We have seen a few companies down grading expectations recently with Pearson and Home Retail being a couple of notable examples earlier this week. Today, following on from my Monday detour down memory lane which featured UK vice stocks, we have had a Q3 trading update from the bookies William Hill (WMH).
This was a bit down beat as they suffered from strong comparatives in the previous year which included the football (soccer) world cup and a poorer gross win reflecting adverse sporting results for bookies this quarter. They also had the effects of the increased rates of UK gambling duty to contend with too. On the back of this they are suggesting that their full year operating profits will now be towards the bottom of a £291 to £312m range which suggests downgrades on average of around 3.5% to me. So the fall in the share price of nearly 6% this morning to 325p would seem to more than factor that in.
Looking at a two year chart this has taken the shares to the bottom of their range and I note a more recent gap on the chart around the 400p which often gets closed eventually and therefore could provide a medium term target if and the shares should recover at some point in the future. In the meantime the rating seems OK and they should start to be supported somewhat by the near 4% yield, but as ever you pay your money and take your choice or place your bets in this case?
Finally, if you were hoping to see Back to the future Part 3 here today - apologies it has been delayed in post production, but I hope to maybe get it out over the weekend or early next week so don't forget to check back here.
Not much news around today, but a good US blogger called Eddy Elfenbein, who I follow on twitter and at his website crossingwallstreet.com, reminded me this morning that it was 28 years ago today that we had the Black Monday of the 1987 crash. Now hopefully we won't have another Monday like that today, although we do have the dreaded US import of the Black Friday shopping event to get through soon I believe.
Talking of the 1987 crash and US imports its funny how your brain works when you start thinking and reminiscing down Memory Lane. That got me thinking for some reason about another US import from that time - a TV show called Miami Vice which you can check out in more detail here if you are not familiar with it and enjoy the opening credits below to liven up a dull Monday.
My mind then went off at another tangent and got onto vice and and thinking about vice stocks after most of the favourites won in the Rugby World Cup over the weekend, which is probably good for the bookies. As an aside I had thought that Ireland might beat the Pumas and that Scotland would get thrashed but it turned out to be the opposite with Scotland so unlucky to lose out in the end. So probably good for the bookies and checking them out it looks to me like William Hill (WMH) might be interesting down here on a technical basis looking at the chart below.
It trades on 13 to 14x with a yield of around 3.7% including a 4.1p interim worth 1.2% which goes xd this week. It scores OK with a CIS of 65 and a Stockopedia rank of 78 so not too bad as the bookies tend to win in the long run. So...
...talking of vice stocks I personally don't mind investing in those, although some prefer not to and there are ethical funds available which screen out those type of stocks - armaments, drink, gambling & tobacco. With that in mind how have a collection of UK Vice stocks done in recent years? Well to find out I pulled together a quick chart to see how William Hill, Greene King (GNK), BA Ssytems (BA.) and BAT Industries (BATS) have done against the FTSE All Share over the last five years. As you can see on the chart, which shows percentage change over that period, they have all out performed the index and would also have had higher yields to boost returns further, with William Hill winning by several lengths.
So there you go if you don't mind investing unethically or in vice as it were then it seem it could be profitable for you. While in another strange mind tangent having coined the phrase UK Vice above I did a quick search and found that apparently there is a site / Company along those lines called Vice which describes itself as specializing in exploring uncomfortable truths and going to places we don't belong. Herein you will find people talking frankly about their hatred and love for various things, general heresy, the only culture, travel and news documentaries you'll want to watch, tons of exclusive new stuff, and probably not a lot of cats. So not sure I would recommend it but check it out if you dare and it has an accompanying twitter feed @VICEUK - so you really do learn something everyday by taking a mind detour down memory lane and here's an appropriate old song for the topic today.
These were announced this morning which in brief showed a strong performance as sports results turned more favourable and they benefited from the World Cup. Meanwhile their on line and increasing overseas activities also grew strongly helping to offset some shop closures in the UK. On the performance and outlook they said:
"Group net revenue grew 23% in Q3 and 12% in the year-to-date (YTD). Operating profit was up 89% in Q3 and is up 19% YTD, with good operating profit growth across all divisions in the quarter.
Following this strong results-driven quarterly performance, the Group now expects operating profit for 2014 to be towards the top end of current consensus range assuming normalised results in the final quarter."
So further confirmation that the bookie generally wins and with the reassurance on this years numbers they look reasonable value on around 13x with a 3.5% yield, although I note that earnings are forecast to be down slightly next year presumably due to the effects of proposed tax changes in the UK and a more normal year without the World Cup effect. If you are not averse to investing in gambling related stocks then this might be a good way to play it. Probably one to put on your watch list rather than chase it today as it has had a good bounce but you might want to consider on further weakness as they seem to have been building a base recently in the low 300's.