Week Ahead: The UK's Best Tech Company | Water Troubles | Inflation Data

12th Feb by Megan Boxall

41 comments 5034 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.

Thank you very much for all your feedback on last week’s kick-off article. We’re delighted with how well this new feature has been received and we hope to be able to keep improving on it in the coming weeks.

FTSE results season is still hotting up with a number of big companies reporting their numbers over the coming days, including my personal favourite, Relx (due to announce numbers on Thursday 15 February).

It’s also quite a big week on the economics front with January’s inflation metrics set to be announced on Wednesday 14 February. This time last year inflation (as measured by the consumer price index) was almost at its pinnacle (CPI figures peaked at 9.2% in February) and have since crawled down. But December’s figures were disappointingly steady at 4.2%, pouring cold water on the hope that base rates will be slashed rapidly in the coming months.

Dunelm’s results (due to be announced on the same day as the inflation figures) might shed a bit more light on the impact the high base rate is having on consumer spending. People tend to spend less on big household items when interest rates are high and the economy is faltering.

We’ll also have GDP figures on Thursday, but as those are backwards looking, they’re less likely to have an impact on the market than the inflation data.

Coming up this week…

Do get in touch in the comments section with your thoughts and recommendations for this blog.

Day	Big UK earnings	US company reporting	Economic announcements
Monday - 12 Feb
Tuesday - 13 Feb	TUI Q1 trading update	Coca-Cola Q4 results AirBnB Q4 results
Wednesday - 14 Feb	Dunelm interim results Severn Trent trading update	Kraft Heinz Q4 results	Retail, consumer and producer price index data
Thursday - 15 Feb	Relx final results Centrica final results Ex-dividend date for many big UK income payers	Deere & Co Q4 results	GDP figures
Friday - 16 Feb	Natwest final results

Can Relx keep flying high?

In the last five months, the share price of data and information company Relx (LON:REL) has soared 35%.…

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Anthony127

12th Feb

I definitely think that qualitatively it looks very good for the future of JD Sports Fashion (LON:JD.) .

You mention that the younger generation treat JD as their 'go to store' but if you look around you will also notice that a growing number of pensioners also prefer to wear trainers because they are simply more comfortable than normal shoes.

If you add in the Athletic Leisure fashion and the growing number of Women and Girls playing sport then I think you can definitely say that there is a secular trend in place here. Also the recent reductions in share price suggest to me that JD certainly looks like a bargain.

Guybrush

From Guardian:

The UK’s services trade has performed better than the goods trade, Goldman adds, which is “confounding expectations for a significant decline after Brexit”.

They add:

Indeed, services exporters are far less likely to report additional costs resulting from Brexit. Services account for over 40% of the UK’s total trade volumes, more than in the other G7 economies, and so this provides an offset to lower goods trade volumes.

1838.jpg?width=1900&dpr=1&s=none

In the second chart, for goods imported from/exported to the EU, the numbers don't look good, 70-80 percent of firms have reported cost increases after Brexit, and half of those are reporting that costs are still increasing.

Firms passing those costs on to consumers, since Brexit my pocket sure does feel lighter these days...

BenHazz

Yes you are absolutely right on athletic leisure, especially for women. A trend that is growing exponentially. US competitor Lululemon Athletica (NSQ:LULU) has seen a 200% rise in the past 5 years. JD Sports Fashion (LON:JD.) is not even up 20% after the recent decline. Lululemon is a more bespoke premium product but it still reflects well on the sector.

RDHOWARTH

Hi Megan Great post and excellent idea.... personally my focus this week is actually the US CPI data tomorrow. In terms of the balance between value and growth I would see this as more important. Mainly due to the influence on the $..... through rate (cut ) expectations. The market would still appear to be tilted to a slightly hot number...and equity bias reflects this being pro growth and not value. We will see more tomorrow whether this can save a miserable quarter for value investing. Personally... I would argue MoM 0.2-0.4% is inline depending how you look at it. Since we have really stepped back from the rate cut bias 0.2% will be enough to be positive this month...and less than 0.2% v positive...ie $ down and yields lower. Good for equities. We will know in 24 hours anyway.

The Phoenix

The 2.5 trillion national debt is where it all comes from

StrawberryDreams

Arm Holdings (NSQ:ARM) post earnings obviously.But up another 20% after folk buying the post earnings dip just the other day.I know the float is low but crazy move for such a high mcap and p/s!I would hardly be surpsied if Arm Holdings (NSQ:ARM) was part of the Magnificient 8 by the end of the year.A half trillion dollar company by summer...?What do you all think?

sevenccc

I suspect there be one or two here who made a few bob out of stagging the privatisation of water all those years ago. I was strongly against the whole privatisation of monopoly natural resources until I had the pleasure of sitting next to a chap from one of the Water Companies at a BIM (British Institute of Management) training day. His take was the industry would always be under-funded for Capex if it remained under direct Government/public sector management and control. The Public Sector Borrowing Requirements and compliance with IMF constraints (remember those?) had effectively shackled or eliminated significant capital expenditure for years.

His view was the only way to improve water quality was privatisation - and a few years later we started getting Blue Flags for our beaches. What went wrong? Perhaps the shareholders and staff just got too greedy? What's the best solution? I certainly wouldn't vote for privatisation as I believe we'd quickly be back in the same cycle. However we do need need much better control of the contractors - and they certainly don't deserve the levels of remuneration and dividend distributions that they've had. IMO.

Megan, not sure what the correlation between big ticket item sales and Dunelm (LON:DNLM) is. I'm not a regular visitor there but I thought they were smaller ticket, soft furnishings.

Wouldn't Howden Joinery (LON:HWDN) give us a better read across? Not due to update for a couple of weeks though - DFS Furniture (LON:DFS) TU mid Jan suggested their market was down -9%, though they of course were outperforming at -1%.

Agree with you on Relx (LON:REL) looking pricey but if the comments about AI are correct they may well continue to outperform like the Magnificent 7 have in this month's earnings reports. Only Nvidia to come and they are expected to continue to be spectacular I believe. The Tech sector looks like it is continuing to drive the market. Certainly the view from Zacks.com.

Meldrew

13th Feb

This is an excellent addition to Stockopedia’s site. Keep up the good work Megan.

markb1961

Great article Megan. On the water companies -
’Meanwhile, the quality of water and sewage services in the UK continues to be sub-par (at best).’

Correct me if I am wrong, but is it not the case that Welsh and Scottish water far outperform their English counterparts?

john2

In a word, no.

Welsh Water admits illegally spilling sewage for years - BBC News

fleur

Nice to have these insights of common sense!

yiannos1

Hi Meghan,

Brilliant idea what you have just started here as the small cap sector in the UK and in general the UK stock market seems to be going nowhere (although there are always opportunities to make money).

Yesterday’s US trading session all magnificent 7 were down and the other three that make the top 10 in market cap were down as well Eli Lilly and Co (NYQ:LLY) Berkshire Hathaway (NYQ:BRK.B) and Taiwan Semiconductor Manufacturing Co (NYQ:TSM)

My concern is that a limited downside made the VIX to jump about 10%. It is my opinion that the market clearly has formed a TOP and needs to correct and consolidate for a while.

BnB

I also anticipate a consolidation but yesterday was actually a rotation into small caps which have risen substantially of late as part of a broadening out of the market rally. Unless you’re in the ever smaller number of observers who believes a recession is about to befall the US, this extra breadth is a bullish sign for the market, though this year’s leaders may consolidate for a while. Indeed it would be healthy if they did!

Hi BnB

Nice to speak about markets liquid enough that grow and not just about teapots!

I will never forget that phrase.

Growing markets indeed. And happy to oblige. Of course the narrative has changed again today with inflation coming in hot. The consolidation starts here! But I bet my bank's CIO will be onto his customers tomorrow with soothing words like "lumpy data" "direction of travel is down" "soft landing reiterated". He needs to keep his AUM up - can't have us going to cash. To be fair to him, he called the October '22 bottom. And in October '22 at that. So I do pay careful attention.

vj119

I just read that article, hats off to Professor Peter Hammond.

El_baek

Thanks Megan, great addition to the forums. I'll be sure to drop in each week for your insight

15th Feb

Jet2 (LON:JET2) has had a decent morning after it's fractionally ahead trading update this morning, up around 5%. I'm pleased as a holder but am wondering about the potential for further growth from here when offset against the impact of unexpected events that could materially impact profits. I've seen the update from cannacord suggesting 1900p price target due to continuing double digit growth in CAGR. Does anyone have a particular strong bull or bear case on the stock they would like to share (I hold).

JimMcLad

Ben I hold, after buying last month. Probably not the level of response you’d hoped for but what convinced me to buy (after all my usual research) was the enthusiastic reaction of my brother-in-law to a recent holiday with Jet2 (LON:JET2) and his decision to use them again where possible. He is normally tighter than the proverbial duck’s derriere, will get up at 0200 to book the cheapest new flight releases and will continually regale us with details of his latest ‘bargain’. If he can be brought on board then I’m sure growth can be enhanced by winning greater market share.

Week Ahead: The UK's best tech company | Water troubles | Inflation data

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Megan Boxall

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