There’s only one thing more pleasing than seeing a company that looked down and out bouncing back against all expectations, and that’s when you happen to own shares in it.
I’m always sceptical of turnaround strategies until they prove they are actually working. But one has to admit that a trebling of profits at construction group Balfour Beatty (BBY) on flat revenue is highly encouraging, even if figures were flattered by the judicious sale of a stake in a motorway consortium. The dividend total is up from 2.7p to 3.6p, enough to keep shareholders happy without being rash.
Chief Executive Leo Quinn has worked wonders since his appointment in 2015, ending the disaster of making uneconomic bids for contracts and steering the group away from the fate suffered by Carillion, the rival that once tried to take Balfour over.
Balfour shares have moved erratically sideways between 250p and 310p for the past 19 months. They are currently around the midway point but I reckon they will test the ceiling again rather than the floor.
Life has not been so kind for shareholders in rival Kier (KIE), where results were greeted with an initial rise of 12p, followed next morning by a fall of 62p. The shares have lost more than a third of their value over the past 12 months as investors speculate that Kier rather than Balfour could turn out to be the next Carillion.
Underlying figures at the half year were solid if unexciting and the outlook for the second half is somewhat better. I think that Kier, like Balfour, will eventually turn the corner given that a major competitor that helped to drive down prices on projects has been removed. However, the shares have a downward momentum that is frightening, so I wouldn’t suggest buying Kier shares until there is a clear sign that the tide has turned.
Don't Sell in May
I know Christmas comes round earlier each year but I’ve never seen anyone parrot the “Sell in May” mantra quite so early. Yet this week I saw a tweet arguing that there was “strong statistical support for sell in May”. The evidence was that shares on average rise “only” 0.3% between May and October.
On that basis if you sell in May you will be 0.3% WORSE off than if you stayed in – and that’s without counting in the dividends you gave up. If that’s the best a protagonist can manage I’ll stick to my annual warning that you follow this erroneous notion at your peril. It does work some years but over time it leaves you out of pocket.
And that’s a cue to warn readers that the ISA year is running out. Don’t scramble to invest at the last moment. If you have any ISA money uninvested, transfer it into your ISA stocks and shares account where it will count for this financial year even if you don’t actually buy anything.
Springing No Surprises
A brief postscript on the almost non-event that was the Spring Statement. The highlight of Philip Hammond’s performance was when he almost broke into a grin when he said the Brexit talks were making good progress.
I suspect there is a growing body of opinion that, like me, thinks the economy is far better off under a Chancellor who follows the motto of “least done, soonest mended”. He’s a massive improvement on George Osborne, who mistook Budget presentations for party political broadcasts.
The projected scaling down of this year’s deficit and scaling up of economic growth were both disappointingly underwhelming but at least both were in the right direction. One day we will – except Mr Hammond – look back on all this and laugh.
