Monday, 17 February 2014

Following up on 3 Mindful Money Articles On: AstraZeneca, Marwyn Value and Rio Tinto

Since late December last year, I have been writing a series of articles for the finance and investing website Three of these articles were focused on single UK stocks: 

1. AstraZeneca AstraZeneca: Why it should defy the bears and perform;

2. Marwyn Value InvestorsMarwyn Value Investors: Unlocking hidden value; and 

3. Rio Tinto Rio Tinto: Mining for value

Since writing these articles, what has happened to their share prices? Well I am pleased, and somewhat relieved, to report that each of these companies has enjoyed a rising share price in the period between article publication and close of play on Friday February 14. 

Performance of Astra, Marwyn, Rio Since Article Release

Rio Tinto (RIO.L) has recently reported an encouraging set of results, focusing on improvement in earnings via cost-cutting, notably a reduction in long-term capital expenditure plans on new mine construction. After all, there is already sufficient mining production capacity for industrial metals like copper and iron ore, and also for fossil fuels like coal, to which Rio is heavily exposed. 

This is a pattern that has been also repeated by Rio’s global mining competitors such as Anglo American and BHP-Billiton. Moving forwards, this positive share price momentum will hopefully benefit from tightly controlled supply of these industrial commodities, and an improvement in commodity prices and demand improves principally on continued growth in China and India. 

Rio Tinto continues to offer attractive valuations on profit-based valuations measures like P/E and EV/EBITDA, and also offers a combination of healthy dividend yield (around 3.5%) plus the prospect of steady dividend growth to come. 

Rio Tinto Breaks Out of its Trading Range

Source: Yahoo Finance

AstraZeneca (AZN.L) continues to wrongfoot its many professional sceptics, with encouraging results in early and mid-stage drug development, giving some hope that the company will be able to manage the oncoming patent expiry “cliff” of major blockbuster drugs like Crestor better than had been previously expected. 

AstraZeneca Breaks the £40 Barrier

Source: Yahoo Finance

Valuations continue to trade at a significant discount to its global pharmaceutical competitors in Europe and the US, and shareholders also pick up a near-5% dividend yield to boot. 

And finally to Marwyn Value Investors (MVI.L). This small-cap closed-end investment fund has been boosted in particular by very good fundamental and share price momentum in its dominant investment holding, Entertainment One (ETO.L). 

ETO reported results this week that were significantly ahead of analysts’ expectations, with a 75% jump in net earnings and encouraging prospects for its pipeline of future TV and film releases. ETO’s shares have gained some 29% since the publication of my article on MVI. So it is hardly surprising that MVI has also seen a 15% price gain in response, in line with the improvement in the fund’s underlying net asset value. 

Would I continue to hold these three shares? While I feel obliged to add the rider that you should do your own research (as always), I think there is further upside potential in all three… 

Personal Disclaimer: I own Marwyn Value Investor shares in my SIPP


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