FTSE having another down day - YELL slumps 23% - tips for RR. and BAE
David Buick - he who predicted the intraday FTSE movement to within 1 point about 2 weeks ago - says that today's correction is due to inflation worries in the UK. The Bank of Engand was summoned to the Treasury apparently to explain themselves and no doubt got a jolly good teling off. Consequently interest rates are heading higher here in the UK, possibly much higher than people expect. The market is, however, still in good shape although short-term it may be too high.
The US is doing better than expected, apart from autos and housing. China GDP is good not bad and there will be continued growth in India and Japan as well as China, which will drive the rest of the world. US interest rates won't drop as fast as people think.
Talking about stocks he recommended Rolls-Royce (RR.), he's the second person to recommend this in the past week, and BAE systems (BA.). He says both are highly undervalued, but he recommends them for a 2 year period not a quick punt
With regard to mining stocks he said avoid KAZ, the CEO sold a great chunk recently and it is not one for widows or orphans. He recommended BLT which has published strong figures and, he says, is extremely well run and has 350 projects under consideration at the moment. Also XTA and a smaller stock Griffin Mining (GFM) .
A shocker from YELL
YELL has had a shocking day ! It was down 23% at one point, which is quite amazing for a FTSE 100 company. It is a monopoly and so can't increase prices in the UK, so it has been expanding in the US, but things aren't going according to plan, as it has reported only 3% organic growth, whereas the market expected 8-10%.
Goldman Sachs has downgraded them to 'neutral' from 'buy' with a price target of 454 pence instead of the previous 630p, given that they were trading around 30p below this 630p target maybe they will now trade 30p below the new target of 454p ? Or maybe that's too simplistic.
Goldman has also downgraded its EPS estimates by 8% in 2008 and by 14% in 2009 and has reduced its US organic revenue growth forecasts to 3% in 2008 and 0% in 2009, and flat US revenues thereafter. So, not very positive !
Some people of course think it may bounce, a 23% drop being seen by many as being a bit overdone. And there is still the possibility of a takeover. This has been rumoured in the past and now that it can be bought for 20% cheaper somebody may be interested. You can make your own minds up on that. Personally I'm just glad I don't have any anymore. I did have some a few weeks back, which I sold. I had been considering getting back in, but interestingly BritishBulls had them as a sell so that put me off ! Well done BritishBulls !
Finally BARC was recommended a couple of weeks back as a trading stock by one analyst. He said it is worth buying if it falls back to between 740 and 720 p, well today it's at 715p on its proposed acquisition of ABN Amro, so maybe worth keeping an eye on.
Have a good day !
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