“While politics has moved to the top of the agenda as the UK general election campaigning machine prepares to get underway, the only shock for investors is the date of the big vote. It’s sooner than expected but until we get full election manifestos from the Conservatives and Labour, markets have stayed calm,” says Russ Mould, Investment Director at AJ Bell.
“The more domestic-focused FTSE 250 index was flat as investors took time to think about their next move. Ultimately, interest rates and inflation remain key focal points for the market and that is not going to change in the near-term.”
National Grid / Utility Providers
“It’s not a good look when a company reports a slump in profits and then goes cap in hand to shareholders, asking them to stump up £7 billion. That’s exactly what’s happened with National Grid as it looks for financial support to boost its energy network investment. Some investors might view this as a bit cheeky, but others will be salivating at the chance to buy shares in a generous dividend payer at a big discount to the market price.
“One thing for certain is that National Grid’s rights issue has spooked investors about the state of the utility sector, with shares in United Utilities, Severn Trent and Drax falling in sympathy. It’s clear that a lot of money needs to be invested to upgrade infrastructure and investors are now speculating that we could see other equity placings across the listed sector.”
Rolls-Royce
“When a share price goes up as much as Rolls-Royce’s, it’s only natural for the momentum to disappear when the company runs out of things to pleasantly surprise the market.
“A trading update that contains no change to full-year guidance has provoked the same reaction as a child receiving a second-hand Nokia phone for Christmas, not the shiny iPhone they wanted. It works fine but doesn’t impress. Investors don’t want a functional Rolls-Royce just getting on with the job, they want to be amazed every time it reports.
“The five-fold increase in the share price between October 2022 and March 2024 made the British engineer out to be a market superstar, the kind of share everyone wished they’d bought. This share price success was driven by turnaround efforts. Now that the recovery in the business is well underway, it’s harder to blow the lights out.
“Rolls-Royce is winning new contracts, civil aerospace flying hours are back to pre-Covid levels which benefits its service activities, and the engineer’s balance sheet is looking stronger. That’s laying solid foundations for the future, but just not enough to keep the share price in the fast lane.”
Bloomsbury Publishing
“It’s taken years for Bloomsbury to get the market to accept it is not a one-hit wonder and that there is life beyond Harry Potter for the business. However, just as investors accepted this situation, along came a new phenomenon in the form of Sarah J. Maas. The superstar author has released a string of blockbuster books over the past 14 years, all published by Bloomsbury and all filling its coffers.
“The twin-headed machine that is Harry Potter and Sarah J. Maas has made Bloomsbury the envy of the publishing world and taken its share price to new heights. Therefore, when Bloomsbury says there will not be a new title from Sarah J. Maas in its current financial year, investors are understandably worried. That shifts the emphasis on making money from her back catalogue, in the same way that Bloomsbury has managed to sweat its Harry Potter assets with new versions of the beloved book series, bringing in a new generation of readers.
“Bloomsbury can talk all it wants about having a broad range of authors and activities to boost its education arm, but the market wants the star author to keep churning out new titles. The news is like a famous band saying they’re going on a hiatus – disappointment now, but the potential to make even more money when they return. It’s the waiting period that will test investors’ patience and not even news that current trading is ahead of expectations can stop the share price from going into reverse.”
CVS / Pets at home
“A lot of bad news about a probe into the vet sector has already been priced into CVS shares, hence the muted reaction to today’s update that a formal market investigation will take place.
“The CMA has concerns about pricing and competition in the sector and CVS now faces the prospect of an 18-month investigation looming over the business. All it can do is co-operate and get on with the day job. Pets at Home, however, fell 5% on the CMA update.”
These articles are for information purposes only and are not a personal recommendation or advice.
