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Burberry - rare diamond in today's large cap choppy weather

By Chris Bailey | Wednesday 17 January 2018

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Lots of larger cap news today but I have to say most of it is pretty sh...poor quality, which of course says something about the wider market…

I ripped up my metaphorical cinema tickets at Cineworld (CINE) six weeks ago and today's formal confirmation of its mega rights issue and confirmation that it is raising money to a magnitude 'representing 400 per cent. of the existing issued share capital of Cineworld and 80 per cent. of the enlarged issued share capital immediately following completion of the Rights Issue' means it remains one for the cinema buffs only. Meanwhile today's Informa (INF) share price dumping because it has announced a punchy takeover of exhibitions/media peer UBM (UBM) is just another deal which looks tolerable only at ultra-low interest rates. Good luck with that one boys...

Elsewhere Pearson (PSON) continues to roll from irrelevance to complete irrelevance chatting in the same update about yet another bout of tough trading in the US text book market and non-repeating gains from lower taxes and disposals impact. Who would have guessed text books would have been shabby.

Also dumping today is Burberry (BRBY) which reiterated numbers, said everything is on track but luxury brand investors always want more... I haven't written about the stock on this website since November 2015 when the shares were fiddling around at 12 quid compared to their post roasting today of a little bit above 16 quid. Investors seem surprised by the dumping in UK sales but you have to remember that not only is the UK consumer not rampant but the higher Pound means that at-the-margin spending by foreign tourists just drops off a bit.

Burberry may no longer be run by someone with a great name (i.e. my own) but of all the names mentioned in this piece it is the only one I would be even close to consider buying. It is not hugely cheap but it is worthy. Sixteen quid has been a level over the last year and I would buy here and each subsequent new pound lower (i.e. at 15 quid, 14 quid etc.). Chinese demand and chav-tastic fervour are ultimately a hard combination to beat but buy at sensible prices only.

And that's really the point of this piece. You really have to pick and choose in this world of very firm share price multiples and a tricky old backdrop. Avoid index funds like the plague and pick your stocks with caution. Despite the nominally great start to the year for global investors the market weather is going to get a lot choppier.

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