Welsh Shares Stay In Touch

January, as investors will know, has been a month of retrenchment in the UK stock markets. After the ebullient end of year rally which saw the main FTSE index recover from its mid year lows to reach more than 5500, shares have fallen back again by roughly five per cent as worries continue over the world economy. In Britain there is the uncertainty over the outcome of the general election, and continuing fears about the size of the debt burden the UK is now carrying and the measures that will be needed to bring it back under control. Sentiment was not helped by the very modest growth in the UK economy in the last quarter of 2009, a 0.1 per cent increase barely justifying claims that Britain had at last moved out of recession.
Over the month the Welsh share portfolio we have been tracking since November 2009 did well, therefore, to suffer only a modest fall, the total value of the 12 nominal shares dropping only £8 from their end January figure and at £1,215 staying – just – above the original £1,200 cost.
Within this overall picture, however, there were once again wide variations in the performance of the 12 shares drawn from across a range of business sectors, including finance, high technology, retail, construction and manufacturing. Seven of the twelve shares recorded a drop in value with only five – Finsbury Foods, Pure Wafer, IQE, Redrow, and Wynnstay – posting an increase.
Finsbury has made some senior management changes in recent months and announced plans to trim staff numbers, and this together with its announcement that it is trading in line with expectations seems to have satisfied the market. Meanwhile, IQE’s share price has responded, albeit modestly, to an upbeat statement from its chief executive who sees a rapid recovery from the downturn as a result of rising demand for internet phones, solar power cells and low-energy lighting. Earnings in the second half of 2009 are forecast to be four times up on the first half. The other technology company in the index, Pure Wafer has seen a 33 per cent rise in the month in its share price but this is from a very low base of only 3.75p at the end of December. The share price currently is in the middle of the range at which the company has traded over the past year – a low of 2p and a high of 8.5p.
Over the three months as a whole since the index was created the big winner remains the Cardiff-based oil and gas exploration company, Amerisur Resources, which is now worth 83 per cent more than at the start of November even though its shares did retreat by just over 5.5 per cent in January. The biggest company in the index, Admiral Insurance, is proving one of the most reliable with its shares reporting a 3 per cent decline in January but still 8 per cent higher at £11.40 than three months ago when they stood at £10.59. The other big company share in the index, Redrow, is also proving one of the more stable with its share price very close to the figure last November after a 3.6 per cent increase over the month.
The big loser during January was again Enfis, the lighting specialists, which dropped a further 11.6 per cent, taking its share price down to only a third of its value at the start of November. Any investor who had bought £100 of share in the company then would now be looking at £33. Less than one year ago Enfis shares were valued at 100p. Boomerang Plus, the Cardiff media business, has also disappointed, losing 16.6 per cent of its value in the past month and 20 per cent overall since the start of November. Its shares at 75p are now well below the high of 124 in 2009. The one time Welsh business favourite, International Greetings, is also suffering. Its shares declined by 16.6 per cent in January, and are now 18 per cent down over three months at 60p.
So what lessons if any can be learnt from the performance of the shares in the index over the past three months? Firstly, it is still difficult to say whether or not investments in a selection of Welsh companies will outperform or underperform the UK economy as a whole, though the Welsh index as a whole is showing slightly smaller growth than the UK indexes with which it is being compared.
The volatility of technology companies is highlighted, however, and only the brave investor would choose to risk money in this sector. Indeed, if Wales’s oil explorer, Amerisur Resources had not performed very well, the index would by now be heavily under water. As might be expected, the biggest companies in the index, Redrow, Admiral, Wynnstay and Moneysupermarket.com have proved to be the safest havens, even though two of these did record small drops in share prices over the three months.
Interestingly, the second best performer over the three months was the Welsh Industrial Investment Trust, which brings together a package of different companies, suggesting there is indeed safety in numbers in troubled times.
The full list of companies in the index is: Amerisur Resources, Admiral Insurance, Boomerang Plus, Enfis, Finsbury Food, International Greetings, IQE, Moneysupermarket.com, Pure Wafer, Redrow, Wynnstay, and Welsh Industrial Investment Trust.
A note of clarification. The observations above are personal opinion, they do not represent the views of the IWA and are not a recommendation to deal in any of the shares mentioned. Any reader interested in buying any of these share would be well advised to consult a financial adviser.