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GeorgeIG

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Posts posted by GeorgeIG

  1. Equity markets provided further gains last year with global stocks returning 22.9% as the economic recovery continued. In this article, we reveal the most popular stocks in 2021 and investor sentiment on sectors is changing due to the current environment of rising interest rates.

    What were the most popular stocks in 2021?

    Last year was an overwhelmingly positive period for equity markets with many developed market stock indices reaching all-time highs as investors displayed confidence in the global economic recovery. Negative news seemed to mostly be shrugged off, the most pertinent being: historically high levels of inflation, new Covid-19 variants, and supply chain bottlenecks.

    Whereas the success of vaccination programmes, booming labour markets as well as monetary and fiscal stimulus to support the economy appeared to win investors over. Overall, U.S. equities rose by a remarkable +30% in 2021, while U.K. and European stocks returned +18.4% and +14.7% respectively.

    So, given the strong returns in the stock markets last year, what were the most popular equities amongst IG clients in 2021? The figure below maps the stocks that have been dealt the most last year, presented as a percentage of overall trades on share dealing, individual savings account (ISA) and self-invested personal pension (SIPP) accounts.

    Figure 1: Top twenty most popular equities in 2021 by number of trades

    Top twenty equities 2021

    Popularity of Electric Vehicles went beyond just Tesla

    Electric vehicle companies had a significant presence in the top twenty most traded equities last year due to their high growth potential and environmental, social and governance (ESG)-friendly characteristics, with sustainable investing reaching records highs according to Bloomberg*. Tesla (TSLA) was, of course, the most popular stock within the industry, accounting for 1.4% of total trades from IG investors in 2021, but NIO Inc (NIO) was not too far behind at 0.9% of trades.

    Furthermore, we saw a number of new listings within the electric vehicle space last year with the two most notable being Rivian Automotive (RIVN) and Lucid Group (LCID). Rivian was listed through a traditional IPO back in November 2021, raising an estimated $11.9 billion making it the largest listing last year and also the biggest IPO from a US firm since Facebook. On the other hand, Lucid elected to go public via a special purpose acquisition vehicle (SPAC) deal, under Churchill Capital Corp IV Ord which made up 0.5% of trades in 2021. Although, Lucid announced in December that it received a subpoena from the US Securities and Exchange Commission (SEC) to investigate its SPAC deal, shares of Lucid dropped as much as 19.5% after the news broke. Click here to read the full article

    • Like 1
  2. On 23/04/2020 at 15:27, grayswood said:

    Hi,

    I've been using the smart portfolios for GIA and some ISA for over two years and have to say that compared to my funds held with HL and other using a wealth manager they have faired better before and post corona. I am thinking of moving money away from the Wealth Manager as roughly charges of 2% really don't seem worth it. They are very disparaging about smart portfolios! Any advice about the IG SIPP would be greatly appreciated.

    Many thanks

    Hello,

    I work in the IG Investments team and I'm glad to hear your pleased with your IG Smart Portfolio performance. We've also been extremely happy with how they've performed - our multi-asset portfolios have beaten their benchmarks by +7.1% over the last 12 months!

    IG Smart Portfolio SIPPs work in the same was as your GIA and ISA accounts, the only difference you should be aware of is that James Hay, who administer IG SIPPs, charge a yearly admin fee of £205. 

    On 12/06/2020 at 08:08, MM_Smart_Port said:

    Hello, I am pretty much on the same boat . 

    I am only using the smart Portfolio, but thinking about making slightly more active by changing Risk Profile every once in a while (at most 3-4 times a year).  Obviously, there will be some transaction costs and I am OK with that.

    I was wondering if, there is any limitation how often and how many times a year you can adjust the portfolio between the 5 predefined risk levels?

    Any answers would be much appreciated. Thanks!

    For your question on changing risk profile, there is no limit on how many times you adjust your risk profile. Also, we do not charge a transaction fee for doing this - the cost to you would be the difference in the Bid/Ask spread.

    Happy to answer any other questions you may have.

  3. It started off with a vision to revolutionise British banking, intent on disrupting the stagnant high street banking industry by enhancing service levels and investing in state-of-the-art IT software. But now Metro Bank (MTRO) is in turmoil.

    Not only have five of the challenger bank’s founding directors left within the last year but the firm also pulled a £250 million bond sale citing ‘poor market conditions’, despite offering a yield of 7.5%. As a result, Metro Bank’s share price has tumbled -90% since floating at 2000 pence per share in 2016.

    The table below shows that Metro Bank’s share price has been the fifth most volatile amongst shares in the FTSE All-Share Index, which captures 98% of the UK’s market capitalisation.

    Figure 1. Top ten most volatile UK shares over the 360 days

    Equity

    360-Day Volatility (%)

    1. Indivior PLC (INDV)

    140.795

    2. Tullow Oil PLC (TLW)

    123.499

    3. Kier Group PLC (KIE)

    104.882

    4. Sirius Minerals PLC (SXX)

    99.478

    5. Metro Bank PLC (MTRO)

    97.377

    6. Intu Properties PLC (INTU)

    92.466

    7. Amigo Holdings PLC (AMGO)

    86.754

    8. NMC Health PLC (NMC)

    81.446

    9. Ted Baker PLC (TED)

    80.78

    10. Allied Minds PLC (ALM)

    79.991

    Source: Bloomberg, February 2020

    If at first you don't succeed, try, try again

    Failing to secure funding in September last year was a huge blow to Metro Bank as it needed to raise finance to meet the Minimum Requirements for own funds and Eligible Liabilities (MREL) regulation by January 2020. MREL intends to ensure firms have the capacity to take on losses so that they can fail safely, removing the need for public funding. The bank went back to the market in October with an enhanced offer: that they would remove Vernon Hill, the chairman of Metro Bank, and a higher coupon of 9.5%.

    Metro Bank managed to secure the £350 million it required, but at a large cost. An accounting scandal revealed in January last year was another reason why bond investors demanded such a yield. Analysts have since raised their concerns about the constraints the business faces due to the bond terms at their third quarter results, to which David Arden, chief financial officer (CFO), responded: 'I fully accept that the cost was somewhat elevated, but I think it was the right thing to do for the long term of the bank.'

    A recipe for disaster: rising costs and subdued growth

    Whilst Metro Bank has satisfied MREL regulations, for now, there are still difficult times ahead with rising operating expenses, potential fines by two regulators and, as outlined previously, substantial costs to finance their recent debt issue.

    The lender is still under investigation from the Financial Conduct Authority (FCA) over its reporting scandal in January last year whereby it miscalculated loans in risk terms, consequently overstating its capital ratios. As a result, investors have been warned that Metro Bank could potentially face financial penalties which could well be 'significant'. Adding to this, the bank is also being scrutinised by the Prudential Regulation Authority (PRA) in a separate investigation.

    Operating costs that are higher than average in the industry is part and parcel of Metro’s business model. The bank’s core mission is to 'change the way Britain banks' by offering customers access to its branches (now 70 in total) seven days a week. It is this that creates a huge dilemma for Metro. Costs need to be reduced, even more so due to its recent bond issue, but equally the bank must stick to its promise that made customers switch over to them in the first place. In conjunction with this, the firm needs to grow in order to return to profitability which in itself is a significant challenge in the current low interest rate environment. To achieve growth Metro Bank will need to battle on two fronts, against the 'big four' on the high street and the influx of new wave digital banks online.

    The graph below illustrates the consequence of Metro’s strategy. It displays the cost to income ratio, a measure commonly used to compare banks, for Metro Bank and the FTSE All-share Banks Index (Ex-Metro). We can see that Metro’s higher operating cost base has consistently resulted in a greater cost to income ratio than the average of its peers. Having said this, Metro Bank has recognised the need to focus on cost efficiency and has managed to reduce this ratio in Q3 2019. Encouragingly, the improvement occurred despite adding three new stores during the quarter as well as developing further sites in Liverpool and Manchester – the firm is sticking to its core mission.

    Figure 2. Cost to Income Ratio: Metro Bank vs FTSE All-Share Banks (Ex-Metro)

    image.png

    Source: Bloomberg, February 2020. Virgin Money and Close Brothers Group have been omitted from Index average due to insufficient data

    Potential for a short squeeze?

    The market is not optimistic that the challenger bank can turn its fortunes around. Currently, Metro Bank is the sixth most shorted stock in the UK of all short positions that have been disclosed under short selling regulations set out by the FCA, with Premier Oil PLC (PMO) topping the list(1). Note, the requirement to publicly disclose short holdings is when the position concerned equates to 0.5% of total shares outstanding. Still, this is a good indication as to how popular a share is to short.

    The combined position of the six funds that have reported a short position in Metro equates to -9.59% of total shares outstanding, after Voleon Capital Management recently registered its bet on the company share price to fall on 17 February 2020. It comes after well-known hedge funds Odey and ENA added to their short positions at the start of 2020, with both having had short exposure for over a year.

    Figure 3. Disclosed short positions in Metro Bank

    Fund

    Shares outstanding (%)

    Reported date

    1. ENA Investment Capital LLP

    -3.22%

    05/02/2020

    2. Odey Asset Management LLP

    -2.62%

    14/01/2020

    3. Marshall Wace LLP

    -1.38%

    29/01/2020

    4. Connor Clark & Lunn Investment Management

    -1.22%

    05/09/2019

    5. Voleon Capital Management LP

    -0.62%

    17/02/2020

    6. Samlyn Capital LLC

    -0.53%

    05/06/2019

    Source: Bloomberg, February 2020

    Metro Bank 2020 results preview

    Since listing in March 2016, we have seen a steady decline in the percentage of analysts whom have issued a buy recommendation. The chart below depicts this, as well as the sharp decline in Metro Bank’s share price. The most recent consensus indicates a twelve-month target price of 232.33 pence, calculated from fourteen different analysts. Its share price closed at 205.2 pence on 20 February 2020.

    image.png

    Source: Bloomberg, IG, February 2020

    Rumours have been circulating since last year, after its reporting miscalculation, that Metro Bank was considered as a takeover target for several large private equity firms. The Financial Times reported at least six takeover firms contemplated whether it would make economic sense to buyout the bank(2). One analyst at Metro’s Q3 results posed this question directly to the leadership team to which they didn’t give anything away but did outline 'should something occur, we will treat it with the right respect because that's the fiduciary duty of the board'. An update on plans to balance growth and cost efficiency will be communicated during its full year results on the 25th February 2020.

    You can invest in any of the shares mentioned in this article with IG from as little as £3, our newly reduced fee, on the IG share dealing platform.

    • Open a share dealing account. You can open an IG account within a few minutes.
    • Fund your account. Our minimum deposit is £250.
    • Place your first trade. Open our platform and trade over 10,000 shares available through IG.

    1. ShortTracker

    2. Financial Times

    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

    • Great! 1
  4. On 13/01/2020 at 04:14, dmedin said:

    The horse has already bolted.  I think you'd be bonkers to buy at this price😵

    GAW-Daily.thumb.png.a49ab430be0f5950294381792c936c14.png

    GAW announced record breaking half-year results this morning, here is a few key points:

    • Big jump in profits to £58.6m up from £40.8m
    • Revenue £145.6m, £125.2m previously
    • Royalties receivable up to £10.7m for the half year, a 94.5% increase from the same period last year.

    Share price up around 7% since open (at the time of posting).

    image.png

     

    • Like 2
  5. On 10/01/2020 at 16:18, dmedin said:

    Yes, I remember them from my childhood days.  They charged extortionate prices on their little metal figures, their magazines and range of paints.  And they changed the rules and figure sets all the time forcing people to buy new stuff.  Now I think they get most of their money from licensing their IP to video games.  They have always been extremely tight-assed, penny-pinching and mean - not surprised that they are very profitable!

    They do make a fair chunk of their operating profit through royalties, but the majority still comes from online/trade sales. Although, royalties is definitely a segment that is growing for them (something they are proud of). It accounted for £6.9m of operating profit in 2017, up to £10.4m now.

    image.png

    • Like 1
  6. Games Workshop Group (GAW) has experienced incredible growth over the last few years. The share price for the wargame manufacturer rose by 101.5% in 2019.

    Games Workshop is a constituent of the FTSE 250, where it ranked fifth highest in terms of contribution to the index’s total return in 2019. You’d be wrong to think this was a one-off. In 2018 the company came in at eighth and was the second highest performer in the FTSE All-Share Index in 2017, generating a total return of 267.17%, beaten only by KAZ Minerals (KAZ).

    To illustrate the company’s extraordinary growth, look no further than the chart below.

    Figure 1: Games Workshop (GAW) market cap and share price

    image.png

    Source: Bloomberg, January 2020

    The meteoric rise in Games Workshop has coincided with growth in the gaming industry, which has been well documented over the last decade. We have seen Fortnite, a free-to-play online video game, post record sales of $1.8 billion in 2019 – the highest of any game in history.1 Record viewership numbers have followed, with 3.9 million peak viewers tuning into a League of Legends World Championship semi-final, 94% higher than last year’s tournament.2 Millennials really do love gaming.

    Whilst most of the growth in the gaming industry is attributed to online video games, the board gaming scene has experienced a recent resurgence and growth is expected to continue in the coming years.

    Arizton, an advisory and research firm, predicts the board games market will grow to £12 billion by 2023, from around £8 billion today.3 The market is forecasted to grow by +8% per year due to the growing audience of gamers and a trickle-down effect to sub-sectors such as board games. Also, as Games Workshop point out, people enjoy the social side of gaming together in-person, as opposed to playing behind a screen.

    You can invest in Games Workshop Group with IG from as little as £5 on the IG share dealing platform.

    1. Open a share dealing account. You can open an IG account within a few minutes
    2. Fund your account. Our minimum deposit is £250.
    3. Place your first trade. Open our platform and trade over 10,000 shares available through IG.

    Solving the puzzle: what does the company do?

    Games Workshop is the largest hobby miniatures company in the world and was founded over 30 years ago. Its most successful brand is the iconic Warhammer product and it also holds the license for The Lord of the Rings Battle board game. With over 400 retail stores globally, it is a truly vertically integrated business as it controls the design, manufacturing and distribution of its product range. Although, the company is keen to outline that it is a manufacturer, not a retailer, with retail stores being used to engage with customers and introduce them to the hobby of painting, collecting and playing with the fantasy miniatures.

    Rachel Tongue, finance director at Games Workshop, has a tight grip on the financial health of the company. The group’s policy is to pay dividends entirely out of any ‘truly surplus cash’, not out of debt – which should be music to the ears of long-term shareholders. Moreover, the company has had no outstanding long or short-term debt since 2010. Lastly, to further demonstrate this, take a look at the below snippet from the company’s investor relations website:

    Quote

    'We don’t spend money on things we don’t need, like expensive offices or prime rent shopping locations or advertising that speaks to the mass market and not our small band of loyal followers. We only invest where it makes a positive improvement to our business model.'

    Guess Who: Games Workshop shareholders

    Institutional investors account for the majority of Games Workshop’s shareholders with investment advisory firms holding 74%, based on publicly reported data. A new addition to this list is Schroders who disclosed on 11 December 2019 that they had purchased 5.6% of the 32.7 million shares outstanding in Games Workshop.

    Interestingly, the former chairman of the group, Thomas Kirby, still owns 4% of the company. On 27 September 2018, Kirby spooked shareholders by issuing the sale of £20.3 million worth of Games Workshop shares – causing the share price to fall by 4.2% the following day. After the sale, Kirby was subject to a 180-day lockup period for his remaining holdings, which has now expired meaning we may see a reoccurrence sometime this year.

    Figure 2: Top 10 investors in Games Workshop shares

    Shareholders

    Shares owned as % of total outstanding

    Type of investor

    1. JPMorgan Chase & Co

    9.14%

    Investment Advisor

    2. Schroders PLC

    5.58%

    Investment Advisor

    3. Standard Life Aberdeen PLC

    5.54%

    Investment Advisor

    4. BlackRock Inc

    5.44%

    Investment Advisor

    5. Vanguard Group Inc/The

    4.05%

    Investment Advisor

    6. Castlefield Investment Partners LL

    3.97%

    Investment Advisor

    7. Kirby Thomas H F

    3.96%

    Former GAW Chairman

    8. Soros Fund Management LLC

    2.71%

    Hedge Fund

    9. Dimensional Fund Advisors LP

    2.60%

    Investment Advisor

    10. Credit Suisse Group AG

    2.59%

    Investment Advisor

    Source: Bloomberg, January 2020

    The (Trivial) Pursuit of returns: what does 2020 have instore for Games Workshop?

    Edison Investment Research, the primary broker for Games Workshop, is one of only two firms who do so, with the other being Peel Hunt. Both will be keeping a close eye on the half-year results which will be published on 14 January 2020.

    The consensus amongst analysts, albeit an extremely small sample size, is that the upcoming year will be another positive one for the group. In its most recent research report posted at the start of November, Edison revised its share price valuation upwards by 10% to £51.76 after a strong five-month trading statement. Since then, the share price has exceeded Edison’s target price by 20.5% (as of 7 January).

    Looking at the previous four years, revenue and net income and have grown by a compound annual growth rate of 21.4% and 47.7%, respectively. In what will be an interesting next couple of years for the company, Kate Heseltine, an analyst at Edison, projects growth to continue into 2020 and in the following year, as indicated in the below graph.

    Figure 3: Games Workshop Net Income and Revenue (History & Forecasts)

    image.png

    Source: Bloomberg, January, data from 2020 and 2021 are estimates

    1. SuperData

    2. Esports Charts

    3. Arizton

    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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