RBS still a mess
That Royal Bank of Scotland (RBS) could make such a list every year tells us that it has struggled to move on from past problems. Not that it hasn't tried. Headed to court in March over claims relating to its infamous 2008 rights issue, the banking group settled last month with three out of the five shareholder groups, and boss Ross McEwan said he hoped the remaining claimants would accept the deal on the table.
Then there is the frustrated spin-off of Williams & Glyn, with the Bank of England reportedly scrutinising the technology risk in the customer transfer, always a tricky part of retail banking M&A: in Lloyds' (LLOY) sale of TSB, it agreed to pay £450m towards the migration process.
The biggest 'known unknown' is how much the US Department of Justice will penalise RBS to settle the misselling of mortgage-backed securities during the financial crisis. Add in the outlook for interest rates and the Brexit negotiations, and is this the ultimate contrarian value play, or not to be touched with a barge pole?
Last IC view: Hold, 176p, 28 Sep 2016
Tesco's comeback
As RBS continued to fall last year, Tesco (TSCO) was making an impressive comeback. In October I suggested five reasons not to buy in, including the revenue challenge the grocer faces to meet its operating profit margin target, and the challenge of rising import prices. The supermarket's stock has headed sideways since then, but there should be plenty of news this year to confirm or confound its bulls. Tesco has its own skeletons rattling in the cupboard, although the numbers aren't as big: institutional investors are seeking damages exceeding £100m over the company's past mis-statement of earnings. The company declined to provide a comment on the legal action.
On the positive side, there were signs last year that the gains of the discounters may be slowing, and Tesco itself returned to year-on-year market share growth. Improving cash flow is helping to reduce the net debt pile, and the company scored a modest PR victory in the first skirmish of Marmite Wars. As sterling weakness persists, we'll soon find out if that was a pyrrhic victory, or whether this company has truly found its fight.
Last IC view: Hold, 208p, 5 Oct 2016
Antofagasta copper-bottomed?
It might not provide so many headlines, but Antofagasta (ANTO) will be at the centre of some important questions this year. As the largest pure-play copper miner in London, it has been boosted by the rise of the price of the metal as a result of both President-elect Donald Trump's promised infrastructure spending and increased demand from the crucial Chinese market.
Therefore, Antofagasta's fate will be determined by the same factors that will determine the global economic path in 2017. Will Trump get his plans through Congress? Will China's capital spending meet expectations? It bodes well that the country's manufacturing sentiment has been in positive territory for six straight months now. We will also find out how far Antofagasta, like other miners, has relied on its higher grade assets during the downturn, and how much margin it can make out of what remains in the ground.
Last IC view: Buy, 725p, 29 Nov 2016
