Stocks to watch in August
The search for a safe yield remains a high priority among investors. Mining giant BHP Billiton is a good example of what is obtainable from shares in big companies at a time when shares as a whole seem to be treading water.
A prospective yield of 4.3% is available on the shares if analysts' consensus forecast is to be believed. Analysts foresee a dip in profits for the year just ended from £19.5 billion to £17.1 billion but a recovery in profits for the current year to around £19.3 billion.
The company's global spread of natural resource interests - in iron ore, diamonds, oil and gas, and aluminium - make it a core stock for many professional fund managers. The shares, at 1,694.5p, are well below the 2,500p peak they reached last year and now sell on just 7.4 times expected earnings for this year.
The rating though is cautious, reflecting uncertainty over the global growth outlook and the effect a worldwide recession might have on metal prices.
Rank Group, the bingo halls, casinos and online gambling firm now under the control of the Malaysian tycoon Quek Leng Chan's Guoco Group, is expected to suffer a sharp profits setback for last year. The pre-tax figures should come in at around £57.3 million, compared with £73.5 million a year earlier.
However, chairman Ian Burke believes his team has now developed a formula for long-term growth with his leading leisure industry brands, and he has just underlined the point by splurging £200 million to buy the Gala casinos chain.
The market remains cautious of prospects, however, partly because it tends not to like situations where there is a minority public holding of the shares, although most analysts think profits could well recover this year. The forward yield tops the 3% mark.
Drinks giant Diageo has set itself a target of getting 50% of its revenues from emerging markets by 2015. Chief executive Paul Walsh's conviction that Scotch whisky has a bright future in Asia and South America recently prompted him to announce a new £1 billion investment in the industry.
The group, whose brands include Johnnie Walker, Smirnoff and Baileys, is expected to deliver a dramatic rise in profits from £2.36 billion to a whisker under £3 billion while £3.3 billion is being pencilled in for the current year.
Diageo cannot quite match the attractive yield on offer from BHP, but its more consistent growth record justifies the lower prospective yield of 3%. Shares are close to an all-time peak.
We tipped Medusa Mining in this column a couple of years ago and the shares have performed very well, rising from 265.5p to a peak of 560p last summer.
They now change hands at 330p, largely reflecting the effects of torrential storms on gold production at its mines in the Philippines. The hope is that production levels will recover this year.
Meanwhile, it is feared the latest results will show profits down from £69 million to just £44 million. But analysts believe this is a temporary blip and that profits will more than double in the current year.
AIM-listed Craneware's clever software helps 1,500 hospitals in the US manage their finances and keep within their regulatory requirements. Healthcare reform in the US has provided strong growth impetus for the company.
But back in January it lost its stockmarket darling status after a profit warning saw its shares plunge sharply. A recent acquisition failed to perform, which signalled that half-year returns would be lower than expected.
The market is hoping a big recovery in the second half will put profits back on a growth track. However, the shares - having peaked at 620p last year - are still languishing at 278p. Analysts still believe the company can continue to deliver rapid growth. But the shares tell a different story.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
A property chain is a line of buyers and sellers (the “links”) who are all simultaneously involved in linked property transactions. When one transaction falls through – for instance, someone can’t get a mortgage or simply withdraws their property from sale, the entire chain breaks and all the transactions are held up or even fail entirely.