The Week Ahead: 9-13 December (AHT, ADBE)
Good afternoon and welcome to the Week Ahead.
Thank you for all your comments on last week’s post, we appreciate the feedback and the interesting conversation about stocks and sectors. Keep them coming.
The week in review
It’s been a stronger week for global markets, especially in Japan where the Nikkei has closed up 1.5%, although fears about financial instability in South Korea caused the market to shrug off some of its early week gains. South Korea has been rocked by President Yoon Suk Yeol’s snap decision to impose martial law and then revoke it again only a few hours later.
France has also been rocked by political turbulence this week. Bond yields rose amid fears of the now ex-Prime Minister Michel Barnier’s proposed austerity measures. But a no-confidence vote on Thursday which toppled the government provided some support to the price of both bonds and stocks.
The FTSE and the S&P have also enjoyed a decent week and look set to close higher on Friday.
At Stockopedia we’ve covered the results or news of 31 companies, you can catch up on all of our news analysis via this link. A special shout out to Mark Simpson who set himself the ambitious target of covering the news of nine companies on Thursday and managed to achieve it.
A couple of company highlights from the week for me:
A nice set of financial results from On Beach group (LON:OTB) which Roland covered on Tuesday. Adding to the strength of these numbers is the fact that management has decided to spend £25m of its surplus cash on buying back its shares. Roland has calculated that could provide an 8% hike to earnings.
Direct Line Insurance (LON:DLG) and Aviva (LON:AV.) Have come to an acquisition agreement far quicker than I was expecting. As recently as 27 November, management at Direct Line said the 250p per share offer from Aviva materially undervalued the company. This week they have agreed that 275p looks reasonable. Considering investors will be getting shares in the new enlarged business and some cash, I think this looks like quite a sensible deal. Graham agrees.
This week saw the final FTSE reshuffle of the year. Frasers (LON:FRAS) (which issued a profit warning alongside its disappointing interim results) has been demoted, alongside housebuilder Vistry (LON:VTY). They will be replaced by St James's Place (LON:STJ) and Games Workshop (LON:GAW) - with the latter entering the UK’s premier index for the first time. The Games Workshop story is a truly fantastic one and I am looking forward to an update on the company’s potential TV deal with Amazon, due sometime in December.
The Week Ahead: 9-13 December
Onto next week and what we can expect from companies reporting.
It’s looking like it’s all winding down for Christmas, with only a handful of companies reporting both here and in the US. If it’s quiet, we should have some time to pick up more detailed analysis or interesting sector stories. Let us know in the comments if there is anything you would like for us to look at.
I am going to try and spend some time trying to understand what is going on in the automobile industry, which seems to be being hammered from all angles. This week saw the sudden departure of Carlos Tevares as Stellantis CEO, just a few days after the firm was forced to close its Luton plant as part of its electric vehicle expansion requirements. We also saw the wildly unpopular launch of Jaguar’s new concept electric vehicle, the Type 00.
Car manufacturers globally are being hammered as EV concerns swirl, while Tesla stock keeps climbing. It’s an interesting sector and there could be some opportunities amid the sell-off.
In response to your feedback in our recent survey, we’re also going to be rolling more macro commentary into our daily reporting. The following table covers the main economic news that could be of interest in the coming week (thanks to Graham for putting this together).
Economic Calendar
Wednesday 11th | ||
13:30 | United States | Inflation Rate |
Thursday 12th | ||
07:00 | United KIngdom | GDP Monthly Estimate |
13:15 | Eurozone | ECB Interest Rate Decision |
13:30 | United States | Producer Price Index |
Friday 13th | ||
00:01 | United Kingdom | GfK Consumer Confidence |
Companies Reporting
The following table is a comprehensive overview of companies reporting this week. Below we go into more detail on some of the stocks that we’ll be most interested in and how we’ll be looking to spend our week in investing.
UK | US (all after market close) | |
Monday 9 Dec | Oracle (ORCL) | |
Tuesday 10 Dec | Ashtead Group (AHT) Ferguson (FERG) Moonpig Group (MOON) Naked Wines (WINE) Solid State (SOLI) | GameStop (GME) |
Wednesday 11 Dec | Cohort (CHRT) Optima Health (OPT) | Adobe (ADBE) |
Thursday 12 Dec | Benchmark (BMK) RWS Holdings (RWS) 4GLOBAL (4GBL) Currys (CURY) De La Rue (DLAR) | Broadcom (AVGO) Costco (COST) |
Friday 13 Dec |
Tuesday: Ashtead
Ashtead (LON:AHT) shares have been benefiting from the same factors driving US stocks to record levels: if there is a trade war, even one caused by America, US stocks look like safer havens than the rest of the world.
Ashtead is a construction equipment rental company which makes the vast majority of its revenue in the US. It has also historically been a high quality compounder, with wide operating margins and decent cash flows.
Its stateside operations, which are run out of over 1800 stores, delivered 86% of group sales in the 2024 financial year. The company operates under the brand name Sunbelt Rentals, which has 11% market share, second only to United Utilities with a 15% share. Roughly 60% of the market is occupied by the top 100 largest companies, meaning over 40% of the market is ripe for bolt-on acquisitions - a useful part of Ashtead’s strategy.
The outlook for rental equipment companies is also encouraging, given US focus on construction and a rising appetite for rental equipment rather than ownership. Ashtead is facing rising input costs, but it has been managing to offset those with rising rental rates. Operating margins at the company have remained relatively resilient around 25% in recent years. Although that doesn’t compare particularly favourably to United Utilities, whose margins have averaged 31% over the last five years.
The company’s US peer is also trading on a more attractive price to earnings multiple, but it hasn’t managed to deliver such impressive growth. Ashtead earnings forecasts haven’t kept pace with its share price gains of late, so any weakness could cause a bit of a correction next week.
Wednesday: GameStop
GameStop (NYQ:GME) reports after the US market closes on Tuesday so I might try and take a quick look at the numbers on Wednesday.
This is the stock which found fame in the infamous short squeeze of 2021. An episode which was meant to hurt the US hedge funds, but really only served in providing private investors with some very bad investment lessons.
GameStop shares are still over 10 times more valuable than they were before the short squeeze. I will be interested to see whether there is any justification for that in the numbers.
Thursday: Adobe
Adobe (NSQ:ADBE) financial results are due on Wednesday, but as they come after the US market close, I will be using Thursday to analyse the numbers properly (I hold).
This week Stephen Yiu of Blue Whale revealed that he has sold out of the US software company entirely - a position he has held since the fund’s inception in 2017.
Here at Stockopedia we try to steer clear of following star fund managers (many private investors have been burned in the past), but I am interested in the investment decisions made by Stephen Yiu because they align nicely with the style of investing I like: high quality, long-term compounding gains.
And, for a long time, Adobe has aligned with that style of investing very nicely.
Its software is used by creative professionals across a huge variety of industries. It has sold its impressive suite of products and services as a subscription since 2013, when it became the first software business to move away from a reliable but lumpy licensing model, to a subscription business. The move had a marked impact on margins, which have averaged well over 80% at the gross level since 2014 and over 30% at the operating level.
Adobe’s business model and quality of products means it has incredibly sticky customers. Using Adobe’s suite of creative software requires training and expertise. Designers and marketers build their skills and are then unlikely to move to a competitor, instead staying within the Adobe network and adding complimentary services. In the third quarter of 2024, the company reported $16.7bn of annual recurring revenue from its digital media division (73% of total group sales in 2023) which included over $500m of new ARR added in the quarter.
These kind of numbers lend themselves to the ratios and metrics that quality investors like to see. In the last five years, sales have risen at a compound annual rate of 16%. Operating profits have risen even faster at a CAGR 18.5% as margins have widened. And the company has hit every one of its earnings forecasts since 2021.
The company’s return on capital employed (ROCE) has risen from an already impressive 20% in 2018 to 32% last year. Cash inflows from operations always exceed operating profits. The company doesn’t pay a dividend, and expenses most of its investments, meaning cash requirements are very light. At the last count, the company was sitting on $2bn of net cash.
Why has Stephen Yiu called time on Adobe?
Adobe has long been considered a potential beneficiary from the swing to artificial intelligence. It has rolled in AI solutions, especially in the image and advert generation markets, which are proving popular with customers and helping to drive strong sales growth.
But Stephen Yiu is concerned that these customers might not be as sticky as the ones Adobe is used to. It will be interesting to see whether management can ease any of those concerns in their results next week.
Friday: The Week Ahead
Friday is quiet on the companies results front, but we’ll have UK consumer confidence data to look at, which should be interesting in the wake of Black Friday and in the lead up to Christmas.
I hope you all have a lovely weekend.
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
49 comments
Megan, will you be doing a review of Adobe (NSQ:ADBE) results?
Looks like Yiu was right.
Many apologies to all ... I haven't used the contact Stockopedia feature before ... have spent a while hunting but cant find the requisite button... could Megan , or someone, possibly point me in the right direction please ?
many thanks indeed
Green circle, bottom right hand corner, on here, click on that.
If using a mobile you may need to go a different route.
Many thanks indeed Rusty... it wasn't there ( I think because I inadvertently activated it this morning )... but after a quick turn off / turn on, it reappeared ... :).... Many thanks once again...
Good morning Megan, thanks for this new outlook article which I find really helpful. Regarding your request for feedback on anything we might like for you to look at, I wonder if you might consider an article on the relative merits of the UK listed Pharma stocks in light of the forthcoming changes in the US? GSK (LON:GSK) has been suffering since the US election and I'm trying to decide if the election is an existential threat to them or a historic buying opportunity.
Batteries need to be cheaper, lighter, last longer and have more range. EVs have too much power and not enough distance. It is like every car having a 3 litre engine. My petrol car does around 500 miles on one tank and takes 5 minutes to fill up, my diesel used to do over 600 miles on a tank.
Batteries need to be cheaper, lighter, last longer and have more range
But this is happening very rapidly. A good number of recently released EVs claim a range of at least 400 miles, including the Macan I test drove. Making the battery bigger doesn’t do anything for the weight issue, although improvements in efficiency will. But most car buyers aren’t sensitive to weight in the same way as the small number of Lotus and Porsche enthusiasts. Meanwhile my wife wants to switch to electric when her current supermini needs replacing and says that 200 miles range would be ample. It means only one stop at Gloucester services en route to her sisters in Devon, where she already takes a break on what is a long journey from Yorkshire. The rest of the time 50 miles range would be ample!
Are you sure 200 mile range is enough for only 1 stop?
Motorway driving uses more, not only the speed but little recharging from braking. If having to recharge from 80% to 20%,:then range is only about 120 miles.
For a journey she does twice a year, a recharge from 0% to 100% isn’t going to do any significant harm. Gloucester Services is 133 miles from our home and only 100 from either of her sisters. New Renault 4 and 5 EVs offer 250 range (ie 200 real world), Volvo x30 claims 300! 133 isn’t going to be an issue and, if it ever threatens to be, she can stop 20 miles earlier and split the drive more evenly.
However, we drive 420 miles to our place in NW Scotland more regularly and there is no EV that will do that journey in a one-er. Split somewhere near Glasgow, over a coffee or an overnight break, however poses few problems for a larger EV with a nominal 400 miles. Although I’m still on the fence about switching while my faithful ICE estate keeps going.
I see. Do the longer range EVs take longer to charge up?
Stopping once would be ok for 30 minutes but nowhere l stay has any charging facilities, so then would have to find somewhere to recharge it when l arrive.
200 mile range EV, is too expensive at the moment but maybe in 2-3 years, it will be within range?
If it is 3 miles a kW, then hardly any saving on petrol/diesel, if paying 30p a kw. Some places charge 70p l hear.
But you’ll be topping up at home for 95% of the time, no? So public charging rates are irrelevant for owners with off-street parking. And you can charge a Macan from 10% to 80% in 21 mins - having paid the Porsche tax on purchase, of course. I would buy an EV (not necessarily a Macan - but it was quiet and comfortable) today if my old estate became unreliable. But then I’m an enthusiast for tech, if not keen to jump in before the gremlins are sorted.
No because l will be doing longer journeys and be away from home. Last trip was 900 miles, so after about 160 miles, l will charging up.
Thanks for the great write up. I’m fairly new round here after re-subscribing to Stockopedia after a break of a few years. It’s good to see there’s still such a lot of quality discussion on these forums, which I find just as valuable as the stock reports and screeners.
If you have time in the run-up to Christmas to take a more in-depth look as specific sectors, I would be really interested to hear your thoughts on listed insurers (and financials more generally). There are lots of these stocks on the London market and many of them seem to score quite well on the Stock Ranks, particularly for value. But I’ve always found it hard to determine fair value for insurance shares because their accounts are super complicated and full of industry specific jargon. Any thoughts on this sector would be gratefully received!
Will there be a Santa Rally this year ?
Tui results this after leaving UK TUI AG (ETR:TUI1) .
its up 25% ish in 1 year. Not as good as International Consolidated Airlines SA (LON:IAG) but may go up 3-4%
a good starting place for Megan on the Car industry https://x.com/EdConwaySky/stat...
LEGO
Looking for something to do with the grandkids over xmas rather than disappearing into their rooms on the media offerings.
The girls might be interested but the boys just want to kill someone in interesting ways. (I have some sympathy).
But Ok today's offer is the Grandad option. Lego.
The Ferrari P40 was £200 in Smyths a year or so ago then is now close to £300 with the McLaren above that on Amazing. And they sell lighting kits for £50.
Think of our toys in the old days, Dinky, Hornby, Lego, and now collectable. Sorry started this and realise it's not really an investment on a personal level.
And Mr China has loads of cheaper copycats - very good - but invent your own stuff please not just knock-offs - join the world not destroy it.
Looked up Lego on Stocko and picked up an article from 2015 - GOLD - a benefit to the site from the archives .....
History does not repeat but it does rhyme - I used to paint Napoleonic war soldiers but nowadays it's some alien nut stuff Games Workshop (LON:GAW) - they chose "Skibbidy Toilet" - sorry bad Grandad.
There is a game by a guy writing the "Rich Dad Poor Dad" books but looked too complex but worth a look.
Hogwarts it is then and forget the investment because half the parts will be eaten or fed down the sofa.
Merry Xmas.
No solution I'm afraid - you can try the JISA and the "wonders of compound interest" but good answers on a 'post...' er email.
Hi Megan great write ups as usual. You did one on Garmin early in the year. A follow up on this would be great as it’s done great and continues to do so. Finding it hard to re value. Thanks.
Thanks Megan. An idea to look at next week is the diverging valuation of gold miners and the gold price, ie why have gold mining stocks lost ~20% of their value since 2011 while the gold price is up over 50% and will that gap close going forward. Thanks
Since the start of 2011 the price of gold has almost doubled. Where are you getting gold miners stock values from? Gold miners have costs, high debt etc? Inflation etc. Gold miners have soared recently. See Serabi Gold (LON:SRB) Pan African Resources (LON:PAF)
I don't know about global but many on the FTSE have more than doubled in the last year.
Pan African Resources (LON:PAF) is up over 3x since 2012.
Maybe some went bankrupt?
Looking at that index, Newmont (NYQ:NEM) seems to be the largest stock, but it is not a pure gold miner, it does many other commodities, probably explains why that index, is not tracking gold prices.
My Whatchlist on Stocko is a sad story of missed opportunity. Was not er 'watching'. Need to set Alerts on everything - support and resistance, easy to see.
In the NEW YEAR - hope to clear out the old dregs from the Coffee Can.
Cannot keep the reds on the screen for months on end - may as well buy bitcon.
Agreed. For example Serabi Gold (LON:SRB) is rated a perfect 100 by Stock Ranks, is up 40% in 6 months and 136% in a year, yet to my knowledge has never been covered by anyone on the Stockopedia team. Please could this be added to the coverage list, Megan?
Plenty of articles on Serabi Gold (LON:SRB) just not on the SCVR.
Regarding Adobe and the email I received from Meghan alerting me to Stephen Yiu, and what seemed like a surprise offloading of Blue Whale's holding in the stock, I was interested to note that in the Directors dealing information, this is a practice they have in common with him, with a long history of selling and no history of their buying into their company.?
That is common on many US stocks. Many of the sales are share options. Why buy shares you are getting them free or cheap? Shares are part of their remuneration.
The FTSE All Share fell back on Friday, the S&P up again.
FTSE All Share +7.4% S&P 500 +27.68% Year to date.
But l notice the 4 UK indexes are all above their 50 day MA.
Hi Megan thanks for this very useful, you might want to change Antares Vision SpA (BIT:AV) for Aviva (LON:AV.)
A few words about the automotive market, Megan.
The most important factor driving this in the UK is the government's net zero programme. In 2024 22% of new cars must be zero emission. By 2025 this should be 28% , 80% by 2030 and 100% by 2035. From January manufacturers will have to pay a £15,000 penalty for every non-electric car they sell that breaches the 28% limit. This is a truly punitive charge, and if it does come in it will result in existing production lines for non-EV vehicles being closed down.
The trouble is that EVs are significantly more expensive than combustion engined vehicles. The Tesla 3 series is a good car, but starts at £40,000 while a Volkswagen Golf starts at £27,000 or so. That's a 50% mark up which the majority of people cannot afford. The government can pass all the laws they like, but car buyers will not suddenly be able to afford 50% more. And this is ignoring the problems that people without their own driveway will have in charging EVs.
Volkswagen have invested a huge amount of money in developing EVs but sales have been poor and for the first time in their history they are considering closing plants in Germany. Tesla are doing well at the moment, but their valuation is greater than that of the 15 next most valuable car manufacturers combined. This is not nearly justified by the number of cars that they sell.
Was the Jaguar advert merely intended to get people talking? I don't know.
EVs not only cost more to buy but the depreciation is a lot higher. Used 5 year EVs are now as cheap as petrol ones.
The range is nothing like what is claimed, especially if you drive on motorways.
l know someone who had one, go rid after 1 year. What is the point of going on a motorway, if you have to charge up every hour of driving.
You must not compare peak ICE tech with early stage ev. It like Philips low energy tubes v leds. We ALL have leds now. I'm incandescent.
Why not. Why buy an early EV when l can buy a used petrol car for around £5k? Early EVs have no range and when the batteries are below 80%, no one wants them.
lt is about what is available now to consumers, l only buy used cars, around 6 years old. New cars are far too expensive, the depreciation on both is high but EVs are a lot worse.
Even the new EVs have limited range. Is the quoted range 100% charge down to 0%?
The other issue is tax, currently there is £25bn tax per annum, from petrol/diesel, where will they get that from, if people do switch to EVs?
I agree with your points Rusty. However the world's biggest car market is China. they are going electric. Just back from Tunisia and Chinese electric is massive there. ( to myshock)
I don't dispute that but the situation is different in Europe and the US. The average age of a car in the UK is over 9 years, more in the US, these are not going swapped for new EVs. Buying a new EV you are likely to loose around 75% of the value over 5 years.
The problem for me is the range and the cost, buy older ones and the range is around 100 miles, no good for longer journeys. New EVs are too expensive. When the 200 mile range ones come down to around £10k, l may buy one. There are other issues such charging in more rural locations, the infrastructure is still primitive and who wants to be hanging around for 30-40 minutes, charging a battery? I'm not one for stopping on long journeys.
There are several points to challenge on your critique of EVs
Firstly, no one is being forced to buy an EV. As with everything new it will follow an adoption curve. First the tech lovers and signallers, then those who get the biggest benefit (city dwellers with lots of start stop/easy access to charging at home/work/commercially; the 1.5mn homes with solar, 2nd cars in a HH). Most cars do less than 100miles/wk. My council is putting in 300 new chargers in the next 6months and private options are booming. Others may choose to adopt later - the govt plan does not see them phased out until 2050.
Secondly, EV prices are falling fast - small models now sub £20K - and likely to do so. The biggest depreciation stories are for the people who bought expensive EVs a few years ago. (What by the way is the depreciation on a petrol or diesel car after 5 years - about 65%. Thats why I buy them that old since they last 15years+ with some TLC. Only tariff barriers will save them; and then only for a while. Most of European car manufacturing will be closed by then as Asia which is getting behind them powers ahead!
The speed of transition will slower in Europe and the UK but the direction is clear - they are just better! I still drive an 11yr old petrol car but my next car will be electric.
People still buy records but first CDs and then streaming took the bulk of thhe market. What's left for ICE engines in 10 years will be hobbyists and laggards.
I wont be buying even bargain car makers that are doing EVs; and EV makers are over-priced as investments. So I guess I am looking elsewhere next week.
Well 5 year old EVs are as cheap or cheaper than equivalent petrol cars. My car is 11 year petrol, l'm considering changing it next year. Will almost certainly be another petrol. I don't do that many short journeys, l cycle instead. For me an EV is about 5 years away. I buy used not new.
Who said anyone was being forced to buy them?
Although the Govt are trying to force manufacturers to sell a certain %.
Looking on Autotrader, there are several e-Golfs, 5-6 years old, around £8k, the petrol Golfs for £8k are 9-10 years old.
The speed of transition will slower in Europe and the UK but the direction is clear - they are just better!
Hmmmm. I spent a day in the Porsche Macan Electric last month. It was very nice in traffic and on the motorway, smooth and quiet, relaxing. In the twisties, where a Porsche should shine, the sheer weight of the thing ruined the experience. Yes, it handled. But only in the sense that the laws of physics were bent to the will of its numerous electronic aids. There was no flow, only the sense of wrestling with large forces. I think there’s still a way to go until you can say electric is better. Batteries need to made much lighter - and that may come.
Maybe I should get one of these while I wait for the electric driving experience to catch up?
At least I'd only need a USB charger
Still happy with my classic car and as long as they still sell petrol and the ULEZ zone exits i shall be
ev cars have 10yr warranty on battery's then value =0 what would you be willing to pay for a car with 5yrs left
Depends on the EV, £10k if the range was over 200 miles. Problem with even that is they say you should charge up to 80% and recharge at 20%, so range still not great if you stick to that.
If doing long trips, it will make the time too long, recently l did 2 around 270 miles, took around 6 hours driving.
Even if no warranty, does not mean they won't charge. My car's warranty was only 1 year. Maybe in 5 years time they can swap the batteries more cheaply.
The share price of Tesla is a reflection of animal spirits / the size of the bubble, it is not connected to reality.
In a similar way the price of Bitcoin is an indication of the size of the bubble currently existing. It is not connected to how useful Bitcoin is in moving money or any other fundamental.
According to an article in T Economist if BYD sold their UK entry level model for the same profit it makes in China it would be 15% cheaper here. The UK consumer is paying to keep Nissan and jlr solvent. That's the post brexit open market! The UK needs Chinese FDI in batteries and assembly. The Chinese are leaders in a wide range of new economy tech.
Hello Megan,
Not a reference to next week!! Hope you can help. I think you have responded on this topic before. (timarr has given a general response- thankyou)
Trying to establish if the following AIM shares are likely to attract BPR.
Finance related : TAM; PMI; POLR; BRK; MERC.
Construction related: SPR; Watkin Jones.
Thankyou.
KBR.
Hi KBR,
I don't know the specific answer to those stocks, but I can point you in the direction of a company which can.
Investors Champion Aimsearch Tool: https://aimsearch.investorscha...
I would guide to the fact that qualifying companies can't deal in securities, stocks and shares, investments, property letting, land, or buildings, so it's unlikely that any of the finance related stocks qualify.
I hope that helps,
Megan
Also worth mentioning that dual-listed coys are excluded so for example Accsys Technologies (LON:AXS) and HUTCHMED (China) (LON:HCM) are a NO. Also of note - a company which owns property in the course of its business, i.e. not for investment, is OK so Young & Co's Brewery (LON:YNGA) is a YES - but DYOR.