Week Ahead: Housing Focus | Asset Managers | US Consumers | Quality Industrials

26th Feb by Roland Head

16 comments 2748 reads

Good morning and welcome to the Week Ahead, your weekly destination for discussion and analysis of the largest stocks in the UK and overseas.

This week is another busy period for FTSE 100 earnings. An interesting mix of companies are due to report, including some cyclical names that might provide some clues on the health of the UK economy.

With the UK now technically in recession, UK economic data on mortgage approvals, consumer credit and manufacturing PMIs may provide some insight into consumer confidence and the health of the industrial sector.

Housing is likely to attract particular interest, with results due from Taylor Wimpey (LON:TW.) , Rightmove (LON:RMV) and kitchen specialist Howden Joinery (LON:HWDN). The latest Nationwide House Price Index is also due to be published on Friday. This comes on top of this morning’s announcement from the Competition and Markets Authority (CMA) citing concerns about planning systems and estate management charges. The CMA has also said it is opening a further investigation into eight of the UK’s listed housebuilders who it suspects of sharing information. All of the housebuilders named in the announcement are trading down about 2% this morning.

Across the pond, a raft of US economic data is due that may provide reassurance (or not) about the health of the world’s largest economy in its election year.

Former FTSE 100 member CRH is also due to report its results on Thursday. This will be the building materials group’s first set of numbers since moving its primary listing to New York. That move has coincided with a significant re-rating of CRH shares, so it will be interesting to see if CEO Albert Manifold remains positive on the prospects for the year ahead.

Coming up this week…

Day	Big UK earnings	US company reporting	Economic announcements
Monday - 26 Feb	Bunzl full-year results	Domino’s Pizza Inc final results Zoom Video Communications final results	US new Home Sales report
Tuesday - 27 Feb	Smith & Nephew final results Abrdn final results Croda International final results Unite Group final results	eBay final results Lowe’s Companies final results Constellation Energy final results Lemonade final results	US Consumer Confidence index US Durable Goods Orders
Wednesday - 28 Feb	Reckitt final results Taylor Wimpey final results St…

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Indie

26th Feb

Different author, same high quality.

Zipmanpeter

Great addition to the Stockopedia offer.

donald pond

Celsius Holdings (NAQ:CELH) earnings on Thursday are also worth keeping an eye on. They make "functional energy drinks" for pre and post workouts but have very slick packaging and are growing very fast. Worth remembering that Monster Beverage (NSQ:MNST) were I think the best performing share in the US for their 10 year period of high growth. CELH unlikely to match that, but it is very different to Monster, with gender neutral packaging, a very clean look, and sales growing at a very fast rate.
Hedgeye reported that US stores in general are reducing the amount of space given to beer and increasing the amount given to soft and sports drinks, and CELH are a prime beneficiary. That may be relevant to Anheuser-Busch Inbev SA (NYQ:BUD) .

I'd note that the same dynamic appears to be happening in sports shops, where the shelf space given to Nike (NYQ:NKE) is being reduced in favour of upstart brands like On Holding AG (NYQ:ONON) and Brooks, which is owned by Berkshire Hathaway (NYQ:BRK.A) . It could be that we are at a point where the big global brands start losing traction as younger generations never perceive them as cool. When I was growing up, there were no challenger brands. Its an interesting change in dynamic which I don't think people have noticed.

Mark Carter

Nice summary.

BNZL down 4.7% today. Forecast PE is 17.9, so maybe market doesn't like to see any signs of weakness. Margins have slipped a little, but revenues are expected to be up a little. It's a good quality company. I hold.

StrawberryDreams

Nike (NYQ:NKE) had a bit of a clanger (profit warning) farily recently and seem to be returning to some of the stores which they were reducing supply to, including Foot Locker (NYQ:FL, which they were leaving in favour of the direct to consumer model.Perhaps they're finding that brands like Foot Locker have some brand power too!Foot Locker (NYQ:FL) have an NBA partnership now and also the new CEO are looking at expanding and selling in India, with their burgeoning middle class and accompanying middle class income.Nike (NYQ:NKE) 's a bit of a Coca Cola HBC AG (LON:CCH) imo.. mature brand, still great but there are naturally young upstarts hot on their heels!

Abercrombie & Fitch Co (NYQ:ANF) is another apparel retailer the other side of the pond, which has been doing well.It was spun out of the Limited Brands portfolio and had suffered a good few years being out of fashion and marred by a bad brand image.A new CEO turned them around and they're growing at a clip, after the street totally ignored them.I like Victoria's Secret & Co (NYQ:VSCO) too as it was a spin off of the same Limited Brands portfolio fairly recently and i'm hoping the power of the brand can be reinvigorated and turn their still 6 billion, yet currently declining, in revenues into a growing, profitable business.

Rambo

Would definitely agree - great recap of the week ahead.

Totally agree re Abercrombie & Fitch Co (NYQ:ANF) looks to be going great guns and some of the guys I chat to have been buying it recently.

27th Feb

ABDN up nearly 5% in early trading, slightly beating profit estimates (£249m vs £242m). Analyst had been upgrading estimates throughout the year. PBV of 0.55, which strikes me as hellishly cheap.

Share price is near a 20-year low. Directors had bought approx £420k of shares last year.

This strikes me as a contrarian value trade. I do not hold. 169p

intuitive6191

Monthly newsletter from Lynn Alden. some interesting comment/charts on the US.

https://www.lynalden.com/febru...

Thomas Whitehead

28th Feb

St James's Place (LON:STJ) taking an absolute battering today - down over 30%. It turns out ripping people off is not a good business model any more.

SJP 423p-32% Finals. Shares hits an 11-year low. Ouch. It has put aside a £426m client refund provision. That is less than the fall in mkt cap today. Loss after tax was £9.9m compared to profit of £407m last year. Potential contrarian play perhaps?

I have a little story. Aways back, a work colleague had an appointment at the offices of SJP (I'm pretty sure it was) to meet and increase his pension. I happened to pass the place one day and noticed that their car park was full of lovely motors. Real expensive stuff. I thought to myself at the time that it was a right good racket to be in. Someone's got to be paying for all that, I figured. Skip forward to the present, and here we are.

RKT 5350p-8% Q4 disappoints. That's a big drop for a company in consumer defensives. Hargreaves Lansdown says "Cost cuts can only support margin growth for so long ... performance across pretty much all business areas was weaker than expected.

RKT has a 5-yr ROCE avg of 5.1%, which is pretty weak for a company that sells branded goods. PZC is a little higher at 8.6%, but still lacklustre. I once had a shareholding in PZC, and it performed terribly, as you can imagine.

ULVR has the kind of ROCE I was expected, at 20.8%. Its shares have only moved sideways over the last 5 years. I own shares in ULVR, for which I am currently underwater. Analysts have been consistently lowering estimates over the last year, which isn't so good.

You'd think that these branded goods would have a lot of pricing power, but they've been struggling.

DLG 189p+16% Possible offer.

I had contemplated this as a buy earlier this year. Shares were trading at near a 20-year low, good divvie, great customer service, and have you seen how much my car insurance went up last year?

Buy what you know and all that, except that I didn't. Oh well, better luck next time.

29th Feb

Several companies that I have shares in reported today (Thu). Given some awful market reactions to companies reporting results yesterday (e.g. RKT), I was very much braced for impact.

HLN 338p+8% in early trading. I bought these shortly after they were spun out, and topped up at a later date. HLN is in the healthcare sector, selling such things as Sensodyne, Panadol and Advil.

HLN is perhaps not something to get too excited about, you're not going to get a 10-bagger within 10 years on this. Demerging from GSK certainly seems to have done wonders for the company. It expects organic revenue to rise 4-6%.

Net debt is expected to be £8514m (2022: £9834m). It's good to see that debt go down.

Net cash from operating activities is expected to be £2100m (2022:2063m).

So, everything seems to be going in the right direction.

Keelan Cooper

1st Mar

Hi Mark,

Another week, another takeover offer!

It looks like plenty of companies are noticing the valuation discounts apparent in UK equities at the moment.

You may have missed the initial jump with Direct Line Insurance (LON:DLG), but there could always be further counteroffers if the shares are still underpriced.

Wincanton (LON:WIN) just received its 3rd bid this week, and the price has even surpassed the latest offer in the expectation of another bid coming in!

Will be taking a closer look at UK takeovers in the coming weeks. Stay tuned.

Hope you have a great weekend.

Best,
Keelan

Fri.

IMI Results out and seemed to have disappointed the markets a little.

Sigh, IMI is a company that I was aware of yonks ago, and reckoned was a good company. To my surprise the shares have barely budged over 10 years. I had figured they'd have done well.

Still, it has a Q score of 93, suggesting good quality. Its returns on capital are good, and its debt level OK. Its fwd PE ratio is around 14, which is very reasonable. I see that they've reduced the dividends as of 2020. Their operating and free cashflows have gone up though.

They've been increasing their dividend cover. Actually, that's something I've noticed with quite a few companies lately. Hopefully they see reinvestment opportunities, which would be great.

IMI strikes me as a good quality company at a reasonable valuation. I don't own it, but it looks pretty good to me. There are so many opportunities out there at the moment, it's hard to know what to choose. There are more exciting things than IMI out there, but it looks like a solid pick to me.

I'm also generally quite impressed with the quality of companies on offer in the UK market. I'm usually down on large-caps in general, viewing them as over-the-hill dinosaurs. But having looked through more of them, I find myself pleased with the fact that I think many of the large-caps are actually quite good.

Anyway, I just wanted to share my tuppence on IMI. Have a good weekend everyone.

2nd Mar

I was listening to a podcast where Paul Scott was interviewed. He said that he was talking to someone who said that US private equity had talked to "every" UK company about a deal.

I like a cheap market even more than the next guy, but I really don't like see good quality businesses being taken over, especially at these valuations.

The market right now reminds me a little of the 2022/3 (approx) period, when we came off the 2000 tech bubble. Smaller cap value was bargain basement. I had bought a few shares based on low valuations and good balance sheets. I was surprised that a large percentage of the shares I owned were taken over.

One of them was Amstrad, as it happens. A third of the value of the company was in cash IIRC, and I had only held it for a few months before the takeover was announced.

Week Ahead: Housing focus | Asset managers | US consumers | Quality industrials

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Roland Head

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