Nicholas Hyett, Equity Analyst 7 February 2019
Brexit has dominated the newspaper pages in January. But for lots of the most popular companies with investors, the issue is at most a minor inconvenience.
Most are mature businesses, selling goods and services that will be in demand regardless of what happens with Brexit.
January’s most popular shares
The links below show the FTSE 100 and FTSE 250 shares (excluding investment trusts) with the highest number of net buys (buys minus sells) among HL clients in January. We’ve also included the most popular large* overseas shares (excluding investment trusts and ETFs).
Shares listed alphabetically
*Of equal or greater size than the market capital of the smallest FTSE 350 stock
These are provided for your interest, but aren’t a guide as to how you should invest. You should think about your own aims and attitude to risk before making any investment decisions, and remember that investments will fall as well as rise so you could back less than you invest. If you’re not sure if an investment is right for you, you can please seek advice.
BP and Royal Dutch Shell
The oil majors were one of our sectors to watch in 2019.
At first glance the sector could feel like a bit of an odd pick this year, after all the oil price spent most of the last quarter in a pretty unpleasant slide. But we think the progress both businesses have made over 2018 means they’re well placed to weather tougher conditions.
Shell's full year results last week showed it churning out bucket loads of cash. That allowed it to launch the next tranche of its $25bn share buyback, boost capital expenditure and scrap the dilutive scrip dividend. Even after all that the group still had enough left over to knock $14.5bn off net debt.
That cash generation means the sector’s prospective dividend yields, 6.2% at Shell and 5.9% at BP, look more secure – although no dividend is ever guaranteed.
Primary Health Properties (PHP) reliable revenues, sizeable dividend yield and long-run growth potential won it a place on our five shares to watch this year.
The group owns and rents out primary care buildings, like GP surgeries, in the UK and Ireland. This kind of out of hospital care is cheaper and governments are investing heavily, so demand for PHP’s purpose built properties should stay healthy.
The group’s been buying and developing new sites for years, and that’s underpinned 22 years of consistent dividend growth. However, January saw PHP take a major step forward with announcement of a merger with fellow healthcare property specialist MedicX.
The merger offers £4m in annual cost savings, giving PHP the lowest average costs in the UK REIT sector. The price of the deal mean's it's more immediately favourable to MedicX shareholders than PHP investors, but in the long run we think it makes sense for all involved.
Investors should bear in mind that PHP could make more acquisitions in the future – but a comparatively high loan-to-value ratio means it will probably need shareholders to fund that growth. Rights issues, where the company sells more shares to existing and new investors, are likely to be a feature of the company going forwards. That means investors will likely be asked to stump up more money from time to time.
Apple didn’t have a great start to January, with an unscheduled trading update knocking 10% off the share price on the first trading day of the year.
The problem lies in iPhone sales – which have fallen some 15% year-on-year.
There have been particular problems in China, where the Trump trade war has resulted in a boycott of Apple products. That’s not an issue which is likely to go away any time soon.
More worrying is a slowdown in iPhone sales in developed markets. Top prices north of $1,000 a phone seem to have been a step too far – and the group is now thinking about cutting pricing to get demand moving forwards.
It’s not entirely a surprise. Rivals have been closing the technology gap for years, and that was always going to make it difficult for Apple to maintain its premium prices.
Long term a slowdown in iPhone sales might not be as much of a problem as it sounds though. The Services division, which includes Apple Music and the App store, is blossoming, and with 1.4bn Apple products in use the potential customer base is huge.
Apple may no longer be a trillion dollar company, but that doesn’t mean investors should just tune out.
Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.