Ideas Farm 

Ideas Farm: 20 years of hurt!

Ideas Farm: 20 years of hurt!

The latest lurch lower by the FTSE 100 provides the cue for another round of consternation about how the UK’s blue-chip index has gone nowhere for over 20 years. But what actual lessons are there for investors from the poor run?

The take-away touted by some, that investing in shares is dumb, is clear bunkum. Anyone will know this who either takes a look at overseas markets during the same period or factors in dividends to their return calculations (doing this changes the 7.5 per cent 20-year drop into a 90 per cent gain). However, the score card of UK blue-chips is nonetheless terrible. 

It is the type of companies dominating the FTSE 100 constituent list that is the real clue to what has gone so wrong. Many of the largest companies in the index are mature, capital-intensive businesses operating in industries that have long faced significant disruption – although it may only be now disruption has become too obvious to ignore.

Take the energy companies BP (BP.) and Shell (RDSB), which account for 18 per cent of the FTSE 100 by value. These have justified themselves to shareholders over many decades with dividends that they can no longer afford to pay due to the world’s rapid switch to renewable power. 

The index’s five big banks (14 per cent) have seen income squeezed by relentless falls in interest rates. Added to that, the commercial property that underpins a vast proportion of their balance sheets is seriously imperilled by not only the current recession, but also long-term disruption in both the retail and office markets. 

The three big Reits (9 per cent) also face the threat of falling rents and property values for years to come as a result of the digitisation of shopping and more recently offices. 

And then there are the retailers that occupy some of that space (4 per cent including supermarkets) which are seeing their profits whacked by trade moving online.

With all these depressing blue-chip narratives, it’s perhaps unsurprising the London Stock Exchange struggles to attract champions of global innovation. The great hope that chipmaker ARM would re-list in the UK has been dashed by its purchase by US company Nvidia. The UK did get the recent listing of The Hut Group, a global online retail platform, but only time will tell whether it lives up to its hype. Other London listed contenders for the title of global innovator, such as would be Microsoft-of-retail Ocado (OCDO), also still have plenty to prove.

However, there is no reason why our blue-chip index has needed to attract new names to keep up with the times. Incumbents can be innovators, too. But only if they have the foresight to identify long-term trends and the bravery to sacrifice old ways to embrace the future. 

Take Danish energy company Orsted (DK:ORSTED), which often appears in the Ideas Farm’s lists of fund managers’ favourite green stocks. We tipped Orsted in January based on the amazing job it has done over a decade in transforming from a fossil fuel junky into a green energy leader. Many shareholders in BP and Shell may now be wishing those companies had spent the past decade ploughing all that dividend and exploration cash into a similarly visionary strategy, rather than pursuing the same-old same-old.

This week’s Tips & Ideas section tells the story of another FTSE 100 company that has been undergoing its own evolution to adapt to a rapidly changing market, and which now plans to double down on the innovations of recent years: clothing retailer Next (NXT). 

What the performance of the FTSE 100 tells us is that size is no protection against major industry changes. Indeed, size can often cause leading players to stay anchored in the past. However, the likes of Orsted and Next also let us know it doesn’t have to be this way. And we could add the names of other change-embracing UK blue-chips alongside, such as Relx (RLX) and Experian (EXPN). 

Indeed, taking the long view, what is really surprising is not the innovations that have laid industry leaders low, but the inertia of so many industry leaders to embrace change and the long-term opportunities it offers.  

 

Click here to view the tables in PDF form.

 

Fund Manager best ideas: Health
 No. Funds
Roche Holding AG Dividend Right Cert.10 (+5)
UnitedHealth Group Inc10 (+4)
AbbVie Inc8 (+5)
Amgen Inc8 (+5)
Vertex Pharmaceuticals Inc8 (+4)
Abbott Laboratories6 (+4)
Thermo Fisher Scientific Inc6 (+4)
Biogen Inc4 (+2)
Boston Scientific Corp4 (+3)
Johnson & Johnson4 (+2)
Sanofi SA4 (+2)
Applied Therapeutics Inc2 (+1)
argenx SE2 (+1)
Avantor Inc2 (NEW)
Baxter International Inc2 (+1)
Becton, Dickinson and Co2 (+1)
Biomarin Pharmaceutical Inc2 (+1)
Exelixis Inc2 (NEW)
Fresenius Medical Care AG & Co. KGaA2 (+1)
Gilead Sciences Inc2
Humana Inc2 (+1)
Incyte Corp2 (NEW)
Medtronic PLC2
Merck & Co Inc2 (+1)
Neurocrine Biosciences Inc2 (NEW)
Novartis AG ADR2 (+1)
Pfizer Inc2 (NEW)
Regeneron Pharmaceuticals Inc2 (+1)
Seattle Genetics Inc2 (+1)

Based on top 5 holdings

Source: Morningstar, as at 22 September 2020

 

New 52-week highs   
NameTIDMPrice% from hi
JP Morgan Japan SmallerJPS490p0.4%
Capital Gearing Trust PlcCGT4,560p0.7%
Collagen SolutionsCOS7p0.7%
Fidelity Japan TrustFJV198p0.8%
BBGIBBGI170p0.9%
EPE Special OpportunitiesESO212p0.9%
Atlan Jap GrthAJG240p1.3%
Witan Pacific Invt TrBGCG399p1.4%
Hastings Group HoldingsHSTG253p1.4%
JBM CN Grw&IncJCGI540p1.5%
discoverIE GroupDSCV636p1.5%
Pacific Horizon Invt TrPHI576p1.7%
Providence ResourcesPVR6p1.7%
Miton UK MicroCap TrustMINI56p1.9%
BlackRock Greater Eu InvtBRGE458p1.9%
SDCL Energy EfficiencySEIT110p2.2%
Gore Street EnergyGSF107p2.3%
Schroder Asian TotalATR420p2.3%
International BiotechIBT794p2.3%
Croda InternationalCRDA6,142p2.5%
Admiral GroupADM2,775p2.5%
Baker Steel Res TrustBSRT67p2.5%
Phoenix Spree DeutschlandPSDL326p2.5%
JPMorgan Asia GrowthJAGI421p2.5%
Augmentum FintAUGM118p2.6%
Jersey ElectricityJEL475p2.7%
Fidelity China SpecialFCSS325p2.7%
JPMorgan Japanese InvtJFJ566p2.7%
Aberdeen Japan Invt TrustAJIT635p2.8%
Bail Giff EurBGEU1,185p2.9%
Intertek GroupITRK6,292p2.9%
High Tact CredHTCF202p2.9%
Impax Asset Management GpIPX520p3.0%

Source: FactSet (23 September 2020)

 

New 52-week lows   
NameTIDMPrice% from lo
Town Centre SecuritiesTOWN86p0.0%
Standard CharteredSTAN339p0.1%
Georgia Capital PlcCGEO351p0.3%
SME Credit Realisation FdSCRF55p0.5%
PetrofacPFC123p0.6%
Capital & RegionalCAL46p0.7%
Derwent LondonDLN2,458p0.7%
HuntingHTG146p0.9%
Rolls-Royce HoldingsRR161p0.9%
AG BARRBAG373p0.9%
Hipgnosis SongsSONC101p1.0%
GreggsGRG1,156p1.1%
HSBC HoldingsHSBA288p1.2%
Lloyds Banking GroupLLOY24p1.4%
Stagecoach GroupSGC36p1.6%
Micro Focus InternationalMCRO259p1.7%
Appreciate GroupAPP28p1.8%
Taylor WimpeyTW100p1.8%
Capital & Counties PropsCAPC114p2.2%
Land Securities GroupLAND513p2.6%
NatWest GroupNWG93p3.0%

Source: FactSet (23 September 2020)

 

Shorts   
CompanyShort InterestNo. Shorters1wk chg in short interest
HAMMERSON PLC15.4%111.3%
PEARSON PLC8.6%90.5%
CINEWORLD GROUP8.6%80.2%
PREMIER OIL PLC8.1%20.0%
TULLOW OIL PLC7.8%50.0%
PETROFAC LTD7.8%50.8%
METRO BANK PLC7.2%60.0%
SAINSBURY (J) PLC5.6%70.7%
BABCOCK INTL GROUP PLC5.5%3-0.1%
PETROPAVLOVSK PLC5.4%7-0.1%
TUI AG5.3%60.0%
PETS AT HOME GROUP PLC4.9%4-0.1%
DOMINO'S PIZZA GROUP PLC4.8%50.0%
WEIR GROUP PLC/THE4.7%30.0%
FUTURE PLC4.4%40.4%
BLUE PRISM GROUP PLC4.4%70.1%
IQE PLC3.8%50.1%
VODAFONE GROUP PLC3.8%30.0%
WOOD GROUP (JOHN) PLC3.8%5NEW
CAPITA PLC3.7%30.0%
MICRO FOCUS INTERNATIONAL3.6%4-0.1%
INTL CONSOLIDATED AIRLINE-DI3.6%3-0.5%
N. Brown Group3.5%40.0%
CRODA INTERNATIONAL PLC3.5%50.2%
WM MORRISON SUPERMARKETS3.4%30.1%
ASHMORE GROUP PLC3.3%4-0.1%
GVC Holdings Plc3.2%4-0.1%
BRITISH LAND CO PLC3.2%3-0.1%
SMITH (DAVID S) HOLDINGS PLC3.2%50.1%
KEYWORDS STUDIOS PLC3.1%40.0%
HURRICANE ENERGY PLC3.0%3-0.3%
AUTO TRADER GROUP PLC3.0%10.0%
Primary Health Properties PLC2.9%30.0%
NETWORK INTERNATIONAL HOLDINGS PLC2.8%40.5%
ULTRA ELECTRONICS HLDGS PLC2.8%10.0%
VICTREX PLC2.5%30.1%
ST JAMES'S PLACE PLC2.4%4NEW
MARKS & SPENCER GROUP PLC2.3%3-0.4%
B&M EUROPEAN VALUE RETAIL S.A.2.3%2-0.1%

Source: FCA (23 September 2020)

 

Upgrades
 FWD EPS CHG
NameTIDM1mth3mth1yr
MJ GleesonGLE385.0%231.6%-41%
LiDCO GroupLID281.4%--
Yourgene HealthYGEN263.5%--
MJ Hudson GroupMJH180.0%166.7%-
Halfords GroupHFD148.3%-24.8%-21%
Litigation Capital MgmtLIT131.1%102.9%87%
Pan African ResourcesPAF118.0%115.3%123%
Keystone Law GroupKEYS102.0%34.5%-12%
Alfa Financial SoftwareALFA79.8%100.6%-65%
JD Sports FashionJD77.1%-36.9%-34%
Science GroupSAG72.3%-12%
RMRM68.2%225.8%-59%
Grafton GroupGFTU67.2%47.0%-45%
Alumasc GroupALU65.7%65.6%-13%
Allergy TherapeuticsAGY61.1%--
Wentworth ResourcesWEN60.2%31.8%-34%
Speedy HireSDY59.2%-65.7%-67%
Accrol Group HoldingsACRL58.2%58.2%-
SigmaRocSRC53.8%54.5%-19%
Kier GroupKIE51.2%21.5%-37%
Beeks Financial Cloud GrpBKS50.1%27.0%-31%
City of London InvestmentCLIG43.5%43.5%12%
GlencoreGLEN42.8%12.5%-72%
Clipper LogisticsCLG39.7%36.7%0%
Sylvania PlatinumSLP38.8%32.9%150%
Dunelm GroupDNLM32.1%43.6%8%
Bushveld MineralsBMN31.9%-16.3%-51%
RicardoRCDO31.8%-16.1%-49%
Plus500PLUS31.1%57.2%223%
ProactisPHD30.0%30.0%-
FerrexpoFXPO28.8%78.3%-21%
Hummingbird ResourcesHUM28.4%13.5%126%
Ariana ResourcesAAU26.7%40.7%-5%
RedrowRDW25.2%-11.2%-39%
CMC MarketsCMCX24.9%75.5%439%
Frontier DevelopmentsFDEV24.5%29.3%79%
CentralNic GroupCNIC21.4%18.4%4%
Games Workshop GroupGAW20.6%22.3%23%
Lok 'n' Store GroupLOK20.2%20.2%13%
AbcamABC19.9%-2.0%-35%
ChesnaraCSN19.5%27.5%-22%
Oncimmune HoldingsONC18.9%--
Henry BootBOOT18.7%18.6%-69%
ComputacenterCCC17.3%29.2%35%
IdeagenIDEA17.1%20.5%7%
KingfisherKGF16.0%52.6%10%
Brooks MacDonald GroupBRK15.6%28.2%2%
McBrideMCB15.0%18.9%14%
Barratt DevelopmentsBDEV14.9%2.1%-30%
ASOSASC14.4%4788.1%266%
Spectra SystemsSPSY14.4%14.4%1%
Smart Metering SystemsSMS14.3%-6.4%-40%
GCP Student LivingDIGS14.3%10.3%-24%
Dixons CarphoneDC14.2%2.1%-26%
Gooch & HousegoGHH13.5%0.0%-29%
Empiric StudentESP13.5%28.1%-36%
EVRAZEVR12.8%28.0%-52%
BHP GroupBHP12.7%-1.1%-15%
Virgin Money UKVMUK12.5%-2.5%-80%
GenusGNS12.4%12.5%14%
WincantonWIN12.4%84.9%-32%
TI Fluid SystemsTIFS12.3%159.3%-84%
Flutter EntertainmentFLTR12.1%15.5%41%
LoopUp GroupLOOP12.0%76.9%305%
OneSavings BankOSB11.9%4.1%-19%
Tritax EuroBoxEBOX11.6%12.8%27%
NextNXT11.6%118.1%-56%
Anglo American PlcAAL11.4%13.7%-33%
FresnilloFRES11.3%56.4%57%
River & Mercantile GroupRIV10.8%12.8%-29%
Next Fifteen CommNFC10.7%12.3%-9%
InterContinental Hotels GroupIHG10.7%-61.3%-85%
FocusriteTUNE10.5%29.2%58%
Rio TintoRIO10.4%17.6%-8%
NewRiver REITNRR10.1%-14.7%-50%
PetropavlovskPOG10.0%-9.4%510%
AntofagastaANTO10.0%90.0%-34%
Biffa PlcBIFF9.9%-14.4%-84%
Keywords StudiosKWS9.7%6.5%0%
McKay SecuritiesMCKS9.6%-13.0%-19%
Team17 GroupTM179.6%10.3%64%
TymanTYMN9.4%25.9%-26%
AO WorldAO9.4%--
RenewRNWH9.3%9.3%3%
BOKUBOKU9.3%1.9%47%
Up Global Sourcing HoldingsUPGS9.0%42.7%-3%
IG Group HoldingsIGG8.5%-12.0%40%
FutureFUTR8.4%11.9%51%
Finsbury Food GroupFIF8.3%--20%
Vivo EnergyVVO8.1%-13.8%-52%
CentaminCEY8.0%6.3%129%
M&GMNG7.8%12.3%-
Network International HoldingsNETW7.8%-11.7%-47%
Phoenix Group HoldingsPHNX7.5%22.1%34%
Signature AviationSIG7.5%-23.6%-69%
Dechra PharmaceuticalsDPH7.3%5.9%-1%
Central Asia MetalsCAML7.0%16.0%-31%
CapitaCPI7.0%-18.6%-51%
BunzlBNZL6.9%16.5%-1%
CapitalCAPD6.9%49.2%82%
AscentialASCL6.7%-49.0%-89%
HelicalHLCL6.6%23.7%11%
Royal Dutch ShellRDSA6.6%75.7%-75%
Close Brothers GroupCBG6.5%-13.2%-45%
CLS HoldingsCLI6.3%17.9%-7%
Chemring GroupCHG6.3%7.5%42%
TBC Bank GroupTBCG6.1%-9.0%-45%
Serabi GoldSRB6.1%-18.7%62%
Polymetal InternationalPOLY6.0%18.4%82%
Hochschild MiningHOC6.0%7.7%-31%
PZ CussonsPZC5.8%5.2%-7%
Just GrpJUST5.7%24.3%29%
John Wood GroupWG5.7%7.0%-44%
Panoply HoldingsTPX5.4%46.0%8%
RDI REITRDI5.2%2.2%-41%
Kin and CartaKCT5.2%4.6%-40%
United Utilities GroupUU5.2%4.1%-18%
Advanced Medical Sol GrpAMS5.1%-40.4%-53%
Arcontech GroupARC5.0%-2%
RenishawRSW5.0%82.5%-31%
EMIS GroupEMIS4.9%3.6%4%
Direct Line Insurance GrpDLG4.5%1.9%-13%
PendragonPDG4.5%4.5%-
Target Healthcare REITTHRL4.2%-0.4%-4%
STV GroupSTVG4.2%-6.0%-32%
RecordREC4.1%10.5%0%
KAZ MineralsKAZ3.9%18.9%-6%
Urban Logistics REITSHED3.9%11.7%-5%
Gear4music HoldingsG4M3.9%199.1%457%
Stock Spirits GroupSTCK3.9%1.5%7%
Spirent CommunicationsSPT3.8%3.9%17%
Atalaya MiningATYM3.8%181.5%-28%
NCC GroupNCC3.7%22.8%-31%
AvastAVST3.7%0.2%9%
Royal Dutch ShellRDSB3.7%63.7%-76%
ZOO Digital GroupZOO3.7%81.0%36%
RSA Insurance GroupRSA3.6%-1.4%1%
Oxford InstrumentsOXIG3.5%7.6%-24%
ExperianEXPN3.5%1.8%-8%
PersimmonPSN3.4%16.7%-21%
Man GroupEMG3.4%-5.8%-31%
BarclaysBARC3.4%230.2%-80%
DiplomaDPLM3.3%2.4%-10%
CRHCRH3.2%23.6%-15%
Burford CapitalBUR3.2%1.4%-38%
FergusonFERG3.2%4.9%-7%
ConvaTec GroupCTEC3.2%-0.2%-15%
MondiMNDI3.1%8.3%-28%

Source: FactSet (23 September 2020)

 

Downgrades
 FWD EPS CHG
NameTIDM1mth3mth1yr
Hollywood Bowl GroupBOWL-90.2%-85.8%-98%
ThinkSmartTSL-81.5%--
Churchill ChinaCHH-77.7%-87.9%-86%
PageGroupPAGE-73.5%-93.5%-98%
Rank GroupRNK-68.6%-69.7%-
Shield TherapeuticsSTX-66.9%-64.8%-
BeazleyBEZ-65.7%-24.3%-93%
Melrose IndustriesMRO-64.2%-97.9%-99%
Gem DiamondsGEMD-62.7%-86.3%-96%
Midwich GroupMIDW-60.9%-71.1%-72%
Town Centre SecuritiesTOWN-60.5%-60.5%-75%
Mercia Asset ManagementMERC-56.5%--
BangoBGO-55.9%-55.9%7%
Harworth GroupHWG-55.0%-55.0%-81%
HaysHAS-53.2%-46.4%-80%
Urban&CivicUANC-51.7%-55.8%-79%
Bonhill GroupBONH-51.6%-51.7%-46%
SagaSAGA-47.3%-53.4%-82%
Trackwise DesignsTWD-47.1%73.1%12%
Countryside PropertiesCSP-46.9%-70.4%-79%
Good Energy GroupGOOD-41.2%-41.2%0%
InformaINF-32.8%-44.9%-77%
InvestecINVP-32.6%-43.6%-54%
Card FactoryCARD-28.6%-30.2%-90%
Secure Income REITSIR-27.2%-27.3%-61%
Serica EnergySQZ-25.3%-50.7%-85%
Bloomsbury PublishingBMY-24.9%-24.9%-46%
MarshallsMSLH-23.9%-42.1%-61%
Medica GroupMGP-22.8%-29.8%-47%
LancashireLRE-22.4%-40.0%-53%
Capital & RegionalCAL-22.1%-27.0%-73%
HammersonHMSO-21.9%-38.5%-72%
Vistry GroupVTY-20.7%-39.8%-50%
PetrofacPFC-20.5%-54.2%-79%
Mattioli WoodsMTW-19.2%-19.2%-5%
ApplegreenAPGN-18.8%-15.1%0%
Pebble GroupPEBB-18.7%-18.2%-
United Oil & GasUOG-15.2%42.4%-
4Imprint GroupFOUR-14.9%-40.9%-87%
Forterra PlcFORT-14.9%-69.3%-86%
MP Evans GroupMPE-14.7%-18.8%62%
Pennon GroupPNN-14.2%-26.7%-46%
Cake Box HoldingsCBOX-14.2%-14.2%-6%
Taylor WimpeyTW-13.9%-50.5%-71%
BellwayBWY-12.2%-28.0%-51%
Costain GroupCOST-12.2%-26.0%-76%
AB DynamicsABDP-12.1%-17.2%-18%
TrifastTRI-11.7%-40.0%-57%
Mediclinic InternationalMDC-11.5%-31.5%-59%
Marks & Spencer GroupMKS-11.2%-3.5%-66%
De La RueDLAR-10.9%-21.4%-64%
K3 Capital GroupK3C-10.9%-10.9%-20%
IofinaIOF-10.7%15.1%40%
Workspace GroupWKP-10.2%-14.9%-40%
Appreciate GroupAPP-9.9%-62.2%-63%
Lloyds Banking GroupLLOY-9.4%-36.2%-86%
AugeanAUG-9.3%-9.3%30%
EKF DiagnosticsEKF-9.2%44.0%184%
PayPointPAY-9.0%-13.0%-28%
Breedon GrpBREE-8.6%-1.0%-55%
Bakkavor GroupBAKK-8.6%-8.7%-43%
Travis PerkinsTPK-8.4%-13.2%-52%
Intermediate Capital GrpICP-8.3%-16.1%-33%
Kenmare ResourcesKMR-8.3%-53.6%-76%
DignityDTY-7.8%-7.9%-29%
TheWorksWRKS-7.6%2.6%-58%
MeggittMGGT-7.4%-18.2%-52%
ErgomedERGO-7.4%4.0%63%
Nucleus Financial GroupNUC-7.1%41.7%-35%
Fevertree DrinksFEVR-7.0%-10.6%-40%
Equiniti GroupEQN-6.8%-16.0%-41%
James Fisher & SonsFSJ-6.3%-7.7%-33%
RPS GroupRPS-6.1%-33.0%-60%
Studio Retail GroupSTU-6.1%-1.3%-2%
Coats GroupCOA-5.7%-40.1%-82%
Polypipe GroupPLP-5.6%-53.3%-64%
Balfour BeattyBBY-5.6%-41.4%-66%
Bank of Georgia GroupBGEO-5.4%-24.1%-46%
STM GroupSTM-5.4%-5.4%-40%
SeverfieldSFR-5.3%-5.3%-24%
Vitec GroupVTC-5.3%-44.2%-92%
PlaytechPTEC-4.6%8.3%-61%
Go-Ahead GroupGOG-4.5%-31.1%-64%
InchcapeINCH-4.2%-28.4%-70%
EbiquityEBQ-4.2%-4.2%-44%
Ashmore GroupASHM-4.1%-1.5%-14%
AFH Financial GroupAFHP-3.8%-3.7%-2%
EssentraESNT-3.4%-9.7%-38%
PearsonPSON-3.2%-11.8%-52%
JTCJTC-3.1%-5.0%7%
First DerivativesFDP-3.1%-2.5%-32%

Source: FactSet (23 September 2020)

 

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