Woodford buys more AA shares to hike stock 6pc
TROUBLED roadside assistance firm AA was helped back on track yesterday after receiving a major vote of confidence from fallen star fund manager Neil Woodford.
Despite shares in AA crashing by nearly 10pc on Tuesday as the firm downgraded its profit forecasts, Woodford – its second biggest-shareholder – increased his stake to 14.2pc from 13.1pc.
Although Woodford has faced a lot of criticism this year following the failure of a string of his investments, his backing clearly still means something, and AA shares jumped to the top of the FTSE 350 following news of his support.
On Tuesday, AA announced that Simon Breakwell had been made its new chief executive. But the appointment was clouded by the news that its full-year performance would be affected by high investment costs due to delays on its IT transformation. Yesterday, shares rose 5.8pc, or 9.1p, to 166.1p.
What if you threw a party and no one came? That was the question posed by analysts Jefferies yesterday as the Bank of England looked likely that it was going to be stood up by the markets. Investors are refusing to put their money behind financial stocks, despite the Bank hinting strongly of an interest rate rise in November.
Markets are now pricing in a 50pc likelihood of a rise following a hawkish set of minutes from the Bank’s Monetary Policy Committee and governor Mark Carney’s claims that rates could be lifted ‘over the coming months’.
But Jefferies believes the recent share price performance of RBS and Lloyds has completely failed to reflect this.
In a note claiming it ‘can no longer sit on the fence’, the broker upgraded RBS to a ‘buy’ rating and raised its price target to 306p. It also gave Lloyds a ‘buy’ rating and increased its price target by 5pc to 91p.
‘The investment community can no longer ignore the potential uplift to earnings from the... greater likelihood of imminent hikes in the UK base rate,’ it said.
Shares in RBS rose 3.4pc, or 9p, to 270.8p, while Lloyds also jumped 3.4pc, or 2.21p, to 67.2p. The note also helped the financials sub-sector of the FTSE100 rise by 1.5pc.
Jefferies wasn’t the only broker to shine a light on the banking sector either. Analysts at Investec upgraded Standard Chartered to ‘hold’ from ‘sell’.
The broker said it is time to reconsider the stock following a 15pc drop in its share price over the past two months. Shares rose 1.8pc, or 12.8p, to 731.2p.
The FTSE 100 recovered after two days of weakness, advancing 0.4pc, or 27.77 points, to 7313.51.
It was supported by a drop in the pound and bullishness ahead of a speech by Donald Trump supposedly detailing plans to cut corporation tax.
Education publisher Pearson was one of the top performers, after Exane BNP Paribas raised its target price for the firm to 700p from 600p and upgraded it to ‘outperform’ from ‘underperform’.
Analysts said Pearson’s change in strategy following numerous profit warnings should help shares recover. Shares were up 3.9pc, or 22.5p, to 606p.
Energy firm SSE warned weakness in its energy grid division will wipe £150m from full-year profits.
The drop comes as a result of a temporary decline in electricity transmission revenue and the sale of its stake in gas distribution business SGN.
However, it is still aiming to increase its full-year dividend in line with inflation and expects to see improved performance in its retail and wholesale divisions.
With SSE already warning investors about the problems in its networks division, shares were little moved, falling just 1.6pc, or 22p, to 1394p.