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Penny Share Review 141

Monday 15 July 2002

The Weekend's Comments

NEWSPAPERS

Surprisingly there was no company specific news comment over the weekend. Concerns about the equity market in general may be contributing to the cautious attitude amongst the various newspaper pundits. Therefore we thought it appropriate to take the pulse of the experts and what some of the thoughts were about the markets and where they are heading.

Hamish McRae, Economic correspondent of The Independent on Sunday, takes a look at the equity market and notes that these are interesting times for those brave enough to invest in equities. He focuses on the US market as “Wall Street will determine what happens to markets worldwide.” His review of the data reveals some mixed signals, but overall he is more positive than negative. The positives he notes are the beginnings of a recovery in the world economy. Industrial production in the G7 countries “has perked up”. Profitability in the US has also turned round. The trend in quarterly profits in the US is upward. The recent second quarter results by the engineering group GE revealed that profits were up 14% with expectations for the third quarter growth to be 25%. This is important McRae believes as GE is a bellweather for the US but also because the “market has to see rising profits through the rest of the year if it is to sustain its present valuation.” On the negative side, consumer confidence in the US appears to be fading. Also shares in the US “are still very overpriced by the standards of the early 1990s” with a p/e of over 40. McRae is sceptical about the p/e calculation and at the moment it varies between 20.5 and 41.5 and depends on who is asked. Overall he is upbeat if philosophical. “Markets always turn in the end and a bear market that lasts more than two years is extremely unusual. What is happening now is once-in-a-generation stuff…I would guess there is more bad news to come, but not much. Meanwhile the further the markets fall the greater the opportunities - if only for the brave.”

Robert Cole in The Times on Saturday advised “that it is virtually impossible to buy at the very bottom unless with a lorryload of luck….But the lessons of history suggest prices will turn. Purchases made now may not find the keenest possible prices, but a suitably selective policy should pay off for long-term investors.” He believes that shares in the UK “are attractively priced” based on the fact that the “average historic dividend yield is about as high as it has been any time in the past five years and the historic p/e ratio is approaching its lowest levels. Both statistics aid those who are looking on the bright side.”

Today’s Announcements

The following companies, in which City Equities customers may have an interest, released announcements to the market this morning. These can be found by entering the relevant company name or ticker code in the search box on this site.

Protec (PRC) - Statement re issued share capital and Contract wins and trading update.

Look Out For This Week

• 15 July - UK BRC retail sales monitor (June), UK Comprehensive pending Review, US Business inventories.
• 16 July - UK CPI (June), US Industrial production (June).
• 17 July - UK Labour market survey (May/June).
• 18 July - BBA analysis of lending.
• 19 July - No main events.

Compiled by Andrew McLintock

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