Equities Update: M&S, Persimmon, BTC…

Marks & Spencer’s incredible run shows no sign of slowing down

 
<Mark Crouch, market analyst at investment platform eToro, says: “M&S shareholders might still be pinching themselves when they consider where the company was just two years ago. Cast adrift after years of disappointment and false revival hopes, a further decline was seen as inevitable. However, since then M&S shares have trebled, surging to an eight-year high, leaving analysts running out of superlatives to praise the retailer.

“The dramatic turnaround has been in no short part down to a clear and ambitious gameplan set out in 2022, that has been executed, almost to perfection, investing in opening new stores, modernising supply chains and improving value. As a result M&S has again posted a better-than-expected rise in first half profits, and unsurprisingly food sales lead the way, up 8.1%, while clothing and home sales increased by 4.7%.

“The only thing more empathic than the scale of Marks & Spencer’s comeback is the speed in which it’s happened. The company’s market share has increased as the food and clothing retailer continues to out-muscle and out manoeuvre its competition. And so, the struggling business of 2022 is gone and in its place is a modernised, quality retail powerhouse, whose rampant rise shows no sign of slowing down.”

Persimmon flags cost concerns

Adam Vettese, market analyst at investment platform eToro, says: “Housing was a major focus of the new government and Persimmon, being one of the big players, might have expected to be a winner from policy that helped builders in Britain. This morning Persimmon has reported that sales are comfortably ahead of last year but the company has flagged that higher input costs and a potentially slower arc of interest rate cuts could prove to be a challenge. 

“Costs have been spiralling for builders for some time so this is not anything new, and with inflation coming under control, shareholders might have expected a bit of relief going forward. This snag seems to have upset the market despite a ‘nailed on’ interest rate cut tomorrow. After flying high at the loftiest price in two years, Persimmon shares have dropped the best part of 20% in all but a few weeks. Some investors may favour picking up shares at a discount if they have faith that the government’s building plans will come good.”

BTC projected to surge after Trump victory

Javier Molina, market analyst at investment platform eToro, says: “With Donald Trump’s victory in the U.S. presidential election, the crypto asset market—particularly Bitcoin—has started to react, anticipating potential policies that could favour these digital assets. Technical projections place Bitcoin’s price between $80,000 and $90,000 before his inauguration in January 2025.

“A combination of Trump’s favourable stance toward the crypto ecosystem and the expectation of a more permissive regulatory environment suggests an interesting outlook, though not without risks. It’s intriguing to see how some “memecoins” like $DOGE (Elon Musk’s favourite) have gained 20% amid these lofty expectations, which, in my view, may be challenging to fulfil.

“Trump’s victory represents an opportunity for crypto asset enthusiasts and believers. His administration has expressed an intent to make the United States the “world capital of Bitcoin and cryptocurrencies,” suggesting a possibly more supportive approach toward this sector.

“This regulatory backing could encourage major institutions to move toward Bitcoin, increasing institutional adoption and, in turn, driving up demand and value. Similarly, if monetary policy loosens further and interest rates continue to decline in the United States, risk assets like Bitcoin could benefit even more, as investors look for alternatives to diversify their portfolios in a cheap-money environment.”

If you are looking for something other than Trump today, please see comments below from Lucas Maruri, Equity Portfolio Manager and part of the Discretionary Portfolio Management team at MAPFRE AM, who has picked out the automotive sector as one to watch in his latest Q&A around investment experiences since joining the Group.

“The sector is experiencing historically low valuations, which could lead to interesting opportunities in the near future,” he says.

“European and American manufacturers must find ways to compete with the aggressive supply of electric vehicles from Chinese manufacturers, who have become highly competitive in pricing and have increased their services significantly in recent years. This has led to the dominant position of large makes being threatened, as these are less cost efficient. Investments are being heavily geared towards new platforms that support the renewal of vehicle catalogs and offer a range of technologies (MHEV, HEV, PHEV or 100% electric hybrids).”

“It’ll be years before we find out who are the ultimate winners in this new competitive environment, which is currently exerting significant pressure on prices, profitability, and cash generation capacity for most companies. However, given that the market is well aware of these realities, the sector has reached a historic low point regarding valuation levels, which could pave the way for exciting opportunities in the near future.”

Lucas also comments on European PMIs, the Middle East and electricity generators.