View my CNBC WorldWide Exchange TV interview!

Here is the video link to to my CNBC Worldwide Exchange interview from this morning:

CNBC Worldwide Exchange: Favoured Sectors

Click on it and have a look!

Best,
Edmund

On CNBC Europe this morning - my preferred sectors...

I went on CNBC Europe's WorldWide Exchange programme this mornign to talk about company results and my favourite sectors. What are they? Well:

1. UK housebuilders - like Inland Homes (INL), Barratt Developments (BDEV) and Telford Homes (TEF). Note the strong results this morning from builders' merchants Travis Perkins (TPK), helped by the strong UK housing market, together with the Government's aid from the Help 2 Buy programmes.
   
2. Technology stocks, in particular semiconductors - Infineon (IFX in Germany) and Sandisk (SNDK in the US) would be two good plays here; cash-rich and benefiting from the "Internet of Things" theme.
   
3. Mining stocks, which are cheap and recently posted good Q4 results: in the short run, they will be driven by sentiment over Chinese growth, but I still like Rio Tinto (RIO) and Anglo American (AAL) in the medium-term. 

While stock markets had a very strong 2013 and have bounced back to new highs this year, I see further positive momentum ahead as economic momentum picks up in the Eurozone, and recovers from a short-term dip in the US and China. 

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 www.mindfulmoney.co.uk. Three of these articles were focused on single UK stocks: 

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

2. Marwyn Value Investors: Marwyn 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

Focus on gold miners as gold glitters once again

Gold bugs have had a good start to 2014, unlike those invested in stock markets. While the FTSE 100 index has lost 1% over the year to date, in contrast gold futures have gained over 7% in US dollar terms. Billionaire hedge fund manager John Paulson’s Gold Fund gained some 18% over the month of January, according to Institutional Investor Alpha.

This rally should of course be put in the context of the substantial slide that the gold price has suffered since October 2012, when it sat close to $1800/ounce. Today, even after rising since December of last year, the gold price is still only $1292/oz (Figure 1). Were the gold price to continue to rise back to its October 2012 level, there could still be another 38% to gain!

1. THE GOLD PRICE BREAKS OUT OF ITS 2013 DOWNTREND

Source: Bloomberg

Now that is easy to say; but what could the drivers be for a continued gold rally? And is there a better way to play this trend than simply through the yellow metal itself?

Uncertainty and Strong Chindian Demand Are Key Drivers

There are two key drivers that can be easily identified for gold; one is uncertainty in financial markets, and the second is the growth in demand for physical gold from Chinese and Indian consumers.

Focus on gold miners as gold glitters once again

A final thought:Bear in mind that, since 1900, the gold price (London fixing) has actually beaten the US Dow Jones Industrial Average stock market index! 

Edmund

Rio Tinto: Mining for value

Over at least the past decade, UK-listed mining stocks such as Rio Tinto (RIO) have been tightly correlated with two key financial asset classes:

Industrial commodities (industrial metals such as copper, nickel and aluminium and coal for making steel) and Emerging markets such as the Brazilian, Russian, Indian and Chinese (BRIC) stock markets, as well as the Australian stock market (which is itself heavily-weighted towards mining stocks).

The reason for this is clear: the main sources of growth in demand both for these industrial metals and for coal have been China and India, as they have expanded their heavy manufacturing bases to become the world’s centres for all types of manufactured goods, from white goods to toys.

Nothing new or particularly interesting to note so far. Recall that the worst-performing major regional stock markets over 2013 were indeed Emerging Markets; and that one of the worst-performing industrial sectors in the UK stock market last year was the Mining sector, both driven by concerns over slowing growth in the major BRIC economies.

But Rio Tinto is Now Diverging from Emerging Markets

However, now for a more interesting and perhaps less obvious fact: Since the middle of last year, the major UK-listed diversified mining company Rio Tinto has managed to de-correlate from the poor trend in emerging market stocks.

To read the rest of this article and see the associated graphs, please click on the link below to my "Expert Opinion" page on the MindfulMoney website:

Mining-for-value-in-Rio-Tinto

Happy digging, 

Edmund