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By Chris Bailey | Thursday 5 July 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.
It is not exactly a classic earnings Thursday but three quick observations from today's regulatory news selection...
First up...housebuilders and specifically Bovis Homes (BVS). In amongst the 'robust' underlying market comments contained in the trading statement and group sales up 8% in the first half was the interesting nugget that Bovis' total average selling price was 'c. £261,000 (2017: £277,400), reflecting the higher contribution from affordable content in the period'. As I have talked about plenty of times, downmarket shifts are sweeping the housebuilding sector. Now Bovis may be naturally more an Asda compared to (say) Crest Nicholson's Waitrose profile but no-one is immune. Selling more at a lower price as a strategy can lead to serious egg on face. Bovis shares may have started today up, but the recent 15%+ fall is more of an insight. I still do not like the space here and I would sell.
Second, a couple of weeks ago I confirmed my love for Mr Kipling cakes, but also the poor taste in my mouth over the way that the management of Premier Foods (PFD) had turned down a perfectly reasonable bid...and now see that the shares are trading around 40% below that bid price. Quite correctly an activist shareholder is agitating and at this month's AGM is calling for the CEO of Premier Foods to go. This has produced a response including a public love-up by the company's board for the embattled CEO and, today, a RNS noting that ISS (the voting advisory service which is well known for its lack of testicular fortitude) is backing the existing management team at the upcoming AGM. Establishment 1, activists 0. Hopefully it goes to extra time and penalties. As I noted at the above link, activist lovers should still buy shares in names like Whitbread (WTB) or even Barclays (BARC) for the benefit of the influence of a firm capitalist shove from an outsider.
Finally, I see Associated British Foods (ABF) is grumbling about lower EU sugar prices. It really should try to get beyond subsidies for the boys and is fortunate that its cheap clothing business Primark has made it more money and so has allowed expectations to continue to be hit. I talked about the scope for a 7 quid plus share price in sugar/related peer Tate & Lyle (TATE) here, which has sensibly reduced its exposure to any subsidy heaven/hell in favour of higher value ingredients/flavours. Much better value in this one...
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