Hotel Chocolat, the innovator of the chocolate bond, which allowed customers to invest in the business in return for repayment in chocolate, recently IPO’d and all the institutions involved in the float have since seen their investment increase by more than 30% – and the stock price is still rising.
A regular request from readers of this blog is for further advice on the subject of how to minimise the risks of investing in smaller companies and to provide an insight into the portfolio of UK funds which are so invested. Many express confidence in the ability of smaller companies to outperform larger ones (citing such logical factors of their being more flexible and adaptable), but are wary of the inherent risk that smaller firms are more likely to fail. The merit of spreading monies over many business sectors, as well as a larger number of individual companies, is especially pertinent to investment in smaller companies.
Most readers will appreciate the merits of diversification – of assets or within a particular asset class – and then tend to increase exposure in certain areas according to their assessment of where best value or opportunity resides.
September proved to be a sunny month for London, both in weather and stock market terms, recording the highest temperature (34 degrees centigrade on the 13th) of the year and UK equities within 3% of its all-time high (FTSE100 index reached 7,103 in April 2015). Benign geo-political, economic and corporate news has represented a fair tailwind, encouraging followers of momentum to talk bullishly of further progress in the final quarter of the year.
Two recent pieces of news flow from stock exchange listed companies caught the writer’s eye, as they seemed to represent critical points in each company’s development and whose share price appears to be on the threshold of making a significant move (one way or the other) as a consequence.
As I write, this company in the support services sector is showing a dividend yield of 6.9%. At its 52 week high, it was 5.4%. So you might think it was in the 25 stocks I mentioned in my ‘rewarding strategy’ article, but it wasn’t. This was because, even though it is in the particular portfolio I mentioned in that article, I cannot be wholly confident of the dividend’s sustainability.
ARM Holdings has been acquired by Japan’s Softbank Group. Do you mind? Some people do, either because they think ARM was sold cheaply, or because it’s yet another British champion sold overseas. Alex Brummer, City Editor of the Daily Mail, calls it “an ill-conceived deal conducted with undue haste” and “an economic error”.
This is an article about dividends. The generation of profit is fundamental to equity investment, even though share prices are often driven by other factors. Companies can generate profits without distributing them, but for some investors the distribution is what matters.
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