Just a quick update on these as they all remain in bullish territory. The FTSE 100 chart shown above, in common with the broader indices such as the All share and FTSE 350, remain around 4 to 5% above their moving averages. While the Mid 250 & Smaller Cap indices had a stronger April and therefore remain 9% ahead of their averages.
Meanwhile the Trump reflation trade still seems to just about be running, although it seems to me that he has U-turned on most of the things he said or promised and does not actually seem to have delivered much in his first 100 days apart from some unfunded tax proposals as far as I can see. Despite this the other economic indicators that I track along side these moving averages on the markets are all still in positive territory.
So for now the trend remains your friend and it looks like it won't be a year to sell in May and go away, although given the run we have had so far this year some sort of pause for breathe or a small correction in the short term wouldn't come as a great surprise to me, especially in the run up to the election in the UK. Having said that though I read some research recently suggesting that the outcome of elections does not have much bearing on subsequent market returns, so as an investor I won't be worrying too much about the outcome of the UK election.
We had interim results from Character Group (CCT) yesterday, which I last wrote up here back in September last year. Then I suggested it could provide 20%+ returns if it managed to make it back to the top of its trading range at 550p. It managed this in March so you would have been able to lock in a decent return if you managed to sell them up there. Since then they had OK final results & a slightly disappointing trading update in January when they flagged that their H1 numbers would be down due to US$ cost effects. Despite this they said they were confident of meeting full year numbers.
The interims yesterday confirmed this fall in profits in H1 as expected and they reiterated their confidence in meeting full year estimates despite this and backed this up with a 28.6% increase in the interim dividend from 7p to 9p. Looking at the pattern of their recent dividends these have gone sequentially 5, 6, 7, 8, & now 9p so with a bit of straight line forecasting I think they might do a 10p final given their progressive policy, cash balances and high cover levels. This would give 19p for the full year versus current forecasts of 16.8p for this year and 19.5p for next year. This would give a yield of around 4% at current prices.
I also note in the chart below that the management have been fairly active buyers of the stock on dips and they were buying again recently and after yesterdays interims, suggesting they have some confidence in their forecasts / prospects as they seem to be able to forecast the swings in their business quite well.
Summary & Conclusion - This appears to be a well managed company which has developed quite a good record of delivering decent profits, earnings, cash flow and dividends in recent years, although longer term it has had its ups and downs. Consequently the market seems reluctant to afford it a decent rating and therefore a dramatic re-rating (outside of a bid) does not seem to be on the immediate horizon. They have however achieved a rating of between 10 & 12x in recent years, so if they do manage to hit forecasts for this year then this would suggest the price could get up into a 520p to 620p range, so a return at least to the top of its range / resistance at 550p / 560p does not seem too much of a stretch.
On the downside it could drift off further to the bottom of its range around 430p in the short term in response to these numbers, but I think that would be an even better buying opportunity if it happens. Of course they may be over optimistic and miss the full year numbers, in which case it would probably break down out of its range.