Wednesday 14 October 2015
Budget airlines EasyJet and Ryanair soar toward investment success
IBTimes UK web link to article, video:
I recently flew back from Geneva to Paris after a long day of meetings with clients. But I didn't fly with either of the two flag-carrier airlines, Air France or Swiss. Instead, I chose to fly with EasyJet, in the process saving my employer hundreds of euros.
While I did arrive 15 minutes late in Paris, due to the airplane being late to arrive in Geneva in the first place, something else struck me. I was amazed at how full the flight was, with hardly a spare seat left on the aircraft. No chance of me getting the aisle seat I prefer.
What is more, so many people had opted, like me, to pay extra for speedy boarding in an effort to get a seat near the front of the aircraft, that in the end it didn't offer much of a benefit. Except to EasyJet of course, who made more money out of all of us.
That set me thinking – how well is the distinctive orange-liveried airline performing this year? Digging into the monthly passenger traffic statistics from the EasyJet website, the answer seems to be that they are doing very well indeed.
EasyJet enjoys strong passenger growth
Every month this year, EasyJet (UK code EZJ) has carried more passengers in Europe than over the same month in 2014
For the first 9 months of the year, EasyJet has on average carried 6.5% more passengers than over the same period in 2014.
Clearly, with Ryanair also carrying a record number of passengers in 2015, budget airlines are enjoying a banner year on the back of strong consumer confidence and a stronger pound sterling, which has improved British tourists' purchasing power abroad.
EasyJet's aircraft are fuller than ever
Profit growth isn't just about how many passengers are carried per year; what is at least as important is how full each flight is. This is expressed as 'load factor' - the percentage of an aircraft's seat capacity that is filled by a paying passenger.
In the case of EasyJet, the load factor is also improving this year over 2014: each month since March, EasyJet's load factor has been higher than the corresponding month in 2014. So EasyJet's profits this year should be better than last year's, not only because they are carrying more passengers, but also because each aircraft is on average fuller than last year.
Analysts following EasyJet are forecasting 20% earnings growth for this year, followed by 9% further growth in 2016.
Is EasyJet the only choice in budget airlines?
An investor who wants to capitalise on the growth in budget air travel across Europe actually has a number of investing options apart from EasyJet:
- Ryanair (UK code RYA) is the biggest budget airline in Europe by number of passengers carried. They claim to be the first airline to have carried over 10 million international passengers in one month, achieved in July 2015. They also achieved a record load factor in July of 95%.
- Wizz Air (UK code: WIZZ) is a budget airline that is listed on the London Stock Exchange, and which focuses on no-frills flights out of London Luton to Eastern Europe, including to Poland and the Czech Republic. This is a growth market given the large growth in UK immigration from Poland, Romania and other recent entrants to the European Union over the last few years. They carried nearly 2 million passengers in July 2015, and are seeing 20% year-on-year passenger growth this year.
- Air Berlin, listed in Germany, is a low-cost German airline operator. However, unlike Ryanair and EasyJet, Air Berlin is struggling against Ryanair, EasyJet and Lufthansa, and is projected to make a loss this year.
- Norwegian Air Shuttle, listed in Norway, is a low-cost airline operator that not only operates low-cost flights to and from Scandinavia within Europe, but which also operates long-haul budget flights to New York from London Gatwick. So next time you want to spend a long weekend in the Big Apple on the cheap, look up www.norwegian.com!
A final note on EasyJet: not only is it cheaper on valuation than either Ryanair or Wizz Air, but it also offers a decent 3.7% dividend yield and is sitting on over £400m of cash - both good supports to the share price. While normally I am not a fan of investing in airline shares, I would make an exception for EasyJet.
Edmund
Thursday 2 July 2015
Idle Investor: Three simple strategies to beat the professionals (VIDEO)
Video Interview with Juliet Mann of news.markets
In this first video of a new series, the Business Book Club, fund manager Edmund Shing explains his three simple strategies to earn high returns and beat the professionals.
Shing, global equity portfolio manager at BCS Asset Management in Paris, outlines his simple, low-risk investing system that beats market indices and fund manager performance over the long term, but requires only a few minutes of investors’ time each month.
The strategy is detailed in his book The Idle Investor and Shing argues that even the laziest investor can achieve it. The Idle Investor includes three straightforward DIY strategies for long-term investing, Shing tells Juliet Mann. All you have to do is follow the simple rules.
Each method requires only a limited amount of time and they all make use of easily accessible, low-cost funds. Shing’s three strategies are: The Bone Idle Strategy, The Summer Hibernation Strategy and the Multi-Asset Trending Strategy.
Yet, argues Shing, being idle doesn’t mean being unsuccessful. “If you are looking for a straightforward investing method that lets you get on with your life while your money grows in the background, then become an Idle Investor,” he says.
On CNBC Today Talking About China: A Long-Term Play, But Not Yet!
Be patient if investing in China: Fund manager
Edmund Shing, global equity portfolio manager at BCS Asset Management, discusses China's economy and its recent easing policies.
Thursday 25 June 2015
Forget Greek debt woes and buy into the European market recovery
International Business Times UK Video link:
I have to admit it - I am sick of being asked over and over again for my opinion on Greece.
Will it stay in the Eurozone or will it be forced to leave? Is the Greek drachma going to come back? And so on and so on...
Here is what I really think deep down: whether Greece stays in the Eurozone or not, I believe that you should be investing in Eurozone stocks anyway.
I have three reasons for believing this:
1. The European economy is improving and Greece is small
Greece is the 13th-largest economy in the EU (out of 28 member states) and only contributes 1.3% to the EU by Gross Domestic Product (GDP), the classical measure of economic output.
So it frankly hardly moves the needle compared heavyweights such as the UK, Germany, France and Italy.
European economies are improving. Not just the UK's, which we can all see through the lens of the employment and property markets, but also in Continental Europe. In Germany, unemployment rates remain at generational lows. Wage growth is now starting to pick up, giving employees more purchasing power.
At the same time, the cost of living in the UK is staying low, thanks to the fall in oil and petrol prices plus subdued food prices. The cost of eating is being depressed in large part by ongoing price wars between supermarket chains and discounters like Aldi and Lidl.
Finally, the weaker euro has helped boost exports from Germany, Ireland and Spain to the rest of the world (while the strong pound is making the UK's exports relatively more expensive).
All of this has boosted the Euro zone's economic growth rate, as measured by GDP.
Eurozone GDP growth has picked up
Source: tradingeconomics.com
2. Reforms are boosting both economies and company profits
Ireland, Spain, Portugal, France and Italy have made varying degrees of progress in lifting regulations and easing job-market rules, changes that can lead to better growth. Ireland and Spain are now the fastest-growing economies in the EU, and even Portugal is improving.
At the company level, investors are seeing a whole host of reforms too. Companies have become much keener on cost-cutting and are targeting their investments on good growth prospects. It has become somewhat easier to hire and fire employees, an essential reform to encourage companies to employ more people to boost sales and profit growth in the long-term.
This corporate strength is reflected in the very high levels of business confidence seen across the European Union today, with companies looking to invest for future growth.
European business confidence is at a high
Source: tradingeconomics.com
The result is that the profitability of European companies has surged over the past few years. Even banks, which have been under the regulators' cosh since the 'Great Financial Crisis' are now starting to see growth in profits, which is translating into growth in dividends too.
3. European shares are cheap
At 15 times price/earnings ratio, the European stock market is cheap relative to other large stock markets such as the US. Shares in countries such as Spain and Italy look particularly cheap. And European stock markets are also cheap relative to their own history, if you compare today to the last 30 years.
At the same time, European companies pay out an average dividend yield of well over 3%, which is an income which is not to be sniffed at in these times of near-zero interest rates.
With the improvement in the underlying Euro economy continuing, European companies should continue to produce strong profit growth; thus an attractive combination of growth and value, which is what experienced investors look for.
What to buy? The direct way via an exchange-traded fund
The easy way to buy into European value and profit recovery is through a fund: I would recommend a cheap exchange-traded fund (ETF) such as the db x-trackers MSCI EMU Index UCITS ETF (code: XD5S).
This is an ETF that is:
- cheap (they only charge investors a management fee of 0.25% per year);
- priced in pounds sterling (current price £18.09); and
- currency-hedged so that investors do not suffer from any weakness of the euro currency against the pound sterling.
What to buy? The indirect way via UK stock which is heavily exposed to Europe
The second option is to buy shares in a UK company that has a heavy exposure to Continental Europe, and which should thus benefit from future Euro area growth.
I would look at Sky (code: SKY). We all know and love Sky for providing us with satellite TV (namely sports, movies and of course not-to-be-missed series such as Game of Thrones), but Sky has also recently integrated Sky Deutschland (its German + Austrian equivalent) and also Sky Italia (Sky in Italy).
In all three countries, Sky is the dominant satellite TV provider. Sky is an excellent company which is dominant in a number of the largest countries in Europe. It will thus benefit from higher consumer spending in Continental Europe.
As an additional inducement, remember that the Rupert Murdoch-controlled US-based Fox network still owns 39% of Sky's shares, and have recently rebuffed two offers to buy this Sky stake from Vodafone and from France's Vivendi.
Perhaps Murdoch is thinking of buying out the 61% of Sky's shares he doesn't own in the near future?
All in all, the bottom line is that Greek concerns should not dissuade you from investing in European recovery, whether via an exchange-traded fund or via Sky.
Friday 19 June 2015
Idle Investor Book Is Out!
Order from the publisher Harriman House: The Idle Investor (2015)
or from amazon.co.uk: The Idle Investor (2015)
Earn high returns and beat the professionals using 3 simple strategies
Are you tired of the paltry interest rates on offer at banks
and building societies? Are you are unsure where to begin when investing your
own money and concerned about shares given the two sharp drops since 2000?
Would you like to use a simple investing system that beats broad market indexes
and fund manager performance over time, while limiting the risk taken, and
requires only a few minutes each month? You could be an Idle Investor!
In The Idle Investor you will
find three simple DIY investing strategies for long-term savings. The methods
here are mechanical, so there is no need for you to figure out what to do each
month - you simply have to consistently follow the rules of the strategies.
Each of the methods requires only a limited amount of your time per month and
they all make use of easily accessible, low-cost index funds. The principles
behind why the strategies work and everything else you need to know to put them
into practice is explained clearly and with worked examples.
The three strategies are:
1. The Bone
Idle Strategy: Part of your portfolio is
allocated to shares and part to bonds. Adjustments to the portfolio are only
required on two occasions per year. The rest of the time you do nothing.
2.
The Summer
Hibernation Strategy: For part of the year your
portfolio is allocated to shares and for part of the year it is allocated to
bonds. Once again, adjustments to the portfolio are only required twice per
year. The rest of the time you do nothing.
3. Multi-Asset
Trending Strategy: A simple trend-following
method is employed to determine whether to hold your portfolio in shares or
bonds. For this strategy you will need to check your investments and make
adjustments once per month.
Each of the three Idle Investor strategies has been tested
for the period 1990 to 2012, with the result that they delivered average annual
returns ranging from 11% to 28%. By comparison, a buy-and-hold approach of
investing in UK shares would have delivered 8.5% per year over the same period.
The three strategies also limited the downsides experienced from stock market
falls.
If you are looking for a straightforward investing method
that will enable you to get on with your life while your investments earn money
in the background, become an Idle Investor.
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