Tag Archives: stock

Stocks in Focus: GlaxoSmithKline

I am once again looking at GlaxoSmithKline (GSK) following the announcement of its first set of results since the appointment of Emma Walmsley as Chief Executive. Ms Walmsley has been with GSK for seven years, having previously worked at L’Oreal in a variety of marketing and management roles. With Pharmaceuticals being the core of GSK’s business, it is unusual to have a CEO whose experience lies outside the core division – although the ability to review the division from a fresh perspective could well be advantageous.

The second quarter results were slightly ahead of consensus, giving Ms Walmsley a solid start to her tenure. Alongside the results she set out her key objectives for the first time, highlighting the need to prioritise improvement of the core Pharmaceutical division. In short, GSK needs to become better at developing and commercialising lucrative drugs. Despite launching high volumes of new drugs, the company has not seen many of these lead to huge sales. Indeed, GSK’s last “blockbuster” product release was the asthma treatment, Advair, which at its 2013 peak made up one-fifth of the group’s revenues.

Ms Walmsley therefore plans to strengthen the pipeline by a) increasing the amount spent on research & development, and b) channelling 80% of this spend on a narrower set of four therapy areas (Respiratory, HIV, Immuno-inflammatory and Oncology). She also plans to bring about a more dynamic/accountable commercial model to help the business make the most of its innovations.

With an enthusiastic, fresh CEO at the helm and a credible plan in place to increase productivity over the long term, GSK looks well set. However, it is fair to say that previous attempts to increase productivity and commercial success have not been entirely successful – and investors may therefore want to wait for some evidence of success before buying into Ms Walmsley’s vision.

https://www.nwbrown.co.uk/news/company-report-library/ 

Stocks in Focus: HSBC

This week I am looking at HSBC, one of the world’s largest banks, which delivered promising half year results at the end of last month.

The results showed a pre-tax profit for the first half of 2017 of $10.2billion, an increase of over 5% on the same period last year.  The better numbers were thanks to a boost from rising US interest rates, which generally enables it to make wider margins on loans, and an improved trading environment. In particular, the bank continues to see growth opportunities in Asia, where it makes three quarters of its profits.

Additionally, management announced a new $2billion share buyback, which will raise the amount of total stock that they have pledged to repurchase in the last year to $5.5billion. On the subject of management, investors are keeping a keen eye on the bank’s succession planning. Mark Tucker has recently been appointed as the new chairman and one of his first priorities will be to find a replacement for existing Chief Executive Stuart Gulliver, who is due to step down next year.

The shares have performed well of late and are currently trading close to a four year high following a rise of more than 50% over the last year. This leaves the shares trading on a relatively high valuation of 1.4x book value at a time of management uncertainty. Set against this, there are still plenty of positives. The bank is financially strong, offers an attractive dividend yield of over 5%, and is well placed to benefit from further normalisation of US interest rates.

Stocks in Focus: McColl’s

 

This week I am looking at McColl’s following the announcement of its interim results on Monday 24 July.  McColl’s is a leading neighbourhood retailer with 1,650 stores across the UK and the results mark one year since it announced the acquisition of 298 convenience stores from the Co-Op; a deal that has accelerated its shift away from being a traditional newsagent towards being a full-blooded convenience store retailer.

On the plus side, results show that like-for-like sales were up 0.2% for the first half of the year and 1.4% in the second quarter – a good result considering that like-for-like sales had hitherto been in negative territory for an extended period.  The Chief Executive, Jonathan Miller, highlighted McColl’s focus on the relatively robust convenience market and the IGD forecasts that the UK convenience market will grow by 12% between 2016 and 2021.  McColl’s hopes to benefit from this growth while continuing to grow its footprint and improve its in-store offering through better product ranges and the addition of more services (such as post offices and online shopping collection points that help drive customer footfall). On the downside, the food retail market remains very competitive and larger supermarkets also remain focussed on improving their convenience store offering. This competitive market may at some point drive negative like-for-like sales again, which can in turn hurt margins.

At the current valuation the shares do not look expensive and successful integration of the Co-Op stores should deliver attractive earnings growth.  However, the increased debt as a result of the store purchases does leave the company more vulnerable in the short term should the UK economy suffer a downturn.

https://www.nwbrown.co.uk/news/company-report-library/

 

Stocks in Focus: Reckitt Benckiser

This week I am revisiting Reckitt Benckiser, the global consumer goods company. In November of last year I mentioned how the company had a good start to 2016, supported by a successful cost savings programme and sales figures beating expectations. This year however, things have turned a little sour for the company with the news of a cyberattack taking its toll on operations and revenue.

The global cyberattack on multinational companies last month disrupted Reckitt’s ability to manufacture and distribute products to customers in multiple markets. Some of its factories are currently still not functioning normally but plans are in place to return them to full operation. Management stated that while it expects some of the sales lost in the past 3 months to be recouped in the current quarter, continuing supply chain disruptions mean that they could lose customers. As a result of these problems, Reckitt now forecasts a 2% revenue growth instead of the 3% originally expected.

Acquisition speculation is also in the news for Reckitt Benckiser as Unilever and Hormel Foods are believed to be bidding to acquire its £2.2 billion food division known for brands such as French’s Mustard and Worcestershire sauce. All three companies involved have not commented about the speculation, but we will surely find out more in the coming weeks.

Although Reckitt Benckiser is facing a tough period at a time when its shares are valued relatively highly, the company has historically shown resilience in difficult periods and consistent growth over the long run. Furthermore, its non-cyclical nature continues to be attractive to the long term investor.

https://www.nwbrown.co.uk/news/2017/jul/19/stocks-focus-reckitt-benckiser/

June 2017 Market Review

 This edition of the Market Review discusses another surprising election result.

The UK General Election delivered yet another surprising political result. Overall, the market’s response has been measured, but political uncertainty remains high and valuations are no longer cheap following an 18-month period of strong performance. Whilst this dampens our enthusiasm for new investments in the short term, the long-term case for equities remains compelling. Moreover, our emphasis on quality, value and diversification leaves us confident that our portfolios are well prepared for a wide variety of eventualities.

June 2017 Market Review

Stocks in Focus: Monks Investment Trust

This week I am looking at Monks Investment Trust, which aims to achieve long-term capital growth from a global equity portfolio.

It is now just over two years since investment management partnership Baillie Gifford, which is responsible for Monks, announced that the management team of Gerald Smith and Tom Walsh were being replaced with its Global Alpha Equity Team in an attempt to improve performance. The new management team wasted no time in implementing its investment process. This involves seeking out attractively priced growth companies and allocating these investments into one of four growth buckets that make up the portfolio. The first bucket is “Stalwarts”, which are companies that are expected to deliver reliable earnings growth of 10% per annum. The second bucket is “Rapids”, which are companies with a 15-25% expected growth rate per annum. The third bucket is “Cyclicals”, which are companies with volatile earnings that should nonetheless deliver earnings growth of around 10% per annum over a cycle. The final bucket is “Latents”, which are companies that are considered slow burners and do not have a specific target but are expected to see accelerating growth over time.

Since reorganisation, the trust’s net asset value (NAV) has gained 45% against a FTSE World benchmark gain of 37%. We are very happy with the new management team and believe the fund provides attractive exposure to global growth companies. However, the strong performance has seen the share price move to a premium against its NAV (whereas historically it has tended to trade between a 10% and 15% discount) and this makes it less attractive in the short term.

https://www.nwbrown.co.uk/news/2017/jul/5/stocks-focus-monks-investment-trust/

Stocks in Focus: Diageo

This week we are looking at Diageo, one of the world’s largest alcoholic beverage companies, following its $1bn offer for an upmarket tequila brand that was co-founded by actor George Clooney. The acquisition of the tequila brand, Casamigos, will initially cost Diageo $700m, and potentially an additional $300m after assessing the performance of the brand over the next decade.

Diageo is currently spread across 21 geographic regions with brands across every category but its main focus has long been premium spirits, with a leading position in the US. Casamigos has grown rapidly since it was launched in 2013 and according to the Distilled Spirits Council of the United States, sales of super-premium tequila are up by more than 700 percent in the US since 2002. Diageo plan to expand the successful brand to countries outside the US, with the hope of penetrating overseas markets – something that remains a key area of focus for CEO, Ivan Menezes, who is also keen for Clooney and his co-owners to remain with the company after the acquisition.

Diageo remains an attractive stock given the long term prospects for expansion to emerging markets, outstanding collection of global brands (including Guinness, Smirnoff and Johnnie Walker), strong management led by Menezes and a good dividend yield. However, Diageo are not expecting Casamigos to be accretive to earnings for another three years, and it will be interesting to see how they go on to build the brand both in the US and overseas. Recent share price performance has remained strong and we continue to be mindful of the price we pay for stocks.

https://www.nwbrown.co.uk/news/company-report-library/