The great mystery of the Autumn Statement is why it took Chancellor George Osborne a whole hour to deliver it. Like previous Chancellors, he shuns the opportunity for brevity when he has centre stage.
So what was in it for investors? Precious little once you take away the rhetoric. Certainly no concessions on stamp duty on share buying, which is too good an earner that cannot easily be evaded. The ISA limit is frozen thanks to zero inflation except that you can now put crowdfunding debt into it. I’ll give that a miss.
Some investors thought that a promise to build more homes was a reason to buy into housebuilding shares. Mortgage lending figures issued the same day were good for house builders but there was nothing tangible in the Autumn Statement that justified the surge in shares in the sector.
If anything, the clobbering of buy-to-let landlords with extra stamp duty, coming on top of proposals to end mortgage interest relief, is a dampener on demand and will push more buyers into the lower end of the market at a time when house builders are trying to sell dearer houses. Thus it will be even harder to get onto the first rung of the property ladder.
I don’t see this as any reason to give up on house builders and I am retaining my two holdings in this sector, having just received a dividend from Barratt Developments (BDEV) equivalent to 18% of my purchase price.
The main benefits will come to infrastructure companies and those providing outsourcing services. No wonder Serco’s (SRP) battered shares leapt 5%. The time delay between utter disgrace and total rehabilitation is remarkably short when it comes to winning government contracts. Putting services out to private contract does a lot more for boosting private profits than it does for improving services or reducing the burden on the taxpayer.
Kier (KIE) could be worth looking at around 1,300p – they topped 1,500p as recently as September and six stockbrokers have target prices above 1,400p. It is already benefiting from the housing boom, although that is less than 10% of its business, and has wider interests in construction and support services.
I already own shares in Balfour Beatty (BBY), another potential beneficiary. More infrastructure work will help it put its recent troubles behind it but I feel that the share price has recovered far enough for now and the case for buying is rather less compelling.
Aerospace and armaments makers should also do well from increased defence spending. I am not an ethical investor but I have personally baulked at taking blood money. However, I have to admit that this attitude comes at a price. BAE Systems (BA.) has long offered a juicy yield because others like me have been reluctant to buy. The shares are undervalued for those who are less squeamish.
‘Every Portfolio Should Have a Utility’
Water companies complained in advance about the tougher pricing regime imposed by the regulator Ofwat yet they seemed to have adapted remarkably well. United Utilities (UU.), Severn Trent (SVT) and Pennon (PNN) have all produced reassuring updates. Every portfolio should have a utility – in my case it is United but I would be perfectly happy with either of the others.
Here comes Santa Claus (or Not)
I resolved not to mention the much hoped-for Santa Claus rally again, as each time I do the rising market falls back. The best we seem able to do is bump the sleigh along the bottom. Nonetheless, the jittery markets have shown some resilience in the face of repeated bear attacks.
Thus I remain fully invested and am looking to invest the accumulated dividend payments in my ISA account. I have committed the cardinal sin of waiting for the right moment, which like tomorrow never comes. So I resolve to make a purchase before the end of this week.
