Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
There is widespread agreement that financial education in this country is lamentable.
This manifests itself in so many ways, from the fact that many people just leave significant cash deposits in banks earning next to nothing, to the large numbers choosing Cash Isas.
On top of this come, unfortunately, the very substantial number of young people attracted by risky “day trading” or the temptation of cryptocurrencies.
I find it extraordinary that, at a time of near-zero interest rates, a company of the quality and strength of Legal & General — which is so sound that its shares are, to my mind, virtually equivalent to private sector gilts — offers a dividend yield as high as 6.5 per cent. Yet this financial services group is seemingly spurned by all those savers sitting on bank deposits.
Yes, of course, schools must do more, but I have long believed that the total failure of television to focus programmes on stock market investment is a national tragedy.
For years I have banged on about this, including writing to the director-general of the BBC, but sadly got nowhere. Programmers seem unconvinced that there would be much viewer appetite. And if they take a look at the current regulations on financial programmes imposed by the regulators — the Financial Conduct Authority and Ofcom — they run a mile!
So, in frustration, I am urging the government to meet representatives of the major television channels and the regulators to discuss encouraging the development of programmes that promote share investment in UK-listed companies.
ShareSoc, the leading representative body of private shareholders, where I am patron, strongly supports this initiative. It is my contention that the whole relationship — or lack of it — between TV and our hugely important savings and investment industry needs to be totally rethought.
How can it be right that betting and gaming adverts are allowed on television, yet financial advertising is effectively banned because the conditions are too onerous? It may well be that this was not the original intention of the FCA and Ofcom, but there can be no denying the result.
How does this square with all the financial advertising allowed in the newspapers, on tubes and sports facilities? The lack of television advertising loses a great opportunity to increase the number of private investors and raise awareness of our many outstanding large and small companies in which ordinary savers can invest. How can we grumble about the undervaluation of UK companies if their merits are hidden from so many?
Of course, one cannot place the blame for the undervaluation solely at television’s door. Corporate management must also look at itself. For example, has the board of the Wm Morrison’s supermarket chain drawn sufficient attention to the value of its properties or the strength of its business, in its proposed sale to private equity buyers?
Surely, executives should have taken action long ago to boost the market value, for example with a shareholder discount card. Investors cannot be blamed for focusing on cash on the table if boards do little to build bridges with their shareholder base. Just fulfilling minimum statutory requirements isn’t enough.
Turning to my own portfolio, the past quarter has seen my big favourites — Anpario, natural stimulants for animal growth, Cerillion, telecoms billing services, Lok’nStore, storage, and Treatt, flavours and fragrances, performing well. Regretfully, I switched out of Legal & General into more Aviva and M&G, judging them to have greater capital potential. My only real “dog” has been Appreciate PLC, the UK’s leading multi-retailer redemption product provider, where the jury is out, as the shares are down 15 per cent this year. Institutional investors seem to have given up on the company, but I am giving them the benefit of the doubt, waiting to see a full year of normal trading.
In managing my portfolio, I spend considerable time studying the precise words and underlying tone of chief executives’ statements and also noting carefully any new hands on the tiller.
For some time I have had a useful holding in Vitec, a hardware/software equipment supplier to the creative content sector, adding last year at a very attractive £6.40 a share.
However, I have become even more excited by its positioning and potential. Recent interims show a big recovery in profits, with chief executive Stephen Bird saying: “The content creation market is a great place to be. The pandemic has accelerated the democratisation and digitalisation of media, driving a permanent structural change to the market. There has been a dramatic increase in the capture, consumption and sharing of video and scripted TV content, and Vitec is right at the heart of this vast growing market.”
Bird added: “The group is well placed for long-term sustainable growth and value creation for all our stakeholders”. I have added sizeably at between £13.39 and £14.70 — they are now pushing on £16, but I believe still have a great opportunity to grow further.
To finance these purchases, I reluctantly sold a number of smaller holdings, taking good profits from Kooth, STV and Tatton Asset Management. Following the arrival of new chief executive Miles Adcock, with a background in large-cap defence, I am keeping a close eye on Concurrent Technologies — a niche provider of specialist super-tough computer boards, where I first invested in 2009. This little gem with its very strong balance sheet and entrée into the defence sectors — 75 per cent of revenue — with 40 per cent of business done in the US — is already aboard many of that country’s most advanced defence/space programmes. Concurrent clearly provides a great platform for the new chief executive to promote his agenda and ambitions. Very much one to watch.
Finally, a mention of a new holding — builders and plumbers merchants Lords Trading Group — from which I hear good reports. I bought at 100p on flotation in July. They are already travelling well at 120p, and with material shortages and product price rises, with DIY buoyant and supplies short, I hope that a happy future is in prospect.
Lord Lee of Trafford is a private investor and author of “Yummi Yoghurt — A First Taste of Stock Market Investment”. He is a shareholder in the companies indicated