A quick catch up and update on a couple of stocks (Howden Joinery and Jupiter Fund Management) which are held in the Compound Income Scores Portfolio before the month end and the latest performance update on this later this week.
Last week we had a decent set of results from Howden Joinery (HWDN) which included earnings and dividend up by nearly 18% on the back of on going strength in housing and the opening of 30 new depots in the year taking the total to 619. Looking at 2016, they said that trading conditions seen in 2015 have continued into the early part of the year with UK depot revenue in the first two periods of 2016 rising by 7.1%, which they said was in line with their expectations. As well as planning to open another 30 new depots in the UK, they also plan to open two more depots in northern France, a second larger outlet further south in France and a similar outlet in Germany as they continue with their cautious early expansion into Europe.
The shares look a little expensive on around 17x this years forecast earnings with a 2.4% yield, although I not that the earnings are only forecast to rise by about 6% which seems quite low compared to their opening plans and current trading so I suspect we could see more earnings upgrades here to add to the rising trend. It is obviously cyclical, but at this stage the economy and housing markets still seem to be ticking along quite well so they should continue to do well on the back of that. Looking at the chart below at around 490p it is currently around the middle of the recent trading range between 440p and 540p - so a strong hold I would say, but maybe one to revisit if it should slip back towards the 440p lows / support.
Meanwhile today we have had Jupiter Fund Management (JUP) full year results which were slightly better than forecast with eps at 29.2p v 28.5p and 29p forecast for the coming year, so seems like there could be some upgrades unless recent market weakness keeps analysts cautious for now. On the dividend front this was also ahead of forecasts for last year and this year coming in at 25.5p v forecasts of 23.6p & 24.2p for the years to December 2015 and 2016 respectively.
Assets under management increased to £35.7bn at 31 December 2015 (31 December 2014: £31.9bn) due to net inflows and market appreciation across the year. While on the all important investment performance they said that at 31 December 2015, 27 of their mutual funds, representing 68 per cent. of their mutual fund AUM, had delivered above-median performance over three years (2014: 25 mutual funds, representing 51 per cent. of mutual fund AUM). This was driven by continued strong performance across key strategies, notably European equities, UK equities and Fixed Income, and better outcomes from previously weaker areas. The one year numbers reflect this strong result, with 31 mutual funds, representing 84 per cent. of mutual fund AUM (2014: 20 mutual funds, representing 46 per cent. of mutual fund AUM) delivering above median performance.
Thus they seem well placed to continue their growth, despite difficult markets, as they continue with international expansion and product diversification efforts. Therefore I was a bit surprised to see the shares off first thing, but then the overall market was down too. Thus at the current price around 400p they trade on a reasonable looking 14x with a 6% yield before any changes to numbers, which as discussed above could be moving upwards given the beat in today's numbers.
Looking at the chart (below) the shares have, unsurprisingly, come back quite sharply with this years market correction given their gearing into that. Given that the overall market has now rallied up to and seems to be backing away from resistance, then you might also get a better buying opportunity in this one in the weeks and months ahead, with the 320p to 360p looking like a reasonable band of support. Unless of course we really are entering an extended bear market, in which case you probably wouldn't want to be loading up on fund management groups.
Talking of bear markets, I should have an update to the simple market timing indicators for you tomorrow, which will probably still indicate that UK markets remain in negative down trends in relation to their 10 month moving averages. However, I have read some interesting research recently which can enhance the success rate and reduce the whipsaws on these indicators so don't forget to check back if that is of interest to you.