Activist investor Gatemore Capital Management is building up its stake in fashion brand and retailer Superdry (LON: SDRY) and it has a record of changing the management and strategy of underperforming companies.
The fully listed company has gone through many directors in recent years and founder Julian Dunkerton has returned as chief executive. Shaun Willis was appointed finance director on 26 April.
Superdry is a former stockmarket star, whose recent performance has been poor. There is the appearance of a lack of leadership in recent years. The share price high was at the beginning of 2018 an...
Going back as far as November 2020, the IAG share price (LON:IAG) was valued at 92p. Now, as a roadmap out of lockdowns have been set forward, and the vaccine roll-out is running smoothly, the FTSE 100 company is valued at 203p per share. IAG, owner of British Airways, added further value to its share price yesterday too, as the UK looks set to announce which countries have made it on the ‘green list’. While there is still uncertainty around the speed of the economy reopening, investors may consider an investment at the current price a risk more worth taking.
Up Again From Here?
There was good news for airlines yesterday, who may dare to dream of a somewhat normal summer, as the EU suggested it could open up to fully vaccinated tourists. “Time to revive EU tourism industry and for cross-border friendships to rekindle – safely,” EU Commission President Ursula von der Leyen tweeted. One drawback is that all passengers will be required to have had a vaccine.
In addition, reports are suggesting that the UK government will set forward ‘green list’ of between ten or 12 countries, including Malta, Gibraltar, Portugal and Israel, that passengers will be able to travel to.
Major tourists destinations including Spain, Greece and France are also rumoured to be on the list. The government’s travel plans involve a traffic light system of red, amber and green classifications for countries depending on the perceived COVID-19 risk.
IAG was also bolstered by the EU’s decision to allow entry for vaccinated people from low-risk countries.
“Foreign holidays are looking like they could actually happen this year, lifting demand for travel and tourism stocks, which were severely battered across the crisis,” said Sophie Griffiths, analyst at OANDA.
JP Morgan’s View
Sharecast has reported that JP Morgan upgraded IAG shares to ‘overweight’ from ‘neutral’ as the prospects for 2022 onwards “look promising as global air travel starts to normalise”, despite there being challenges ahead.
“We anticipate turbulence on this journey but consider IAG an attractive long-term investment,” JP Morgan said.
“It is still unclear when widespread intra-European travel will be allowed, but by late summer we would expect a meaningful pick-up across the region,” the investment bank added.
ITV’s total external revenue rose by 2% to £709m during the quarter ending on 31 March
ITV (LON:ITV) is retaining a level of cautious optimism over its recovery during 2021 as its advertising sales have seen a resurgence in recent months.
The UK broadcaster told shareholders that it has been “encouraged” by trading levels over the past quarter as revenues rise on robust growth of its ITV Studios production and distribution arm.
“The weather may be unseasonably chilly, but the advertising market is heating up according to free-to-air broadcaster ITV.
Despite people now being allowed outdoors, there is reason for ITV bosses to be optimistic over the coming months, according to Russ Mould, investment director at AJ Bell.
“Even the biggest devotee of reality show Love Island won’t be as excited about its return as ITV given its importance to driving online viewing.”
“The lack of a ‘winter’ Love Island in the first three months of 2021 meant online viewing was down 11% for ITV but when it was stripped out, eyeballs on the ITV Hub were actually up by nearly a quarter.”
“The Euros football tournament will provide another reason for people to switch to ITV and combined with the reopening impact, and assuming the UK keeps the virus under control, advertising growth is likely to be very significant for some time to come,” Mould said.
The broadcaster is fighting to stay relevant having seen both the television market and advertising space heavily disrupted by giant US companies in recent years – Disney, Netflix and Amazon Prime on the streaming side and Google and Facebook competing for advertising spend.
“However, TV as a medium still has reach, particularly with certain sections of the population, and ITV has a chance to prove it still has a place as it benefits from the reopening boom,” Mould said.
With especially strong growth in its sizeable mining sector, the FTSE 100 climbed 1.14%. Just enough for the UK index to get back to 7,000.
“On Wednesday the UK index traded 1.14% higher at 7,002 thanks to the best efforts of miners and financials. Cyclical stocks were very much in favour, with construction groups CRH and Ashtead also joining the top risers,” says Russ Mould, investment director at AJ Bell.
“Yellen had said on Tuesday that ‘it may be that interest rates have to rise somewhat’ to prevent the post-covid economy from overheating. A statement, obviously, that didn’t go down well with investors, who were already fretting over the impact of the ongoing chip shortage on tech and car stocks,” said Connor Campbell, financial analyst at Spreadex.
Such was the reaction that the former Fed chair issued a correction, of sorts, assuring the markets that a rate hike is neither something she is ‘predicting or recommending’.
FTSE 100 Top Movers
CRH (3.42%), BHP (3.32%) and Croda International (3.28%) all made solid gains during the morning session on Wednesday.
Just Eat (-1.49%), Ocado (-1.09%) and Land Securities (-0.97%) are the biggest fallers on the FTSE 100 at mid-morning trading.
New UK Car Sales up 3,000%
New car sales in Britain surged by 3,000% in April as car showrooms were reopened to the public, boosting the numbers from the year before when lockdowns decimated car sales.
New car sales in Britain surged by 3,000% in April as car showrooms were reopened to the public, boosting the numbers from the year before when lockdowns decimated car sales.
But last month’s performance was still 13% below the 2010-2019 average, the SMMT said.
“After one of the darkest years in automotive history, there is light at the end of the tunnel,” said SMMT boss Mike Hawes.
“A full recovery for the sector is still some way off, but with showrooms open and consumers able to test drive the latest, cleanest models, the industry can begin to rebuild.”
People have set aside £140bn over past year with £100bn on corporate balance sheets
Cash-heavy households and businesses are set to boost the UK’s economic recovery over the coming year as the spend money accumulated during lockdown, the chancellor has said.
People have set aside around £140bn over the past year, with £100bn on corporate balance sheets, as confidence is getting back to levels seen before the pandemic and economic activity is rising at a fast rate, Sunak told The Wall Street Journal’s CEO Council Summit.
“As we look forward to reopening over the coming weeks and months, there are signs to be cautiously optimistic and we can see that in the data. I’m hopeful that will be sustained through the rest of the year,” he said.
Sunak’s comments were timely, coming soon after a UK PMI survey revealed that UK manufacturing grew at the fastest rate in nearly 27 years in April.
Mortgage lending has also spiked, up by £11.8bn in March, as households sought to take advantage of the stamp duty holiday on the first £500,000 of a purchase before the policy is withdrawn in June.
In recent weeks, economists have upgraded projections for GDP growth for the UK this year from 5% cent to 7%, a pace last seen in 1941, with the Bank of England expected to confirm the rapid recovery in its latest forecasts tomorrow.
“We are seeing consumer confidence back to pre-pandemic levels. Chief financial officers are very positive. Various manufacturing and services indices are trading above [trend] and we know that there is an enormous amount of excess savings both in the household sector, approaching £140 billion, and £100 billion sitting on corporate balance sheets,” Sunak said.
“We have tried to put things in place to unlock some of that cash, particularly the [corporation tax] super deduction. The signs are promising. Our policy a year ago was to help people and protect businesses so that when we got to this point we could bounce back strongly.”
Britain suffered its biggest recession in three hundred years last year, as the economy shrank by 9.8%. However, this time around, households and companies have built up an excess of cash which could go some way to supporting the UK’s recovery.
Boohoo (LON:BOO), the online fashion brand, has confirmed its sales and profits jumped up last year after the company concentrated on its loungewear and activewear ranges while the coronavirus pandemic was going on.
The FTSE 250 company revealed on Wednesday morning that its revenue rose by 41% during the year ending on 28 February, as sales rose by just over £0.5bn to £1.75bn.
Pre-tax profit soared too, up 35% £124.7m over the same time period.
Earnings per share increased 36 per cent from 5.35p to 7.25p.
“Boohoo has strutted ahead of flailing high street rivals showing that its bang on trend when it comes to the way fashion followers want to shop and the styles they want to buy,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown. “Looser stay at home styles like sports and loungewear added extra comfort as the fit was easier to get right, so people sent fewer items back. With the returns bugbear retreating, that helped push up gross margins to 54.2%.”
Superstar sales have meant Boohoo has piled up the cash, with its operating cash flow hitting more than £200 million, compared to £127 million in 2020.
Boohoo’s deep pockets already sent the company on a spending spree rifling through Arcadia’s bargain bins to grab a clutch of brands including Dorothy Perkins. It’s also grabbed the Debenhams online store, with the aim of turning a company, which began as a market stall, into an international apparel marketplace. “This plan is on track with revenue growth for international up 44% over the year, now accounting for a bigger slice of the overall sales pie,” said Streeter.
“Boohoo is now a fashion powerhouse, and investment in scaling the platform is expected to keep paying off, with even higher margins expected in the second half of the year. But the catwalk isn’t completely clear, with hurdles of uncertainty ahead.”
Ark Innovation struggling as investors turn away from growth and tech stocks
It was one of the worst days in weeks for the Nasdaq as investors sold off their tech stocks in droves last night.
Apple shares fell by 3.5%, while Amazon and Alphabet, owner of Google, were down by 2.2% and 1.7% respectively in a show of concern over the companies’ high valuations.
The Nasdaq more broadly was down by 1.9% to 13,633.50, its weakest day since late March. The S&P 500 lost 0.7%, down to 4,164.66.
A recent dip in the Tesla share price, in addition to a move out of growth and technology stocks, has caused downward pressure on ARK Innovation, the star performing exchange-traded fund of 2020, managed y Cathie Wood.
According to Morningstar data, the $23.1bn fund confirmed gains of less then 1% last month, nearly 3% below the average fund in its category.
Since the beginning of the year the ArkInnovation ETF is down by 9%, while the S&P 500 is up by 10.9% over the same period.
Shares in Tesla, the fund’s biggest holding at 10.5%, are down 4.5% since the beginning of the year, playing a significant role in the fund’s fall.
“The market has rotated away from the fund’s favored growth stocks toward more economically sensitive segments of the market,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. “We think if underperformance continues longer, some investors will become frustrated and seek an alternative.”
Hardman & Co has initiated research on narrowband radio frequency communications networks developer CyanConnode (LON: CYAN) and it believes that the company could be profitable within two years.
Smart meter roll outs have been gathering pace in India and the company’s RFMesh smart meter communications technology is an important component in several of the contracts. There are also potential contract wins in other countries, such as Thailand, the UAE and Egypt.
There are orders for more than 513,000 modules and potential to gain more in India and other parts of the world.
Uncertainty
The sh...
Despite a fall today, the Lloyds share price (LON:LLOY) has broadly continued its momentum from the beginning of 2021 in recent weeks, now standing at 45p per share. The FTSE 100 company has added 23.6% since the turn of the year, as the UK economy continues its seemingly stable path out of lockdown.
The bank finished off strong last week following the release of its solid results in a show that it could be set for a sustained recovery going forward.
Outlook
Can Lloyds continue this recovery for the remainder of this year and into 2022? Its Q1 results make good reading as the bank reversed some of the provisions it had made for loan losses following the spread of coronavirus. As a result Lloyds saw its pre-tax profit soar to £1.9bn for the quarter ending in March, well up from below £100m for the same period a year ago. It is certainly a positive start and can help to explain why the bank’s share price moved up over the last week.
However, Lloyds is not out of the clear just yet. Low interest rates provide difficulty as the bank relies on lending deposits in the form of mortgages, loans to small companies and credit cards.
“Banks make money by lending money out at higher rates than they pay on deposits – the difference is known as the net interest margin. With interest rates on savings accounts already on the floor (and zero in many cases) they simply can’t push the cost of funding much lower – whereas competition and regulatory action means lower interest rates get passed on to borrowers relatively quickly,” says Nicholas Hyett, equity analyst at Hargreaves and Lansdown.
That being said, Lloyds is expecting net interest margins to exceed 2.45% this year, which wouldn’t be too damaging for the bank, even if it doesn’t record massive profits.
“Given that low interest rates look like they’re here to stay, it’s perhaps no surprise Lloyds is looking elsewhere for growth,” Hyett said.
