The Greek tragedy has taken on Jacobean proportions in the length of time it is taking to play out the final act. Even John Webster in the Duchess of Malfi managed to dispatch the dying players more speedily than this.
I have long held the view, repeated in this column, that the European Union and Greece would eventually find some fudge on Greek debt that would postpone the hour of reckoning until the next crisis. Both sides have so much to lose.
That hope is no longer realistic. Greece has, legitimately under International Monetary Fund rules, postponed its immediate repayment to the IMF until the end of this month, when it will roll up three repayments into one.
Or not, since Greece is no nearer to borrowing cash from the European Union to pay its debts to the IMF. In the crazy world of brinkmanship, this is one brink too far. Stock markets have decided that the final curtain will at last come down on a production that has teetered into farce.
It is a test of nerves for investors but I intend to stay fully invested and to look for buying opportunities. The removal of uncertainty when Greece defaults could lead to a surge in share prices.
When Mergers Work
There are few words that bring more music to the ears of an investor than the phrase: “profits will be ahead of expectations”. Not even the addition of the word slightly can take the edge off that.
Just short of one year into what looks increasingly like a very successful merger, electrical goods and telephones retailer Dixons Carphone (DC.) says profits for the full year that ended on May 2 will be slightly above the top end of the previously guidance range of between £355 and £375 million.
In the UK and Ireland, like-for-like sales were up 13% in the final 17 weeks, much better than the perfectly acceptable growth in the previous three quarters. Dixons has gained market share in Scandinavia and Greece. The only black spot is Spain, but nonetheless total group revenue is up 6% for the year, with the fourth quarter figure even better at plus 9%. Gross margins were stable.
Chief executive Sebastian James says the merger is working well and while further investment is required it is reassuring that no nasties have emerged in this process.
Dixons shares have been on a rise since the merger and were particularly strong ahead of the trading update, gaining 60p to around 480p over the past four weeks. Even so, they did not deserve to run into the profit-taking that greeted the update. Shareholders should stay in for the foreseeable future.
Vodafone Shares Fall
Investors should read every stock market announcement to the end, especially when it is only four thin paragraphs long.
After weeks of speculation intensified this week, telecoms giant Vodafone (VOD) confirmed that it is in talks over doing a deal with rival Liberty Global. Although talks were said to be in the early stages, that confirmation was enough for an immediate 2% rise against a sea of red across the FTSE 100 stocks.
Given that only five minutes earlier I had confidently forecast on Share Radio that Vodafone shares would fall, that was a shock lightened only by the fact that I have a holding in the company. However, it didn’t take long after the kneejerk reaction for investors to see what bothered me. These were talks on trading assets, not on a merger as the rumours had suggested.
Vodafone shares were soon in negative territory. This was more of a denial than a confirmation.
