Stocks to watch in November
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ABERDEEN ASSET MANAGEMENT
Aberdeen Asset Management chief executive Martin Gilbert issued a remarkably calm bulletin to shareholders at the end of July against a background of severe turbulence in financial markets. "Volatility creates opportunities for long-term investors with a fundamental approach like Aberdeen," he said.
Certainly, the group continues to trade well with assets under management - boosted by its strong presence in emerging and Asian markets - rising to £185 billion at the last count. Gilbert is expected to announce more than doubled profits to £284 million for 2010/11 in November and analysts look for further progress to over £300 million this year.
A dividend increase should boost the yield to 4.4% while a further rise in the current year could lift the yield above 5%. The shares have risen from 140p to 230p in the past year but have slipped back from the peak in the general market malaise. Brokers remain bullish on the whole.
Britvic shares have spent the year slumping from a peak of 503.5p to a recent low of 289.9p. Owner of the J20, Tango and Robinson brands, it is one of our biggest suppliers of soft drinks. The strong growth performance - revenues have nearly doubled in the past five years - has not been reflected in the bottom line.
Last year's losses of £28.8 million, because of large write-offs in the troubled Irish operation, triggered the share shakeout. Higher raw material costs and the poor summer recently prompted brokers Nomura to trim profit forecasts slightly.
However, Nomura's Ian Shackleton still believes Britvic will reward patient shareholders. Profits for the year just ended are expected to reach £110 million and rise to £125 million in the current year. The prospective yield rises to 6.3%.
Grainger is the UK's largest quoted residential landlord with a property portfolio worth an estimated £2 billion. The shares offer an excellent way to play the UK housing market. At 400p in the boom times of 2007/8, they now trade at a quarter of that level. So the market value of the business is only £434 million - a discount of at least 50% to the estimated net asset value.
While many experts are quite bearish about house prices, Grainger is a shrewd operator and its portfolio benefits from a high weighting towards London and the South East.
Analysts believe the company will make a pre-tax profit of £28.7 million with the upcoming results, compared with a £21 million loss last time. In the current climate the forecast for 2011/12 is for profits of only £9.8 million, though brokers expect a further dividend increase.
Diploma operates in the support services sector, supplying a wide range of technology products to companies in engineering, controls and life sciences. Its business proved resilient in the last recession and dividends have risen every year without a break in each of the past five years.
In 2010 profits jumped from £20.5 million to £26.7 million. The pace of recovery has been even more spectacular lately and the upcoming pre-tax returns should hit a record £43.2 million. A further rise in profits is expected to £46 million for the current year. Analysts reckon dividend increases in the pipeline will boost the yield to 4.1%.
The shares have been hard-hit in the recent shakeout. They peaked at 414p in early July and have since shed 100p. They look oversold.
Avon Rubber's two niche businesses - military respirators and milk liners for the dairy industries - are both doing well and in early July the shares hit a 12-year peak of 324p. They have slipped back since then although the immediate outlook for the company seems buoyant. Profits for 2010/11 are expected to come in at just over £10 million (£7.13 million) while £12 million is forecast for this year.
AIM-listed Polo Resources produced its 2010/11 results two months early at the beginning of September. These showed post-tax profits up from $28.8 million (£18 million) to $65.2 million. The company invests in mining projects around the world and recently realised its £100 million stake in Caledon, an Australian coal project.
The shares are firmly in the penny shares category - trading between 3.61p and 6p in the past 12 months. Evolution Securities, the only broker following the stock, reckons Polo might make losses this year of around £6 million. The shares are backed by net assets of 6.56p a share.
Meanwhile, shareholders have just pocketed a special dividend of 3p a share.
Optos supplies retinal imaging equipment to opticians and its share price performance was certainly eye-catching, rising from under 100p to a peak of 209p in the six months to April. Since then, though, it has drifted back, although the recovery story still seems to be intact.
Profits should reach £11.2 million compared with just over £8 million in 2009/10 and are targeted to hit £15.3 million this year.
Brewer Marston's has built a £1 billion debt mountain in creating one of our largest and most successful independent brewing and pub retailing outfits. It has five breweries - taking in other names such as Banks's and Jennings - and a 2,100 strong network of pub/restaurants.
The debt mountain makes the market wary, but the latest bulletin from chief executive Ralph Findlay suggests the group's strategy is working. Profits for last year are expected to come in at £79 million while this year the market hopes for around £87 million. That could boost the yield to 6.5%.
This article was written for our sister website Money Observer
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%.
Net asset value
A company’s net asset value (NAV) is the total value of its assets minus the total value of its liabilities. NAV is most closely associated with investment trusts and is useful for valuing shares in investment trust companies where the value of the company comes from the assets it holds rather than the profit stream generated by the business. Frequently, the NAV is divided by the number of shares in issue to give the net asset value per share.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.