A quick note today to catch up on what was out yesterday and today's news. Stocks which featured that I have covered in the past included Micro Focus (MCRO), Photo Me (PHTM),
S & U (SUS) and Sprue Aegis (SPRP). While today we have had announcements from Bellway (BWY) and Polar Capital (POLR)..
Today we have had updates from two UK fund management Companies Jupiter (JUP) & Polar (POLR) which showed contrasting fortunes. Jupiter, which features in the Compound Income Scores Portfolio saw net inflows of £77 million in Q3 despite the difficult market background which therefore wiped £884 million off their funds to leave them overall at £33.5 billion, down by 2.3% on the quarter. The inflows were aided by demand for their European equity and dynamic bond funds.
Meanwhile Polar Capital saw continued outflows, primarily from their Japanese funds, although at a slower rate given their improved performance. Thus they saw outflows of $710m which, in contrast to Jupiter, was greater than the market effect which was $616m in Polars case, although they were reporting on a six month period rather than Q3. This left their assets under management at $10.9 billion, down by 10.8% over the six months to the end of September and by 11.4% over Q3.
On value and quality grounds they are similar, although Polar is smaller and has been around for a shorter period of time so perhaps has more to prove but also maybe therefore has more scope to grow organically. The other main difference is in the yield where Jupiter yields around 5.7% whereas Polar yields about 1% more with a 6.8% yield, but if you are a fan of momentum, then you would probably favour Jupiter over Polar. However on the charts / technicals, while both look toward the bottom of their range, Polar perhaps looks more oversold and may have greater short term upside reflecting its poorer recent momentum.
So as ever you pay your money and take your choice and with contrasting fortunes they both may be interesting short term recovery plays if you think markets can maintain their recent form and sustain a year end rally. Of course if you think we have entered a bear market then you would probably not want to be long fund management companies.
First a quick update on Kingston Communications (KCOM) which I highlighted back in January this year as offering value and at that time I suggested that they could perhaps return to around 100p from the 80p level they were trading at around the time. I updated on this after the final results earlier this month when they reported a further 10% dividend increase and I concluded that there didn't seem to be enough in these numbers to me to justify it breaking our from its range at this time.
I note that in the last week it has hit my 100p target, although it has just nosed above that briefly in the past. I note also that forecasts for the dividend to March 2017 are now out and these show the slow down I expected to around 2% or so. The yield of around 6% should still support them up here, but I'm not sure they will re-rate much more for now. Thus with the shares due to go XD the final dividend of 3.58p this Thursday, I suspect this may help to maintain the resistance at the 100p level for now.
So if you are not bothered about income, now might be a good point to lock in a decent 25% or so capital gain in the space of 6 months against a market that has been flat. Otherwise it seems like a solid hold for the 6% yield, but I wouldn't expect much more from it in capital terms for now though.
The second 6% or so yield stock today is one I mentioned briefly back in early November 2014 as a way of playing a recovery in the Japanese market by investing in a fund manager that was big in Japan. While the idea was a reasonable one as the Japanese market has gone up by around 20% since then, sadly Polar Capital (POLR) the suggested stock has lagged this. In my defence though at least the Sterling Hedged I-Shares MSCI Japan GBP Hedged UCITS ETF I also suggested as a purer way of playing it has outperformed.
Polars under performance was due to the fact that their Japanese fund suffered a poor performance run and saw large outflows and consequently in today's results they suffered their first outflow of funds since the financial crisis. Despite this they did maintain the level of the full year dividend payment as they are confident about their business going forward having added a few new teams and product areas to diversify the business. They look OK value on around 16x with a near 6% forecast yield for the current year, but their larger more established competitors like Jupiter and Aberdeen look more attractive on the Compound Income Scores right now.
Thus again it is probably one that is supported by the yield, but will need the underlying business to improve to move it on in price terms. They seem optimistic on this front and the Chairman's outlook statement in today's results is worth reading as it includes sensible comments such as:
"Markets are by no means cheap and are susceptible to a meaningful correction if central banks cannot manage to deflate at a measured rate the various bond market bubbles they have created in Western economies. Overall debt levels remain uncomfortably high in too many countries although there has been notable progress in some such as the US."
In conclusion, probably not one to chase after the recent share price move and on the back of these slightly disappointing results. However, if you are sanguine on markets medium term and Polars ability to continue outperforming and attracting assets then this could be one to consider on weakness as they seem to be finding good support between 360p and 400p.
Finally, if Greece manage to pull off another great escape (for now) from default then I guess markets could have a relief rally too in the short term.