Investment View: Where to put your money on an early Christmas cracker
If you own a shopping centre in Europe it's logical to want to have a Primark there
Is retail back? Not yet, it seems. The last batch of figures on footfall and sales suggested that the sector's "recovery" – such as it was – is starting to slow. It might only be October, but retailers are already looking ahead to the crucial Christmas period, which can account for half of sales or more for some, with a degree of trepidation.
Get set for a wave of ads, then. You might find yourself sick of the festive season by the end of November if they start really early.
But whatever the overall picture you can be sure that within the great morass of shares on the stock market's shelves some will do very well while others will be a horror. Picking winners at this time of year isn't so easy. But with the help of a few friends from the City I'm willing to have a go.
And the first up is (drum roll please) Primark, or in this case Associated British Foods, the owner of the discount clothing chain which has had the odd brush with controversy down the years. These days it's more like Primark being the owner of Associated British Foods because the discount chain will sooner or later eclipse ABF's still substantial sugar business.
Handy, then, that the group is focusing its capital expenditure on that part of the business, and its European expansion drive. Its house broker Panmure has pointed out that store space has been growing at 800,000-900,000 sq ft annually in recent years. It expects this to accelerate to 1.2m sq ft next year.
"If you own a shopping centre in Europe, it's logical to want Primark there," the broker says. And it's right. Europe's economy is still in a mess, and the cost of living issues which bedevil Britain are also making their presence felt on the Continent. Discounters such as Primark are very much in vogue. Over the next decade its profits will treble, in the short term it will continue to do well.
The shares have come off a bit after a bravura run in recent months. But at 18.5 times next year's earnings (the year ends 30 September) they aren't over-priced when you consider Primark's crazy growth prospects. The prospective yield is 1.7 per cent but you don't buy shares like these for the divi.
It's for similar reasons that I like Sports Direct. It's a discounter, it's pushing out of the UK with some success, its online business is a star. I'm wary of the governance issues it's had, and owner Mike Ashley should just give up the ghost as regards Newcastle United and concentrate on what he's good at.
The shares also look almost as frothy as ABF's, but its last trading statement indicated a business in very good shape. You'll have to stump up a high price for them at about 20 and a half times earnings for the year to 30 April, 2014. Grit your teeth and pay it. The lowest recommendation from an analyst covering the stock that I can find is neutral. While buys generally outnumber sells in the City (and I won't retread the reasons for that) that still says something.
My final Christmas cracker (at least as regards this part of the high street) is N Brown. It used to be famed for plus-sized clothes, but these days it's everywhere with a bewildering array of brands.
The one whose ads I can't seem to escape, probably because I'm in its demographic, is Jacamo, the awfully-named online clothing brand fronted by no less than Freddie Flintoff, the former England cricket hero.
N Brown has come off a bit, and caused a few flutters with a recent trading statement that suggested rising bad debt. On the other hand you'd expect that if you go about acquiring customers at the rate N Brown is. It's sensibly slowed up a bit in the US and while the shares might look pricey at 16.5 times earnings for the year ending 28 February, they're a decent short-term bet to bounce back. Watch the sales figures in January. I'm betting they'll be good.
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