Highlights
- Although the financial sector was the main culprit, only 1 out of 6 sectors were in positive territory
- Small Caps have lost steam down 11.2% in November
- Bright spot continues to be spurned by M&A rumours particularly in the utilities and mining sector
- For the last 5 years December has performed extremely well. Expect the same.
- The UK trading at a slight discount to its historical price earnings
- Telecommunication services and hotels could surprise in the next 3 months.
In the Numbers
- FTSE All Share 2007 EPS growth rate is 5.7% , which has been revised down 2% from the beginning of the year
Bulls – Performance (3 month EPS 07 revisions %)
Hotels 15.3%
Defence 10.8%
Insurance 10.3%
Bears - Performance (3 month EPS 07 revisions %)
Household Goods & Textiles - 10.3%
Construction & Building Materials - 4%
Banks - 2%
Scorecard: Performance of the FTSE All Share (Excluding Investment Trusts)
Evolution of FTSE All Share Growth Rates
The symptoms in the US are starting to spread in the UK. Banks, politics and real estate are all showing serious signs of weakness. In the wake of this obscurity December looks anchored to produce decent returns. We recommend staying with securities that are trading at a relevant discount to its 5 year historical price earnings average, while showing rising revision rates. Telecommunication services and hotels come quickly into mind that might reap benefits from this strategy. We advise to stay away from small caps.
These views are independent of FactSet Europe Ltd and are proprietary to Bobby Rakhit. For any comments please contact rakhitreport@yahoo.co.uk.