Nicholas Hyett 5 June 2019
May’s turned out to be a surprisingly busy month.
We’ve had a glut of mega IPOs in the US – including ride hailing app Uber and meat alternatives manufacturer Beyond Meat. The market’s reception of the two groups has been very different – with one stalling and one stoking investor appetites.
Meanwhile in the UK, we’ve had dividend cuts from the likes of Vodafone and Royal Mail, as well as new share issues from Marks & Spencer and Sirius Minerals as the two look to fund development.
All that corporate activity has led to a real mix of companies topping the lists of most popular investments.
May’s most popular shares
The lists 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 May. 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 consider your own aims and attitude to risk before making any investment decisions, and remember that investments will fall as well as rise in value so you could get back less than you invest. If you’re not sure whether an investment is right for you please seek advice.
Beyond Meat - bitten off more than it can chew?
Beyond Meat listed in New York at the beginning of May. Since the IPO, the shares are up a whopping 280.6%. That’s enough to make your stomach flip, although remember past performance isn’t a guide to the future.
The excitement isn’t entirely unwarranted – the meat free and vegan movement is expected to see demand for meat alternatives soar. Plus news the group’s expanding in Europe too opens up even more possibilities. There’s even talk of potential partnerships with McDonalds in the future.
The product is a popular one, and the macro environment is certainly supportive. But that also means there are plenty of competitors snapping at its heels. Developing and promoting new, market leading products doesn’t come cheap either – which meant Beyond Meat reported a $30m loss last year.
The company clearly has plenty to shout about. But it’s very early days – and the shares are currently priced with the very best case scenario baked in.
Sirius Minerals - final hurdle cleared?
May was a big month for Sirius, which finally closed its phase two funding round. In theory it should now have all the firepower it needs to finish its ground breaking Polyhalite mine in North Yorkshire.
That will come as a relief to investors. Despite drumming up significant demand for its naturally occurring fertiliser, with agreements in place to sell 10.7 mega tonnes a year once production starts, the group’s struggled to close the deal on this last round of financing.
It was meant to be all over by Christmas (Christmas 2018 that is) but has instead ground on into the New Year. Even more painful for shareholders is the fact a fundraise that was meant to be all debt has wound up including the issue of a significant slug of new shares.
But while the share price has fallen some 28% since the end of April, we’ve always argued that Sirius should be viewed as a long-term investment with inevitable short-term volatility. If construction goes to plan, the road to first production in 2021 will hopefully be less eventful.
Imperial Brands - looking chilly
Imperial Brands has taken a real battering in recent months, with the shares falling 18.2% since the start of the year. But that didn’t stop Imperial proving popular with investors in May.
That’s perhaps because the group has one of the most generous dividend policies on the market. It currently aims to grow the pay-out 10% a year over the “medium term”, resulting in a prospective yield of 11.4%. Although remember, neither the current yield nor future growth are guaranteed.
With that in mind, you’re forgiven for asking why the shares have fallen. The fact is, it’s no longer cool to be seen supporting “unethical” businesses. And combined with the ongoing slide in tobacco sales, that’s hit valuation across the industry.
Imperial’s been particularly hard hit given its sizeable debt pile – which increased to £13.4bn at the half year – and a slower take up of the group’s e-cigarettes than some might like. All-in-all, people are worried the dividend could be wound in a bit, it can’t grow 10% a year forever.
But at the time of writing, Imperial shares traded on 6.9 times expected earnings. That’s some 40% below the longer-term average. Given the exceptionally sticky nature of Imperial’s customer base, that could be overly harsh.
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The author owns shares in Sirius Minerals and Imperial Brands.
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. Past performance is not a guide to the future. 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.