Recently on TipTV I interviewed a former broker friend of mine who I have known since the mid 1990s. I was reminded of two things. The first is why I am not a broker anymore. This is because my plaintiff advice to many a client just after the stock market opened would on many occasions be, “Don't do anything today, you might lose money.” This was of course very FCA-compliant, years before the rules tightened up on financial advice. But it was no way to earn commissions.
The other perhaps more salient point as far as this week's newsflow is that my old friend reminded me of how, while people were deciding on whether to buy the dip in shares of fashion retailer Next Plc (LON:NXT) at £40 a share (down from an £80 peak), the shares were freely available in the mid-1990's at 10p. Indeed, I have met more than a couple of people who confess to have bought the shares all those years ago at near to those levels.
While they may not have kept them all the way up to their peak of £80 a couple of years ago, they did very nicely thank you. For those involved in the shares now the conundrum has been whether to buy the stock just below £40 in the wake of the announcement of the first annual loss at the company since 2009. In fact, from a technical analysis perspective it did appear the aftermath of the results was the time to go long as quite an extended base towards £38 did look robust. It was also an example of investors having factored in the worst from this former stock market darling, and there was a decent near 10% rebound.
Further down the market cap scale and we go from a £6bn market cap company in the form of Next, down to a more niche player, Ted Baker (LON:TED). This has been one of the High Street's more successful stories of recent years, all the more impressive to have achieved its £1bn market cap in an era of decline for many leading players. But even though the group was able to boast full-year profits growth and sales, it was the outlook for the designer brand group was rather more clouded, and guarded. The shares are also well off their 2015 peak, but let us assume for now the uptrend is still intact.
Finishing off the trio of High Street picks in retail at the moment is my token small cap, Hotel Chocolat (LON:HOTC). Here the shares in the £3.85 chocolate bar retailer have not surprisingly doubled since their post IPO floor at 150p. They are perhaps the only retailer of the three picked out here which I actually shop at – once every couple of months, given the prices of course.
The market cap is £300m and while the group may not get to the dizzy heights of a Next or a Ted Baker, the premise is that a player which has managed to achieve pricing power in the present cut throat environment looks to be the horse to back in a sector where visibility on future winners is foggy to say the least.
Perhaps the only negative for Hotel Chocolat, apart from having to pay nearly 4 quid for one's cocoa bean fix is that one a p/e ratio of over 60, it really is not cheap. But then again at £2.88 a share, the shares are cheaper than the chocolate bar, for now.