from Southern China for an exhibition. The trees are part of an installation by Chinse artist Ai Weiwei. In order to create the exhibition, Weiwei used parts of trees that died naturally on the Chinsese mountains, and were then sold as decorative pieces in the markets of Jingdezhen. He pieced the parts together in order to create eight complete trees, describing the process as “just like trying to imagine what the tree looked like”. However, the exhibition will cost around £100,000, an amount that the RA could not fund due to he short notice; so they are turning to crowdfunding platform Kickstarter to ask the public for the money to allow the exhibition to go ahead. “It is an experiment and a gamble, but a sensible one,” said Tim Marlow, the RA’s artistic director. “If it comes off, brilliant; if not then it was worth trying.” In the UK, Ai Weiwei is best known for his installation that filled the Tate Modern’s Turbine Hall with 100 million ceramic sunflower seeds. However, internationally Weiwei is well known for quite different reasons. He has had several run-ins with the Chinese government; in 2009 he needed surgery after being punched by a Chinese policeman in Chengdu, and in 2011, he was arrested without charge and held in custody for 81 days for exposing those who were responsible for the deaths of schoolchildren buried alive in the Sichuan earthquake. He is still not able to get a passport, and the RA believe it very unlikely that he will be able to come to London to see his show. The RA are hoping that, through crowdfunding, the public will be able to show their support for the artist and his work. If the campaign proves successful, Marlow said he could see the fundraising method being used again; although it is unlikely that it would become a replacement for corporate sponsorship.

Wetherspoons falls 5% after pre-close statement

Miranda Wadham
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0
Wetherspoons falls 5% after pre-close statement
J D Wetherspoon plc fell 5.9% this morning after releasing its pre-close statement for the financial year. For the 11 weeks to 12 July 2015 like-for-like sales increased by 2.9% and total sales increased by 6.5%. In the year to date (50 weeks to 12 July 2015) like-for-like sales increased by 3.4% and total sales increased by 7.6%, showing a slow in growth over the past few months. In his statement, the chairman of Wetherspoon, Tim Martin, said: “The recent government announcement regarding the “living wage” adds considerable uncertainty to future financial projections in the pub industry. The average price of a pint in a supermarket is less than GBP1 and we estimate staff costs to be around 10% or 10 pence. In contrast, a pint in a pub costs around GBP3 and staff costs are about 25% or 75 pence. Increased labour costs therefore affect pubs with far greater force than supermarkets. “This disadvantage is compounded by a huge VAT and business disparity between pubs and supermarkets, which is putting unsustainable pressure on many pubs in our industry, especially in smaller towns and less-affluent areas.  

Burberry reports drop in sales growth

Miranda Wadham
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0
Burberry reports drop in sales growth
Luxury clothing retailer Burberry fell 3.4 percent this morning, after reporting a slowdown in sales growth for the last quarter. Same-store sales at the British fashion house rose 6% in the three months to end-June compared with a 12% rise reported for the same period last year. The company were hit by a slackening demand for luxury goods in Hong Kong and other parts of the Asia-Pacific region, as experienced by the rest of the luxury sector. Chief executive Christopher Bailey said he was pleased with the growth reported in a statement. He said: “This [result] reflects our ongoing emphasis on serving our customers ever more effectively on and offline, and continued innovation in design and marketing.”

Apple Pay launches in the UK

Miranda Wadham
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0
Apple Pay launches in the UK
Apple Pay, Apple’s highly anticipated contactless payment system, launched in the UK this morning – nearly nine months after its launch in the US. The Apple Pay system allows owners of iPhone 6, iPhone 6 plus and Apple watches to pay for goods and services by touching their device on a contactless payment pad, in the same way the recently introduced contactless payment cards. Apple Pay is set to be available in 250,000 sites, including Tube stations, supermarkets and travel services.

However, HBSC missed the launch this morning, saying instead that they planned to launch the service by the end of July. The bank had been expected to begin offering the system today; yesterday the bank was listed on the Apple website as a “participating bank” .

HSBC denied that its decision not to participate at launch was last minute, saying that it had not planned to take part. Barclays – which has its own payment system – said it would be offering Apple Pay “in the future” and five other banks, including Bank of Scotland, Halifax, Lloyds, TSB and Marks and Spencer will launch in the autumn.

Starbucks to enter Sub-Saharan Africa

Miranda Wadham
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0
Starbucks to enter Sub-Saharan Africa
Sub-Saharan Africa will get its first Starbucks next year, after a deal was struck between the US coffee giant and South African franchise Taste. In a statement, Starbucks announced “an exclusive licensed partnership with Taste Holdings. The first store will open in Johannesburg in the first half of 2016, with more locations to follow. Starbucks and Taste Holdings will design and build stores serving the entire range of Starbucks food and beverages alongside its advanced digital offer for customers”. Taste say that they will staff the new cafes predominantly with unemployed young people from local communities, aged between 17-25. Kris Engskov, president of Starbucks Europe, Middle East and Africa (EMEA) commented: “We are proud to be bringing Starbucks to South Africa next year. Working with Taste, our partner, we’re going to deliver a great Starbucks experience. The coffee market here is vibrant and growing fast – we want to be part of that growth, bringing the passion and energy of this remarkable country into the design of our first store and our first barista team. We can’t wait to get started.” Global fast food brands are already popular in South Africa, but coffee companies have been slower to enter the market. The US doughnut and coffee giant Krispy Kreme plans to follow Starbucks into the region, and around 31 stores in South Africa over the next five years. Starbucks is currently up 0.09%, trading at 55 pence per share.

Fintech is a revolution – so get involved

Miranda Wadham
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0
Fintech is a revolution – so get involved
  Fintech is a buzzword that has been around for a few years now – and it seems it is here to stay. The Fintech – or financial technology – sector has shown impressive growth all over the world; the valuation of the industry has tripled from $928 million to $2.97 billion. Essentially, fintech start-ups are companies that aim to change the finance industry with technology. The internet is changing finance, just as it has changed all other sectors – in our so-called “snapchat generation”, people want things quicker, faster and easier than before. By developing and using new technology, start-ups can use their lower costs to undercut banks and established industry players with a cheaper and faster service. According to Anthemis group, a leading digital financial services investment advisory firm, finance “is in the midst of a revolution”; a revolution that was kick-started by the financial crisis. A combination of a lack of trust in the banking system, as well as the refusal of banks to lend money, led to a real gap in the market for companies that offer the same services as banks, but easier and cheaper to access. Two of the biggest London-based companies are TransferWise, who transfer money abroad far cheaper than banks, and Funding Circle, an online crowdfunding platform. Both of these companies offer services that would, in the past, have been a monopoly of the banks. For many, these fintech start-ups are not just a phase; they are the future. Instead of the traditional route out of university and into jobs or grad schemes, more and more graduates are setting up their own businesses; and given it’s potential, it’s unsurprising that many of them are in the financial technology sector. One such company is FundingInvoice, set up by seven graduates straight out of university, several of whom had turned down highly-paid jobs in the city to pursue their vision. Essentially, FundingInvoice aims to bridge the gap between suppliers selling their stock and being paid by the buyer. They recognise that many small and medium size enterprises (SMEs) may have problems with cashflow, and hope to provide an online platform where SMEs can “sell” their invoices to investors and receive payment up front, rather than having to wait to receive the money. SMEs will not pay any fees to use the service; they will only pay the investors a small percentage of each invoice value. The founding team, led by founder and CEO Aamar Aslam, anticipate that the investors involved will be High-Net Worth (HNW) Individuals, Hedge Funds and Family Offices. They are effectively “developing a new asset class that yields annualised returns of up to 20%. It’s safe, it’s high-yield and it’s easy.” Marina Yakas is one of FundingInvoice’s founding team, and has just graduated from Queen Mary, University of London. When asked what it was that made her want to work for a start-up, she said: “It took a lot of courage to take the step and work for a brand new start up. I, like many of my colleagues, was offered an entry-level job with an asset manager. It meant financial and social stability, moving out of my parents’ house, and more money in my pocket for the weekend. But I’ve always worked better with a smaller team where we all share the responsibility rather than having a manager delegate tasks. We’re a tight knit group, and most importantly, we all absolutely love what we’re doing.” “The digital age is something which is outgrowing its conquerors. Once you think you’ve mastered Twitter, Facebook, LinkedIn etc, someone comes up with a brand new idea on how to gain more followers, get more likes, and connect with new people. It is constantly changing. But people are constantly trying to keep up with it. Why? Because it’s addictive. We’re all desperately keen to see our company take off in the impending “Fintech revolution”.” Currently FundingInvoice is still testing the product, and is enrolled in the Warwick Ventures Software Incubator; the launch date for the platform is set for August/September 2015. If the original venture proves successful, the founders aim to expand into other asset classes, including small business loans and even crowdfunding. Currently, there are separate online platforms for each type of peer-to-peer lending; Funding Invoice eventually aims to to create one platform for all asset classes. According to the team, they’re “simply a marketplace, much like Amazon, who just take a commission from both sides.” “This is a world where Uber, the world’s largest taxi company owns no cars, Facebook, the world’s most popular media owner, creates no content, Alibaba, the world’s most valuable retailer, has no inventory and, AirBnB, the world’s largest accommodation provider, owns no real estate. There is room for a bank which owns no capital.” I have to say, I’m inclined to agree. Given the incredible growth of Fintech and the success of similar peer-to-peer lending platforms, including Funding Circle, Crowd2Fund and LendInvest, it’s easy to see why this group of graduates are so excited about the venture. These start-ups simplify and discount financial services that are used by all industries, and Fintech should not be underestimated. It is a revolution – one that every business should be looking to be part of.   Miranda Wadham
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