Tag Archives: Tony Reading

Business, Finance, Occupation & Industry

Can Diversification Power Tesco's Growth?

Leave a comment

By Tony Reading, The Motley Fool

Filed under:

LONDON — Before its infamous profit warning, Tesco  stood out in two ways: Its U.K. grocery market share of 30% was double its rivals, and it was more diversified.

The company has remained sotto voce about diversification while repairing the neglected U.K. grocery business. And it would be too early to call the recovery of its core business. Its shares are still 6% off their pre-profit warning level, against a FTSE 100 rise of 13%.

But the company’s six-point plan to “Build a Better Tesco” through investment in training, stores, and price promotions is well under way, and there’s a strong chance of it proving successful. A dominant market share is a great starting point. The preliminary results, due next week, could be the platform for management to boast of progress.

So if the stock market is the future discounting mechanism it’s supposed to be, sentiment might soon switch back to focus more on Tesco’s distinct advantages.

Clever
One clever new strand of diversification helps the U.K. grocery business. Tesco aims to broaden the appeal of its large stores with family-friendly facilities. It bought the restaurant chain Giraffe last month, and has taken stakes in the Harris and Hoole coffee chain and the upmarket cakes and sandwiches chain Euphorium Bakery.

But the big diversifications are online, telecoms, banking, and geographically.

Everything digital
An online platform is a “need to have,” but Tesco can roll it out to its international businesses. It’s also the biggest virtual mobile phone network operator in the U.K. and has launched a movie-streaming service, Blinkbox.

Tesco’s bank is a stand-alone operation, much larger than Sainsbury‘s joint venture with Lloyds Bank. Recently, it started offering mortgages. With the reputation of the high-street lenders trashed and the U.K. government keen to make changing current accounts easier, Tesco Bank could become a serious player.

Overseas
Geographically, success has been mixed. Europe and Asia contribute more than 30% of total grocery sales, but Europe has been held back by the eurozone crisis.

Tesco’s failure in the U.S. is a warning of the dangers of overseas expansion. It now plans to exit, as it has done from Japan. But with limited room for growth domestically, Tesco’s foreign forays offer a potential upside over the other supermarkets, if it can get the execution right.

Yield
Yielding 3.9%, Tesco’s solid U.K. grocery business and diversified growth options earn it a place in my portfolio.

It’s also one of the stocks selected for “5 Shares to Retire On,” a brand-new report from The Motley Fool. It describes five shares that could form the core of any holding, whether you’re saving for retirement or shorter-term goals: companies with healthy balance sheets, dominant market positions, and reliable cash flows.

To find out more, you can download the report by clicking here — it will be delivered straight to your inbox and is completely free.

link

The article Can Diversification Power Tesco’s Growth? originally appeared on Fool.com.


Tony Reading owns shares in …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Shares to Survive the Cyprus Aftershock

Leave a comment

By Tony Reading, The Motley Fool

Filed under:

LONDON — It’s getting tiresome, but once again the eurozone is threatening markets. Shares wobbled last week but just held on after an 11th-hour deal to “rescue” Cyprus was agreed. The wobble showed that the confidence powering markets up this year is fragile. If Cyprus hadn’t secured funding from the “troika” of the IMF, the EU, and the ECB, then stocks would have plunged.

The snowball keeps rolling
That’s worrying, because the Cyprus deal has stored up more trouble ahead. It has loaded the country with debt and simultaneously trashed its financial sector, the mainstay of its GDP. Capital controls mean a euro in Cyprus isn’t the same as a euro in Germany, and confidence in Southern Europe‘s banks has been undermined.

What should investors do? It’s too much of a bunker mentality to just put your money in a (non-eurozone) bank. Europe will probably muddle through, and 2013 could be a great year to be in the market.

Safety first
But I think there’s a good case for having a slug of safe shares that would survive a euro blow-up. They are shares that:

  • Have low exposure to the eurozone.
  • Aren’t exposed to the financial sector.
  • Are in defensive sectors.
  • Have growth prospects.

Here are three I have picked.

1. Tesco
Tesco has lost its halo, but it’s repairing past mistakes. The U.K.’s economy is vulnerable to events in Europe, but Tesco’s 30% share of the grocery market makes it resilient. It’s not short of ideas for growth, from coffee shops in the U.K. to online sales in China.

2. Centrica
British Gas, Centrica‘s downstream utility, is well insulated from economic turmoil. Last week’s bad weather exposed the U.K.’s shortage of gas storage, and the Government’s “dash for gas” is sure to benefit Centrica’s upstream gas-production business.

3. Unilever
Strong brands and the indispensible nature of Unilever‘s personal-care and health care products give it its defensive characteristics. Expansion in emerging markets provides growth. A quarter of Unilever’s sales come from Europe, but that’s lower than for Reckitt Benckiser.

Boring is good
Two of my three picks are included in “Five Shares To Retire On,” a brand-new report from the Motley Fool. It describes a mix of five solid (some might say boring) shares in diverse sectors that could form the core of a portfolio — shares that you can tuck away and not have to watch every day.

Whether you’re saving for retirement or building an investment portfolio for any other reason, it’s sensible to have some solid, dependable core holdings. To find out which of my three picks made the grade and discover the identity of the other three stocks, you can download the report straight to your inbox. Just click here — it’s free.

The article 3 Shares to Survive the Cyprus Aftershock originally appeared on Fool.com.

Fool contributor Tony Reading owns shares …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why BP Is Still on My Shopping List

Leave a comment

By Tony Reading, The Motley Fool

Filed under:

Last November I declared that BP  was my next buy. The liabilities from the Gulf of Mexico oil spill were about to be settled, and the company had pulled a rabbit out of the hat in Russia.

That meant BP could concentrate on its business and its shares would revert to being valued conventionally as an oil stock.

Well, the shares are still on my shopping list, but I haven’t yet bought.

Trials and tribulations
Things haven’t gone smoothly in the U.S. BP couldn’t agree a settlement of civil liabilities, and is in the throes of a court case that could last up to a year. U.S. prosecutors have taken a hard line and the worst case scenario could cost BP $18 billion in fines, $14 billion more than it has provided. That’s half a year’s cash flow.

The administrator of BP‘s settlement with private claimants is also — in BP‘s view — being over-generous. It has gone to court to try to rein him back, and has given up estimating the total cost.

On top of that, BP didn’t join the bidding for new drilling rights in the Gulf of Mexico because it’s not sure the U.S. government would give it the necessary licenses.

Share price
So uncertainty still weighs on BP‘s shares. They have underperformed the FTSE 100, even after a 2% jump last Friday when BP announced an $8 billion share buy-back. The market reaction was illogical: the company is returning cash raised by its sale of TNK-BP in Russia, doing what it previously said it would do. But since when have markets been logical?

More substantially, BP has sealed the deal to buy 20% of Rosneft, the Russian state-owned oil major. The two companies have announced projects to ramp up exploration and development in the Russian Arctic.

BP‘s previous Russian partners had blocked its collaboration with Rosneft. Now it’s best friends with a company that produces more oil than Exxon, and is run by Vladimir Putin‘s right-hand man. At the moment, the wind is blowing BP‘s way in Russia.

Unique upside
That makes it a distinctive play, with unique upside and unique risks. I’d prefer to see the U.S. liabilities put to bed, but there’s still a good investment case.

BP‘s travails highlight the risks in the oil business, even for the majors. When it comes to smaller companies, the risks are bigger-but so are the potential rewards. It pays to diversify, and to pick stocks with care. “How to Unearth Great Oil and Gas Stocks” is a publication from the Motley Fool that can help you do just that. It’s packed full of tips, and you can download it to your inbox just by clicking here — it’s free.

link

The article Why BP Is Still on My Shopping List originally appeared on Fool.com.

Fool contributor Tony Reading has no position in any stocks mentioned. The Motley Fool has no position …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why I'm Bullish on Defence

Leave a comment

By Tony Reading, The Motley Fool

Filed under:

LONDON — So-called “sequestration” — automatic spending cuts, half of which are allocated to defense — came into effect in the U.S. this month after Congress failed to agree a budget.

Bad, but not that bad
It’s an added threat on top of planned military spending cuts. But a report from rating agency Fitch last week suggested that sequestration won’t have such a dramatic impact on European defense companies as many fear. It thinks:

  • Exposure to U.S. defense spending is limited;
  • Defense procurement will be protected;
  • Defense companies are good at restructuring to maintain cash margins.

US Department of Defense (DoD) contracts typically have lead times of around three years, so procurement spending will be little affected in 2013. The DoD is saving money by cutting operational expenditure such as training.

BAE most exposed
With 30% of its revenues coming from the DoD, BAE  is the most exposed. But Fitch estimates its 2013 revenues will suffer by 2% or less. The company has a 17% interest in the F-35 Joint Strike Fighter project, which has largely evaded budget cuts.

Like most of the sector, BAE is pursuing emerging market sales and reducing its dependence on defense. But its entrenched position in the U.K. and U.S. defense markets underpin its secure cash generation.

On a price-to-earnings (P/E) ratio of 9 and with a prospective yield of 5.3%, the twice-covered dividend makes it a great income stock.

More expensive, better growth
If only Rolls Royce  were so cheap! The world’s second-largest jet engine maker is on a prospective P/E of 17.6. Revenues grew 9% last year compared to a 6% contraction at BAE. Civil aviation accounts for over half of sales, with defense a fifth.

Meggitt  is the only other U.K. aerospace and defense company to make the FTSE 100. The aircraft brake manufacturer saw a 6% rise in revenues last year, and confidently increased its dividend by 12%. On a projected P/E of 13, it’s yielding 2.6%.

Overweight
One fan of the aerospace and defense sector is Invesco Perpetual‘s star fund manager Neil Woodford. He has 8% of his £22 billion funds invested in BAE and Rolls Royce. That’s a big bet on a sector that represents less than 2% of the FTSE‘s total capitalization.

Woodford’s stock-picking track-record is unmatched. His high income fund has grown at an annual compound growth rate of 12.6% since its launch in 1988, turning each £1,000 invested into £19,365. According to Hargreaves Lansdown, it’s “the best performing of any fund investing in the U.K. since it launched”.

You can learn more about how Woodford selects stocks in a brand-new report from the Motley Fool: “Eight Shares Held by Britain’s Super-Investor“ — now updated for 2013. It’s full of insights into his investment style. You can download it by clicking here — it’s free.

link

The article Why I’m Bullish on Defence originally appeared on Fool.com.

Fool contributor Tony Reading owns shares in BAE and Meggitt but no other shares mentioned in this …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Message to Apple Investors: Don't Panic About the Galaxy S4

Leave a comment

By Tony Reading, The Motley Fool

Filed under:

LONDON — On the cover of Douglas Adams‘ book, “The Hitchhiker’s Guide to the Galaxy,” are the words DON’T PANIC, written in large, friendly letters. That’s advice Apple  shareholders would do well to follow as the tech world enthuses over Samsung’s new phone, the Galaxy S4.

Samsung has stolen a march on its rival, with a jazzy product packed with new gizmos such as automatic scrolling when you read to the end of a page, no-touch gesture control, and video that pauses when you look away.

Apple shareholders should brace themselves for a lot of Apple bashing that will likely become worse when the first sales figures for the new Galaxy are reported.

So it’s worth taking a deep breath and reviewing the long-term investment case for Apple.

1. Apple has a big market share in a growing industry
Apple and Samsung don’t just cannibalize each other’s sales. The potential for growth in emerging markets is massive, and developed market growth hasn’t yet run out of steam. Gartner, a respected technology research firm, has predicted that the smartphone market will double between 2011 and 2014.

Nor is having the top spot what really matters. I believe having a big market share counts more.

2. Apple innovates
Apple isn’t a one-product firm, and past growth has come from its ability to innovate and market effectively. Having a tough competitor doesn’t strip the company of that ability, and it might even sharpen it.

Losing its effective monopoly does mean that we won’t see a repeat of Apple’s historic growth rates. But then the shares no longer price in such growth. On a P/E of 10, they’re trading at barely more than half the S&P 500 average.

3. Apple’s products are “sticky”
Brand loyalty is fickle in this business. Some people stay with formats they’re familiar with while others chase the “coolest” product. But there’s some stickiness in services such as iTunes and iCloud. Apple’s big customer base won’t evaporate overnight.

4. Apple is flush with cash
The debate over Apple’s $140 billion cash mountain has gone quiet. But so much cash gives the company a lot of room to maneuver, and dividend prospects look brighter. The cash hoard makes the valuation look even more attractive, too.

Adapt and survive
If you’re convinced of Apple’s ability to adapt, then I suggest you also have a look at this company. Its industry has been revolutionized by the Internet, but it has adapted so well that its earnings per share has charged 44% higher since 2009 and it has maintained its record of increasing or holding its dividend every year since at least 1988.

In fact, the company has been chosen by The Motley Fool as its top growth share for 2013. To discover its identity, you can download a free in-depth report just by clicking here.

The article Message to Apple Investors: Don’t Panic About the Galaxy S4 originally appeared on Fool.com.

Tony Reading and The Motley Fool own shares in Apple. Motley …read more
Source: FULL ARTICLE at DailyFinance