Derek Pain: I'll ignore sell talk and keep Whitbread
No Pain, No Gain
Friday 21 December 2012
The City seems to have mixed feelings about the Whitbread leisure group. Whereas some stock-market players enthusiastically claim the shares are on the way to 2,650p – even 2,800p – others are much more subdued.
Indeed, it is not difficult to come across those who suggest selling is the order of the day. According to many stockbroker analysts, the shares will suffer from profit taking and it would be wise to at least trim holdings. There is also a feeling that the group faces some uncomfortable trading as customers tighten their belts.
True, Whitbread shares are not in the bargain basement. The no pain, no gain portfolio has enjoyed a generous time since it invested at 1,105p in July 2008 against, as I write, 2,419p.
Like all consumer-facing businesses the budget hotels, pub/restaurants and Costa Coffee group, operates in a tough environment. Yet it enjoyed robust trading in its third quarter and seems to be on track to meet, and possibly exceed, City expectations.
The powerhouse is the Costa operation. At the last count the rapidly expanding division embraced 2,437 coffee shops and 2,365 stand-alone coffee machines. To add a little caffeine stimulation to Costa's growth there is every possibility that it will continue to benefit in this country from rival Starbucks' tax humiliation. There is also the prospect that Whitbread will eventually float the coffee side as a separate company. So the portfolio is hanging on to the shares.
The trading update came too late for my portfolio valuation, published last week. Nevertheless, its performance, which briefly pushed the shares to 2,557p, represented a high note on which this column ends 2012 as my next effort will not appear until next year.
There is, it appears, a view that it could be a rewarding one. Schroders, one of the City' oldest names, is bullish. It says unequivocally : "We have already passed the low points for UK equities – below 3,500 on FTSE 100 twice in the last 12 years – and are in the foothills of a new bull run." And AXA Investment Managers suggest being "overweight" in shares.
Others who are relatively cheerful include Aberdeen, the investment group, claiming "investment opportunities remain" despite world economic uncertainty and Bestinvest which says shares provide better value than fixed-income offerings and adds: "Equity yields are also attractive and well covered by underlying earnings."
The closing year has yielded some smart returns as evidenced by the Footsie advancing some 500 points although it is still a long way from the high achieved at the turn of the century when it almost touched 7,000.
I am happy to go along with the optimists; shares should make further headway next year, although I would be surprised if the old peak is conquered. After all, the euro crisis and worldwide economic problems are unlikely to be resolved in the coming 12 months.
One share, naturally a no pain, no gain constituent, I expect to perform is Northern Petroleum. It has been something of a disappointment with the stock market unwilling to accept the valuations flying around. The dry well off the South American coast that I referred to last week has, I believe, had an unjustifiably severe impact.
Director buying has helped lift the price from 48p to around 57.5p, still below the portfolio's 68p investment. T1ps.com, the internet website, points out that Northern's stake in the South American exercise may be worth £60m. At the present £54m capitalisation, the rest of the group's interests are, therefore, in for nothing. Assets include £22m in the bank, wells in England and Holland and highly promising licences in Italy that together could add up to around £174m.
The dry drilling has little, if any, impact on the likely value of the South American adventure. Oil has already been found in the vicinity and further exploration is expected to confirm impressions that a significant oil field has been discovered
Avation, another constituent, continues supplying aircraft to the joint venture of Australian airlines SkyWest and Virgin Australia. Although profit expectations have been pulled back, the shares still have long-term attractions.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens