Thursday, 26 August 2010

Jobless Claims Improve

This week’s jobless claims figure came in better than consensus and better than last weeks. The figure reported was 473k, this compares with last weeks figure which was revised from 500k to 504k today. The 473k figure is better than consensus expectations of 488k. This news is well received by the bulls as in the past six weeks this is the only week the actual figure has beaten consensus. Today figure also breaks the past four weeks rising trend for this number. This improvement in jobless claims helps the outlook for next Fridays Non-farm payrolls data which was shaping up to look quite bearish.

Tuesday, 24 August 2010

FTSE Allshare Low P/E Growth Companies

The table above comprises a list of companies that appear to be cheap in comparison to earnings and are also profitable and are expected to grow. The list has been put together from companies in the FTSE Allshare index. The criteria that had to be matched and resulted in the list is shown below.

• Projected Price/Earning                                   < 12
• Projected PEG (Price Earning/Growth)            < 0.8
• Projected dividend Yield                                  > 3%
• Net Gearing Excluding Intangibles                    < 50
• ROCE (Return on Capital Employed)              > 10%
• Current Net Asset Value/ Price                        > 0.2

All of these companies are expected to grow their earnings per share over the next 3 years. Man Group Plc, the investment management company, is expected to grow its profits and report EPS of 35P for the year end 01/03/13, this would put the company on a P/E ratio of under 6 at its current price. At this price that would result in a dividend yield for that year of nearly 9%.

Game Group Plc, the specialist video game retailer, is expected to report for year end 01/01/13 earnings results that almost match its results from 31/01/08. Back when those results were published the company was trading at 200p, it is now trading around 67p. At this current price the company will be on a P/E of just above 4 if analyst’s expectations are correct for the next few years.

Some companies on this list have issues and that is why they appear to be cheap. BP Plc as everyone knows has had some problems recently which have made it look quite cheap. But this is due to the uncertainty about its performance in the future. As always investors should do their own research as a company may appear cheap but it may be due to a valid reason.

New Industrial Orders Beats Expectations

Released today at 10:00 GMT by Eurostat was the Eurozone’s monthly change in new industrial orders. Expectations were to see that orders had increased this month by 1.6%, but the figure released showed that the actual increase in orders was 2.5%. This may not have been as high as last month’s 3.8% rise, but the figure has been positive for the past 5 months. In the Past 12 month’s new industrial orders has grown 10 months and only fell 2, and in the past 2 months has beaten expectations. Lots of investors are speculating at the current time that we are going to get a double dip recession and are forcing equity prices lower. As this data continues to rise and do better than expected surely it means that companies out there are set to make significant profits from these orders. This says to me that there must be companies out there that are getting cheaper as they are sold down that have strong order books and the potential for strong profits.

Monday, 23 August 2010

European Consumer Confidence - Better Than Expected

Eurozone consumer confidence was released a few minutes ago at 15:03 GMT. The reading released showed that consumer confidence was better than expected, registering a figure of -12 compared with the -13 expected. This is the third month in a row that the index has beaten expectations. The index has risen for the past four months after it seemed to stall in the period between January and May. The index reading of -12 today has put European consumer confidence back at the same level it was at in 2005.

Eurozone consumer confidence is improving and this comes as the major economies of Germany and France continues to show strong economic figures. France earlier today reported a better than expected Manufacturing PMI, while Germany reported better than expected Services PMI. This does suggest that the European economic recovery is continuing, but tomorrow mornings German GDP figure will have a large story to tell.

Sunday, 22 August 2010

The VIX Index

The volatility index produced by the Chicago Board Options Exchange, more commonly known as the VIX, shows that volatility in the markets has jumped up in the past couple of weeks. The index, often referred to as the fear index, is a weighted mix of options prices. The higher the index the higher volatility in the markets is expected to be. As market volatility increases or expectations of market volatility increase options prices rise. This is due to an options price being a function of volatility in the underlying asset. If the underlying asset is expected to be more volatile the corresponding options contract has a higher probability of being in the money so the price is higher.

Even though the index has risen over the past couple of weeks it is still trading within its recent down trend. The current level is in the range at which the VIX was trading in the one and a half years prior to the collapse of Lehman’s. The recent turmoil seen over the past couple of months in the markets saw a severe spike, a mini 2008, but now it appears to be trending back down after this spike. If a double dip recession happens, as some people believe it will, and the markets crash again the VIX will break its trend on the upside and trade higher. If the uptrend seen in the past couple of weeks continues and moves out above 30 it may be an indicator that investor’s beliefs in a double dip are widening.

Saturday, 21 August 2010

Britvic Plc. Thirst for Profit Growth

Britvic, one of Europe’s leading soft drinks producers, has had a tremendous last few years of growth. The company is expected by analysts to continue to grow earnings per share at a strong rate over the next few years. The company has grown its EPS from 19.71p in 2007 to 30.63p in 2009, a percentage gain of 55.4%, and is expected to report further growth of 9.95% to 33.68p this year. Cementing the company firmly as a growth company is the expectations that EPS will have increased to over 45.00p in 2012.

Using the earning figure expected for yearend Sep 2010 the company is priced on a P/E of 13.98, this may appear relatively quite cheap for a company that has earning growth expected to be near 50% in the next few years. Britvic’s recently expanded its business and European market exposure through the purchase of Fruité Entreprises SA , a independent soft drinks company in France for EUR237.0 million. This recent acquisition has expanded the drinks range and now includes Robinsons, J2O, Fruit Shoot, Tango and drench in GB, Mi Wadi, Energise Sport and Ballygowan in Ireland, and Teisseire, Fruite and Pressade in France. The Company also has exclusive bottling agreements with PepsiCo in the UK and Ireland for global brands such as Pepsi and 7Up.

Since the financial crisis of 2008 the share price has made a strong recovery. From the bottom of its trough to the peak of its rise (last month) it has risen 314% in about 2 years. The rising trend in this period has been quite defined and at the moment it is at the very bottom of this trend. If this trend is not broken downwards and a continuation is seen this may be a very successful investment opportunity.

FTSE 350 Top 10 Dividend Payers

During the current economic situation investors are demanding a high return on risk in the equity markets. This is due to the uncertainty felt in the strength of the major economies. As of recently, economic data has showed that the economic recovery has begun to slow, bond prices are high and equity prices are who knows where. The question is whether the economies are going to continue to grow or are going to fall back into a double dip recession.

This aversion from risk has left some strong companies looking under priced and paying very attractive dividends. The list below shows the top 10 FTSE 350 companies ranked by projected yields. Companies with dividend covers of less than 1.25 have been filtered out, along with highly leveraged companies with gross gearing excluding intangibles above 100. If a company has a projected P/E of above 20 it has also been filtered from the list. The companies left offer attractive yields with some degree of safety.

All of the companies have a projected P/E ratio under 12 and half offer a projected P/E to Growth ratio of under 1. The Game group Plc which is expected to increase its dividend over the next 3 years seem an attractive proposition at this price, but as investors always say “do your own research”.