A reflection on some of my earlier share picks

As the year draws to a close, I feel now is the perfect opportunity to assess how some of my earlier picks have performed.

2017 has been a very good year for the equity markets, with the FTSE100 and FTSE 250 indices all performing very well in the year, returning 7.1% and 14.25% respectively.

Prior to my picks of shares for 2018, I have written analysis on 3 companies, namely Lloyds Banking Group on the 17th of September, Greene King on the 11th of October and Easyjet on the 15th of October. Performances since then are as follows:

  1. Lloyds Banking Group (LLOY)

Since my posting on the bank, the share price has risen by 3.67%. This lags behind the FTSE 100 which has gained 6.55% in the same period. However, extrapolating the gain on Lloyds in the period since my initial posting to a full year yields just under 14%! So I’m reasonably happy with the performance here, and suspect a good 2018 for the bank is on the cards since it’s one of my picks for the year.

As mentioned in my previous article (which can be read here), Payment Protection Insurance claims payouts have been a real headache for Lloyds, having cost the bank in excess of £3bn. However, it is believed by analysts that no further provisions will be required, which should see a significant rise in statutory profits when the full year results are announced in February.

Also, the net interest margin the bank earns on its loans should rise, due to the Bank of England finally raising interest rates for the first time in a decade. Finally, the Brexit negotiations finally appear to be making some headway, with discussions allowed to move on to the next phase, and the confirmation that any final deal will be subject to full scrutiny by the houses of parliament. This is welcome news to investors who have become unsettled by the uncertainty that has been hanging over the UK economy.

 

  1. Greene King (GNK)

Since my previous post (see link), the shares have made a gain of 3.16%. This has out-paced the FTSE 100 index in the same period by 1.12%, which in turn made a gain of 2.04%. Similarly extrapolating this gain in Greene King to a full year yields a very strong 15.66%, so I’m delighted by the performance to date.

I posted about my bullishness on the pub, being a strong income buy for investors, since dividend paid on current prices are very high-yielding, and covered at least twice by net profits. Also, the dividends have been increased every year for over a decade.

Investors have turned bearish due to a fall in like for like sales posted prior to the interim results, which in turn reported an 8% drop in profit before tax. This has lead the firm to maintain a dividend of 8.8p, which is the same as last year. However, on current prices, assuming the final dividend at June is similarly held, this would lead to a yield of 6%! So I’m sticking with Greene King as of now, and hopefully signs of improvement will be realised at full year in June 2018.

 

  1. easyJet (EZJ)

Of the 3 postings, EasyJet has been by far the strongest performer of my picks, gaining a staggering 11.5% since my posting up to now. This blows the FTSE100’s gain in the same period out of the water, having grown just 2.02% in comparison!

I have been optimistic about easyJet’s prospects, especially since competitive pressures for the short haul flight market are likely to ease with Monarch’s collapse and further market share gained after acquiring some of insolvent Air Berlin’s assets.

Since my posting, easyJet has posted a full year report with a very optimistic outlook. Although headline profits are down 30% on last year, the flight has had record numbers of passengers, with more expected next year as forward bookings have exceeded last year’s. They also clearly anticipate an improvement in profits in 2018, as implied in their outlook on dividend policy, stating, “easyJet’s policy of paying its dividend from headline profit after tax is expected to deliver dividend growth in 2018 financial year”. In the challenging year for the airliner due to the pound’s fall impacting margins, the firm has rigorously cut costs, with headline cost per seat (minus fuel and disruption) level with 2 years ago. Also it will be able to operate in a post Brexit Europe, having successfully established its Air Operator Certificate. I think 2018 will be an exciting year for the firm from an investor’s point of view, assuming there are no real shocks along the way.

 

Although this is a fairly short time period, I can’t help but feel very encouraged by the performance of my picks! I am hopeful of seeing similarly strong results in my pick of 5 for 2018. Of course I remain cautious, as none of us can see reliably into the future. However, I will keep an eye on the portfolio over the course of the year, and will aim to write an update on a quarterly basis. As things stand, share prices of my pick of 5 (which can be read here) are as follows:

  1. Legal and General (LGEN): 273.3 pence
  2. Hollywood Bowl (BOWL): 206 pence
  3. Taylor Wimpey (TW): 206.4 pence
  4. Lloyds Banking Group (LLOY): 68.06 pence
  5. Moss Bros (MOSB): 90 pence

Have a great new year and I’ll see you all again soon!

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