Our last report discussed a possible balance sheet for a hypothetical “man on the Clapham omnibus”. Ignoring the liability side the example below details one hypothetical asset mix for different age groups. We have bolded below the investable assets.
| Age Group | 30-40 | 40-50 | 50+ |
| Long term assets | £k | £k | £k |
| Property | 200 | 300 | 400 |
| Intangible assets / i.e. State pension / SIPP/ life policies | 10 | 20 | 50 |
| Personal effects/ Furniture | 10 | 10 | 10 |
| Realisable commodities gold coins / alt assets | – | – | – |
| Bonds/ NS certificates | 10 | 20 | 60 |
| Equities | 30 | 40 | 50 |
| Short term assets | |||
| Cash /Cash ISA | 10 | 10 | 10 |
| CFD other cash positive Derivative assets | – | – | – |
| Total Assets | 270 | 400 | 580 |
| Portfolio Assets/ Total Assets | 60 (22.2%) | 90 (22.2%) | 170 (29.3%) |
| Liquid Assets/ Portfolio Assets | 50 (83.3%) | 70 (77.8%) | 120 (70.6%) |
| Illiquid Assets/ Portfolio Assets | 10 (16.7%) | 20 (22.2%) | 50 (29.4%) |
Source; CSS Investments Ltd
The above provides pointers for measuring asset mix weightings. Certain features are apparent which could be broadly relevant for the majority of individuals:-
Broadly this helps determine how to allocate / supervise assets within an asset mix.
A number of assumptions / objectives were made to derive a balanced portfolio.
*An objective to obtain a sector diversified UK 100 portfolio that uses the assumption that returns over the last 60 months (5 years) are representative of returns going forward.
*A decision to take out mining companies due to a decision that exposure to China going forward is undesirable in the short-term.
*Using equity average returns measured against the riskiness of those returns as measured by standard deviation, to derive a balanced portfolio that optimised returns and minimised portfolio risk.
Aviva is UK 100 listed life assurer/ fund manager/ savings/ pensions/ healthcare assurance specialist. The Sept-Oct 2014 sell off has brought Aviva back close to MCEV (488p)
| Company | Aviva |
| Share Price | 489 |
| Target Price | 550 |
| 52 Wk Hi/Low | 535/412 |
| Shares O/S | 2.948bn |
| Market Capitalisation | £14.4bn |
| Avg Daily Volume | 4.27m |
| Dividend Yield | 3.20% |
Source; Fidessa plc
Key Catalysts
Improving combined ratio (95.5%) at the interims could improve in H2 due to relatively benign claims environment/ absence of major large cat events. Steady embedded value (478p) should 4p-10p gain in H2.
Aviva’s progress in reaching key metric objectives, cash (+7%), op profit (+4%), expenses (-8%) is taking place in the context of a rapidly changing UK pensions environment with further changes expected in 2015.
Key Risks to Price Target
Please note the risk warnings and disclaimers on the last page of this document.
The Bankers Investment Trust is a UK 250 listed investment trust run by Henderson Group, itself a UK 250 fund management co. An in depth report on Bankers Investment Trust was written on 9th October 2014 and is available on www.css-investments.com.
| Company | Bankers Trust |
| Share Price | 527 |
| Target Price | 600 |
| 52 Wk Hi/Low | 595/519 |
| Shares O/S | 112.1m |
| Market Capitalisation | £590.8m |
| Avg Daily Volume | 83.2k |
| Dividend Yield | 2.80% |
Source; Fidessa plc
Key Catalysts
Bankers Trust net asset value at 554.9p has trended down from 604.2p (4th September 2014) the recent 2014 high. The 8.16% decline has outperformed the 12.2% decline in the UK 100 over the period 4th September – 16th October 2014.
Key Risks to Price Target
BP recent weak newsflow, Rosneft, US Dept of Justice, lower oil prices during Q3/Q4 and knocked an improving story on E&P and shareholder returns. As the divestment phase winds down, we expect increased share buybacks /QTR dividends and improving clarity on liabilities.
| Company | BP |
| Share Price | 425 |
| Target Price | 500 |
| 52 Wk Hi/Low | 524/416 |
| Shares O/S | 18.32bn |
| Market Capitalisation | £77.85bn |
| Avg Daily Volume | 56.5m |
| Dividend Yield | 5.60% |
Source; Fidessa plc
Key Catalysts
Q3 on 28th October should see the board finally lift the provision for Macondo possibly by $9-$10bn to reflect the Barbier finding of gross negligence (now on appeal). The existing provision of $3.5bn assumed negligence which is unlikely in our view. Still the recent sell off seems over done; market cap ($123bn) now $11bn under net assets ($133bn H1 2014) pricing in the provision.
Key Risks to Price Target
Carnival Corp is a cruise line owner operator with brands, Carnival, Princess, Holland America, Cunard, AIDA, Costa, Ibero Cruises, P&O Cruises.
| Company | Carnival Corp |
| Share Price | 2180 |
| Target Price | 2400 |
| 52 Wk Hi/Low | £26/ £20.60 |
| Shares O/S | 216m |
| Market Capitalisation | £4.7bn |
| Avg Daily Volume | 912k |
| Dividend Yield | 2.75% |
Source; Fidessa plc
Key Catalysts
Q3 2014 saw operating margins rise to 26.23% from 20.12% helped by falling fuel prices, a trend for FY14.The Fuel Conservation Program – expected to save $2.4bn in costs is an encouraging tailwind for Carnival.
Carnival is also seeing top line revenue growth $12.16bn v $11.8bn at the nine month stage. Relatively strong pricing power and the demographic positives are in evidence.
Key Risks to Price Target
GSK is a leading global pharmaceutical company specialising in oncology, HIV, respiratory, cardiovascular, vaccine and consumer goods.
| Company | GSK |
| Share Price | 1336 |
| Target Price | 1600 |
| 52 Wk Hi/Low | 1690/1324 |
| Shares O/S | 4.85bn |
| Market Capitalisation | £64.79bn |
| Avg Daily Volume | 6.1m |
| Dividend Yield | 6.04% |
Source; Fidessa plc
Key Catalysts
Q3 2014 on 22nd October should clarify the nest step post the China fine ($500m) September 19th and GSK’s bribery conviction.
The interims made clear GSK sees FY14 as “broadly similar to FY13” but investors are concerned over the potential for further slippage. The reversal to near 52 week lows should reward patient holders with Q3 also expected to see more clarity on the GSK pipeline.
Key Risks to Price Target
HSBC is a top financial institution, headquartered in the UK with its core businesses in the UK and Hong Kong.
| Company | HSBC |
| Share Price | 619 |
| Target Price | 700 |
| 52 Wk Hi/Low | 703/589 |
| Shares O/S | 19.18bn |
| Market Capitalisation | 118.7bn |
| Avg Daily Volume | 18.5m |
| Dividend Yield | 4.79% |
Source; Fidessa plc
Key Catalysts
Our expectation is for HSBC to rethink the share buyback (ditched for 2014) but left open for 2015. We are expecting 2014 dividend to be 52 cents. HSBC’s recent US settlement of $550m (mortgage bond mis-selling) despite the fact the securities sold never missed a coupon or capital payment looks very odd in our view. Our expectation is for further impairment decline, alongside higher net interest margins as boosting HSBC looking ahead 6-12 months.
Key Risks to Price Target
Unilever is a leading consumer goods company operating in personal care, foods, refreshment and home care. Unilever brands include Hellmanns, Flora, Ben & Jerry, Magnum and Persil.
| Company | Unilever |
| Share Price | 2465 |
| Target Price | 2700 |
| 52 Wk Hi/Low | 2729/2306 |
| Shares O/S | 1.283bn |
| Market Capitalisation | 31.65bn |
| Avg Daily Volume | 2.22m |
| Dividend Yield | 3.72% |
Source; Fidessa plc
Key Catalysts
A multiple reversal back to 19.9x from 22x reflects concerns over end retail demand in core markets and a slower Asia Pacific/ emerging market. Ahead of the key Q4 period and with prelims on 21st January 2015 expectations have been lowered. However trading should not obscure the benefits of the Slim Fast exit and re-positioning that saw profit grow €400m to €2.82bn at H1. The reversal present a reasonable entry into a very solid performer.
Key Risks to Price Target
Vodafone(VOD) BUY
Vodafone is a leading telecommunications group with significant presence in EU, Middle East, Africa and Asia Pacific.
| Company | Vodafone |
| Share Price | 187 |
| Target Price | 220 |
| 52 Wk Hi/Low | 252/184 |
| Shares O/S | 26.5bn |
| Market Capitalisation | 49.58bn |
| Avg Daily Volume | 52.5m |
| Dividend Yield | 5.96% |
Source; Fidessa plc
Key Risks to Price Target