In part one, I talked about some of the complexities around the FTSE 100 today...but finished the piece by promising some stock picks. Before I get into these I have to highlight Nigel's recent piece, which absolutely nails the opportunities around names such as BT Group (BT.A), Centrica (CNA) and ITV (ITV). Aside from those three names, I think you beat the patchy outlook for the FTSE 100 on larger cap shares in three different ways over the next year.
The first I will call 'dividend plus' and plays on a similar theme to Nigel's 'dividend muncher' piece. Picking up decent yields, possibly augmented by a bit of capital growth, may well provide an index thrashing total return. I am not going to provide a links fest, but I encourage you to use the ShareProphets search functionality to read my recent articles on names such as Royal Mail (RMG) and Imperial Brands (IMB). The second theme I am going to call 'macro' and is linked into the big fears out there I mentioned in part one: higher rates, world trade angst and - within the context of the UK - inevitably Brexit. For me the big opportunities from these themes are in areas far removed from the recent technology sector love-up, more emerging market-facing assets and in more domestic UK stocks.
You cannot get further removed from the technology sector than the gold space and I would still be long the out-of-favour Randgold (RRS) and Polymetal (POLY). On the emerging market facing assets (again use that search functionality!) PZ Cussons (PZC) strikes me still as a good buy. Finally, if you want to play better perceptions towards domestic UK opportunities (and I think it is coming) then Dixons Carphone (DC.), Greene King (GNK), Dunelm (DNLM) and Kingfisher (KGF) among others all have angles.
The final theme is 'idiosyncratic' and is the purest stock picking aspect out there. If you want to beat the FTSE 100...you have got to get specific. I made Wood Group (WG.) one of my tips of the year because of the scope from the takeover synergies with Foster Wheeler. Ibstock (IBST) shares should not have got hit by an investment plan that will boost its capability to help close further the supply inability currently apparent in the UK brick industry. Meanwhile FirstGroup (FGP) has turned down one bid already...but has a very cash generative bus business and an ability to refinance a lot of its debt. Finally, Quilter (QLT) has been recently spun-out and the entrepreneurial management team has a lot of self-help capability. In short...much you can be doing rather than buying a tracker fund and worrying where the FTSE 100 may or may not be going.
Filed under: FTSE 100, Chris Bailey, Lenigas, Haydale, Toople, Koovs, TomWinnifrith.com
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