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The World Cup:

who makes our stocks team?

Important - The value of investments can fall as well as rise, so you could get back less than you invest, especially over the short term. The information shown is not personal advice, if you are unsure of the suitability of an investment for your circumstances please contact us for personal advice.


George Salmon & Nicholas Hyett

Investment Analysts

The World Cup is here.

Fans will be hoping this time (more than any other time) England can finally bring football home after 52 years of hurt.

But since the Three Lions haven’t even made a World Cup semi-final since 1990, it’s probably no surprise we’ve created ways to keep the interest going if (or as might well be the case, when) they bow out.

Office sweepstakes are a long-established tradition, but fantasy leagues are also popular. As ‘managers’ up and down the UK pick their teams, we thought we’d take a light hearted look at which companies might share the qualities they’ll be looking for.

This article is not personal advice. Unlike fantasy leagues and penalty shoot outs, investments are intended to be held for the longer term. When deciding on investments you should look at your own strategy, formation and attitude to risk. Managers at the top of their game can still get it wrong and investments can fall and investors make a loss. If you are unsure of the suitability of an investment for your circumstances seek advice.

Click the shirts below to find out which stocks have made the cut.

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The World Cup is here.

Fans will be hoping this time (more than any other time) England can finally bring football home after 52 years of hurt.

But since the Three Lions haven’t even made a World Cup semi-final since 1990, it’s probably no surprise we’ve created ways to keep the interest going if (or as might well be the case, when) they bow out.

Office sweepstakes are a long-established tradition, but fantasy leagues are also popular. As ‘managers’ up and down the UK pick their teams, we thought we’d take a light hearted look at which companies might share the qualities they’ll be looking for.

This article is not personal advice. Unlike fantasy leagues and penalty shoot outs, investments are intended to be held for the longer term. When deciding on investments you should look at your own strategy, formation and attitude to risk. Managers at the top of their game can still get it wrong and investments can fall and investors make a loss. If you are unsure of the suitability of an investment for your circumstances seek advice.

  • Strikers

    Striker

    Quality strikers rarely come cheap, and at 108 times expected earnings, Amazon has one of the highest price to earnings ratios out there.

    But the reason clubs don’t mind shelling out the big bucks is that strikers are worth their weight in gold if they can find the net more often than not. Amazon’s share price tells us it’s been pretty good at hitting the target so far.

    Growth has been helped by its huge R & D spend, which at $26bn is the biggest of the large US tech stocks. Innovations like Alexa and Prime have pulled in the masses, while its cloud computing business grows behind the scenes.

    The market is clearly expecting more growth to come. The question for investors is how fast, and what will it mean for profits? That rating means the bottom line needs to start motoring.

    Consensus has earnings rising from a little over $4bn in 2017 to $21bn by 2020. It’s a tall order, but you only need to see the progress Amazon’s made in the last few years to see what’s possible. Investors will hope Jeff Bezos’ relentless pursuit of doing it better can keep the ball rolling.

    Amazon share prices, charts and research

    Find out more about the big names in the US tech sector

    Sales ($bn)

    Source: Thomson Reuters, 8/6/2018

  • Midfield

    Central midfield

    The world’s second largest miner is a good all-rounder that’s not afraid to get its hands dirty.

    Like any good centre-mid, Rio Tinto keeps things simple. It’s got a world class portfolio of iron ore, copper, aluminium and diamond assets and production costs are among the lowest in the world.

    It costs Rio’s Australian mines just $13.40 to produce a tonne of iron ore, compared to an average market price of $64.10 last year. Even in the depths of the 2014/15 commodity crash, prices never fell below $35.

    Yet commodity prices can still trip the group up. Rio got its laces tangled in 2007, when it took on a huge debt to buy Canadian aluminium giant Alcan for $38bn only for the global aluminium price to take a dive.

    Rio’s done a much better job of keeping its eye on the wider game in recent years though. Debts are lower and the group’s disposing of its contentious coal assets. With commodity prices on the rise there’s potential for the dividend to kick-on from here, though there are no guarantees.

    Rio Tinto share prices, charts and research

    Net debt ($bn)

    Source: Rio Tinto 2017 Annual report

  • Wing-backs

    Wide midfield/Wing back

    Control, speed and quality of delivery are the key attributes here.

    Spanish-listed Industria de Diseño Textil, or Inditex for short, has those characteristics in abundance. The owner of the all-conquering Zara brand has got fast fashion down to a tee (shirt).

    The group is the world’s biggest fashion retailer. But by manufacturing a lot of its clothes itself, Inditex has a nimbleness that defies its size.

    In-house production means it’s got effective control over its own supply chain, which helps it react to trends quickly. If something’s flying off the shelves, rails can be replenished, while if a design isn’t so popular there’s less excess stock to shift.

    Analysts think growth will continue, which means the shares trade on 25.2 times, a premium to several UK retail names. The prospective dividend yield is 2.8%.

    Industria de Diseño Textil share prices, charts and research

    Sales ($bn)

    Source: Fast Retailing – accessed 7/06/18

  • Defence

    Defence

    Defensive is a word that crops up a lot in the consumer goods sector.

    That’s because the sector is mostly separate from the wider economy’s fortunes. Spending on basics like soap, shampoo and the odd sweet treat doesn’t tend to change, even when there are ups and downs in the markets.

    Unilever makes our fantasy team because CEO Paul Polman showed excellent leadership and organisation, two more characteristics you’d want in a defender, when fending off an unwanted takeover bid from Kraft Heinz last year.

    Since then, Unilever has announced it’ll be transferring to Rotterdam. But the decision to combine the Dutch and British businesses in one single entity listed in the Netherlands shouldn’t impact the investment case. The shares will still be traded in London.

    Unilever is exposed to a few long-term trends that should be in its favour. 58% of sales are in emerging nations, which makes us think Unilever is well-placed to capitalise as these economies mature, although the fortunes of countries like India and Brazil could vary as much as those of their football teams.

    Unilever share prices, charts and research

    Geographic spread

    Source: Annual reports 2008-2017

  • Goalkeeper

    Sophos is a FTSE 250-listed cyber security firm. Its focus on blocking attacks makes it a natural fit as goalkeeper.

    Big price moves in both directions this year might mean Sophos seems more in tune with the eccentric style of former Colombian international Rene Higuita (he of scorpion kick fame) than your average goalie. But we think there’s plenty to like.

    A spate of cyberattacks has seen companies the world over scramble to shore up their defences, and Sophos has cornered an attractive niche in this growing market.

    By guarding against hacks targeted at both a network and the individual, its product is ideal for small and medium-sized businesses without the budget for big IT departments. The group already handles over 300,000 contracts the world over, and is adding around 10,000 a quarter.

    The potential for continued growth supports a lofty rating of 61.6 times adjusted earnings. This rating means that if Sophos drops the ball the consequences, as for any keeper, could be dramatic.

    But in the long run we think the group has enough attractive qualities to be successful.

    Contributors to this article own shares in Sophos plc.

    Sophos share price, charts & research

    Number of customers

    Source: Sophos Annual Report, 2017

Important information: 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.

Finished your warm up?

Bored of sitting on the sidelines and want to kick off your share dealing? The good news is it’s easier to buy shares than you might think. If you don’t have an account with HL, you could open one online in minutes. Then:

  1. Log in
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  3. Get a live price and buy
I’m a first time investor so was a bit nervous, your process from start to finish gave me confidence as it is so clear and comprehensive and very easy.

MRS FARRAR, Cambridge

Striker

Striker

Quality strikers rarely come cheap, and at 108 times expected earnings, Amazon has one of the highest price to earnings ratios out there.

But the reason clubs don’t mind shelling out the big bucks is that strikers are worth their weight in gold if they can find the net more often than not. Amazon’s share price tells us it’s been pretty good at hitting the target so far.

Growth has been helped by its huge R&D spend, which at $26bn is the biggest of the large US tech stocks. Innovations like Alexa and Prime have pulled in the masses, while its cloud computing business grows behind the scenes.

The market is clearly expecting more growth to come. The question for investors is how fast, and what will it mean for profits? That rating means the bottom line needs to start motoring.

Consensus has earnings rising from a little over $4bn in 2017 to $21bn by 2020. It’s a tall order, but you only need to see the progress Amazon’s made in the last few years to see what’s possible. Investors will hope Jeff Bezos’ relentless pursuit of doing it better can keep the ball rolling.

Amazon share prices, charts and research

Find out more about the big names in the US tech sector

Sales ($bn)

Source: Thomson Reuters, 8/6/2018

Midfield

Central midfield

The world’s second largest miner is a good all-rounder that’s not afraid to get its hands dirty.

Like any good centre-mid, Rio Tinto keeps things simple. It’s got a world class portfolio of iron ore, copper, aluminium and diamond assets and production costs are among the lowest in the world.

It costs Rio’s Australian mines just $13.40 to produce a tonne of iron ore, compared to an average market price of $64.10 last year. Even in the depths of the 2014/15 commodity crash, prices never fell below $35.

Yet commodity prices can still trip the group up. Rio got its laces tangled in 2007, when it took on a huge debt to buy Canadian aluminium giant Alcan for $38bn only for the global aluminium price to take a dive.

Rio’s done a much better job of keeping its eye on the wider game in recent years though. Debts are lower and the group’s disposing of its contentious coal assets. With commodity prices on the rise there’s potential for the dividend to kick-on from here, though there are no guarantees.

Rio Tinto share prices, charts and research

Net debt ($bn)

Source: Rio Tinto 2017 Annual report

Wing back

Wide midfield/Wing back

Control, speed and quality of delivery are the key attributes here.

Spanish-listed Industria de Diseño Textil, or Inditex for short, has those characteristics in abundance. The owner of the all-conquering Zara brand has got fast fashion down to a tee (shirt).

The group is the world’s biggest fashion retailer. But by manufacturing a lot of its clothes itself, Inditex has a nimbleness that defies its size.

In-house production means it’s got effective control over its own supply chain, which helps it react to trends quickly. If something’s flying off the shelves, rails can be replenished, while if a design isn’t so popular there’s less excess stock to shift.

Analysts think growth will continue, which means the shares trade on 25.2 times, a premium to several UK retail names. The prospective dividend yield is 2.8%.

Industria de Diseño Textil share prices, charts and research

Sales ($bn)

Source: Fast Retailing – accessed 7/06/18

Defence

Defence

Defensive is a word that crops up a lot in the consumer goods sector.

That’s because the sector is mostly separate from the wider economy’s fortunes. Spending on basics like soap, shampoo and the odd sweet treat doesn’t tend to change, even when there are ups and downs in the markets.

Unilever makes our fantasy team because CEO Paul Polman showed excellent leadership and organisation, two more characteristics you’d want in a defender, when fending off an unwanted takeover bid from Kraft Heinz last year.

Since then, Unilever has announced it’ll be transferring to Rotterdam. But the decision to combine the Dutch and British businesses in one single entity listed in the Netherlands shouldn’t impact the investment case. The shares will still be traded in London.

Unilever is exposed to a few long-term trends that should be in its favour. 58% of sales are in emerging nations, which makes us think Unilever is well-placed to capitalise as these economies mature, although the fortunes of countries like India and Brazil could vary as much as those of their football teams.

Unilever share prices, charts and research

Geographic spread

Source: Annual reports 2008-2017

Goalkeeper

Goalkeeper

Sophos is a FTSE 250-listed cyber security firm. Its focus on blocking attacks makes it a natural fit as goalkeeper.

Big price moves in both directions this year might mean Sophos seems more in tune with the eccentric style of former Colombian international Rene Higuita (he of scorpion kick fame) than your average goalie. But we think there’s plenty to like.

A spate of cyberattacks has seen companies the world over scramble to shore up their defences, and Sophos has cornered an attractive niche in this growing market.

By guarding against hacks targeted at both a network and the individual, its product is ideal for small and medium-sized businesses without the budget for big IT departments. The group already handles over 300,000 contracts the world over, and is adding around 10,000 a quarter.

The potential for continued growth supports a lofty rating of 61.6 times adjusted earnings. This rating means that if Sophos drops the ball the consequences, as for any keeper, could be dramatic.

But in the long run we think the group has enough attractive qualities to be successful.

Contributors to this article own shares in Sophos plc.

Sophos share price, charts & research

Number of customers

Source: Sophos Annual Report, 2017