Broker picks out winners and losers on the High St
BerenBerg isn’t exactly a household name. But for those in the know – namely the suits who invest billions of pounds of our savings annually – the german investment bank has more than a cult following.
And for good reason. For fundamental research doesn’t get more fundamental than sending analysts out on the shop floor and into the stock rooms of some of europe’s biggest retailers to see what makes them tick.
This back-to-basics approach resulted in what Berenberg believes is a more granular understanding of what makes an effective, successful retailer.
Apparently, there are five facets: people and culture, product, infrastructure, marketing and product margin.
On the infrastructure point, former stock market darling turned serial profit-warner, asOs, trips up, according to Berenberg, which downgraded the online fashion giant to ‘Hold’ from ‘Buy’. The shares ended 0.2pc, or 4p, lower at 2555p. Its top pick? associated British Foods (off 1.2pc, or 30p, at 2416p), owner of the Primark chain. ‘We believe Primark’s culture has been a significant driver of its success, together with its strong product strategy,’ Berenberg said in a 16-page note.
It rates Marks & spencer (down 1.4pc, or 2.9p, at 209.3p) a ‘Sell’ as it has an ‘enormous challenge’ streamlining the unwieldy business and reforming its culture.
Next (off 2pc, or 114p, at 5616p) and superdry (down 2pc, or 8.8p, at 434.4p) are rated ‘Hold’.
The FTse 100 gave up its early gains as the market became jittery around the US Federal reserve’s monthly interest call later today. The index of bluechips finished down 0.52pc, or 39.84 points, at 7646.77.
There were some big individual falls on the Footsie led by Mexico-focused silver miner Fresnillo. It was punished heavily for undershooting market expectations as its shares were sold down 17.7pc, or 141p, at 653.6p.
The pay-out cut by Centrica (19pc, or 17.26p, lower at 73.58p) revealed a fundamental problem for fund managers, who rely on the compounding value of dividends to deliver the bulk of the returns from investing in shares.
In fact, just ten companies make up more than 50pc of total FTSe 100 dividend payments – and by extension a good slug of income derived from the Square Mile.
That’s fine when things are going well. But, with Vodafone and Marks and Spencer slashing their pay-outs and BT mulling a cut of its own, the pool for these bluechip-focused funds to pick from is getting smaller.
Dropping down to the secondtier, elementis (up 10.4pc, or 13.9p, at 147.5p) posted betterthan-expected interim results, buoyed by a contribution from its recently acquired talc business. The temporary generators group
aggreko (ahead 7.7pc, or 59.6p, at 836.6p) was not far behind after the glasgow-based group said its earnings were on target to meet City forecasts.
Also based in glasgow is the industrial pump maker Weir, which was marching in the opposite direction after its interim figures were hit by a tough north America market. The shares dropped 4.4pc, or 69p, to 1492.5p. Finally, shares in Onesavings
Bank (OSB) and Charter Court fell despite regulators giving their merger the green light. Shareholders in OSB ended up with 55pc of the enlarged company following the all-share £1.6bn marriage. OSB closed 1.4pc, or 5p, down at 365.4p and Charter Court fell 0.8pc, or 2.5p, to 298.5p.