PRESS TIPS:
Tempus in The Times writes that Schroders' performance since the financial crisis started gives an idea what can be achieved if you stick to your knitting and abjure significant acquisitions, unlike other fund managers such as Aberdeen Asset Management.
Over the past 14 quarters Schroders has gained an inflow of £53bn in new business, with only one of those quarters showing a negative performance. In the three months to end-September, net inflows were £2.6bn. Of this, £1.9bn came from institutions and £800m from retail clients, while private banking had a £100m outflow. Schroders shares, despite the strong rise this summer, sell on a typical sector multiple of about 11 times this year's earnings, stripping out the spare cash. Further outperformance looks unlikely in the short term, but they remain one of the strongest holds in the sector (Last IC rating: Hold, 2 Aug).
Tempus writes that the phrase 'high operational gearing' is used to describe companies where fairly small changes in sales or costs have an overwhelming effect on profits. It is hard to think of a better example than Electrocomponents, the world's biggest distributor of electrical and electronic bits and pieces. This is a well-known proxy for global economic performance because its goods are ordered in their millions, so the slightest slowdown has an immediate effect.
In the first half to end-September, cost inflation was running at about 3 per cent. Margins fell by 1.2 per cent and the lower euro hit earnings from the Continent and there were one and a half fewer trading days than in the previous first half. These are tiny changes, but together they meant that pre-tax profits were off by 30 per cent to £41.5m on flat revenues.
It is the ultimate cyclical stock, and on 12.5 times this year's earnings, unless you think the world economy is set for a significant bounce, probably worth leaving for now (Last IC rating: Sell, 8 Nov).
Questor in The Telegraph writes that infrastructure funds own relatively low-risk assets that offer a solid yield for investors. A number of funds have listed in the UK, with 3i Infrastructure being unique in offering exposure to India. The main reason to hold these funds is for the income. The interim dividend was 2.97p, which is flat year on year. The payment will be made on January 9th.
The dividend policy of the fund is to pay out 5 per cent of shareholders' equity - essentially the value of the group's assets minus its liabilities - each year. The interim payment represents 2.5 per cent of shareholders' equity, so is bang in line with its target. The rating remains the same, buy for income and long-term growth (Last IC comment: 12 May 2011, also listed on IC's Top 100 Funds).
Business press headlines:
Eurozone leaders face a new round of brinkmanship over Greece's €174bn bailout after international lenders failed to bridge differences on how to reduce Athens' burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week. Officials had hoped to finalise the new programme, which extends Greece's rescue two years to 2016, at a meeting of eurozone finance ministers in Brussels on Monday. That would free up a long-delayed €31.3bn aid payment desperately sought by Athens. [Financial Times]
Germany's Angela Merkel on Wednesday warned Britain not to turn its back on Europe and urged its Prime Minister David Cameron to work with her to avoid deadlock at European Union budget talks later this month. The leaders met in London to try to iron out differences over the EU's €1 trillion (£800.5bn) budget that threaten to block a deal and fuel fears that London is drifting away from the 27-nation union. Describing plans to increase the EU budget as "ludicrous", Cameron has threatened to veto any deal he thinks is not in Britain's interests and will push for a real-terms freeze. [The Telegraph]
Shop Direct, the home shopping group owned by the Barclay brothers, is considering acquiring the brand and website of the failed electricals retailer, Comet, which is to start closing some stores next week. A host of retailers - including the discounter B&M Bargains, the single price retailer 99p Stores, and the homewares chain Dunelm - are among those looking to buy parcels of Comet's shops on both short and long-term leases from the administrator, Deloitte. The 236-store chain collapsed into administration last week just nine months after it had been acquired by OpCapita, the private investment firm whose chief executive is Henry Jackson, for a token £2. [The Independent]
Oil cartel Opec acknowledged the growing importance of unconventional 'shale' oil reserves for the first time on Thursday - as it cut its oil demand forecasts on fears over eurozone growth. In its annual world oil outlook report, Opec - whose 12 members include Saudi Arabia, Iran, Iraq and Venezuela - said: "Shale oil represents a large change to the supply picture." While in previous reports "no significant shale oil contribution to liquids supply was envisaged," this year "a rise in the importance of shale oil is expected", Opec said. [The Telegraph]
Pay has risen at a faster rate for Britain's biggest earners than for anyone else over the past 25 years, according to research published yesterday. The top 1 per cent of full-time workers have enjoyed a 117 per cent surge in between 1986 and 2011, according to the Office for National Statistics. The top 10 per cent and bottom 10 per cent received increases of 81 per cent and 47 per cent, respectively. [The Times]
The tax affairs of every Briton with an HSBC bank account in Jersey are being examined by Revenue & Customs after a whistleblower leaked a list of names, addresses and account balances. HMRC officials are trawling through a list of more than 4,000 people based in Britain after it was handed over this week. The list is understood to include serious criminals and celebrities. [The Times].
