Stock picks: Headlines hitting share prices

5th October 2011


Apple (APPL)

Many of us were disappointed with news of the iPhone 4S – what happened to a flash unveiling of the iPhone 5? The new boss Tim Cook faced a tough enough challenge replacing "star" Steve jobs, and the headlines did him no favours. The Financial Times ran with ‘Apple's new leader unveils modest iPhone update'. Hardly going to have people shouting from the rooftops. Or the Guardian's ‘Apple targets wider audience'; awe-inspiring? I think not.

However, Apple did this before in 2009 when it just shifted the iPhone 3G to 3GS and no one seemed to mind, so perhaps it's just the new CEO was expected to produce a spanking new product. The new iPhone 4S, which comes with 16, 32 or 64GB of storage, will be released in seven countries, including Britain, on October 14th.

The market was unimpressed. Apple's share price fell 5% at one stage following the news, reports the Daily Telegraph, having been up more than 1% ahead of the launch.

However, Phil Schiller, Apple's vice president of product marketing, introduced the new iPhone 4S saying: "Don't be deceived because inside it is all new."  The iPhone 4S runs on the same A5 processor that powers the iPad 2 and has an improved camera. It offers 8-megapixels, compared with the iPhone 4's 5-megapixels and, Apple says, will deliver sharper pictures with better colours.

Whether Apple can continue its success with a new boss at the helm, and an unexciting new product, only time will tell. For now, most pundits believe the company will maintain its current course with its army of fans. 

Stock shift: The share price fluctuated between around £3.60 and £3.73. At time of writing they were worth £3.70.


Tesco (TSCO)

Despite news that UK like-for-like sales have fallen, the supermarket remains a stalwart in investment portfolios. After all, Warren Buffett recently topped up his Tesco holding, at a time when UK retail sales, including at supermarkets, are expected to suffer some falls, reports The Motley Fool.

But could Buffet have got it wrong? After all, as the Guardian and others write, Tesco has reported its weakest six-monthly UK sales figures for 20 years as higher food and fuel costs contributed to stark decline in spending on non-essentials such as gadgets, CDs and games in its stores.

UK like-for-likes, excluding petrol and VAT, declined 0.5% in the six months to 27 August, with underlying sales down 0.9% in the final three months of the period. British shoppers have been cutting back on non-essential purchases, especially in non-food items, and spending more time at the super-cheap options, such as Lidl.

Yet the outlook remains optimistic for the typically stellar supermarket. The company is expecting to create 7,000 new UK jobs this year – and at the bottom line, total underlying pre-tax profit came in at £1.9bn, up 6% from £1.8bn last year. The interim dividend was also raised, by 6%, to 4.63p per share.

There is also a price-cutting is a strategy that Tesco should be able to win customers back.

As a long-term bargain, The Motley Fool says that Tesco is one of the best to be had these days.

Stock shift: At open shares were changing hands for around £3.82 each, and at time of writing had risen around 11% to £3.91.


Sky (BSY)

British Sky Broadcasting was dealt a blow by the European Court of Justice in Luxembourg this week, when the Court declared Sky's exclusive national broadcasting policy was incompatible with the single market, knocking its share price.

Pub landlady Karen Murphy won her European court battle against the Premier League over the use of a foreign TV decoder to screen games.

The European Court of Justice said an exclusive system of licences for the broadcasting of football matches in different EU countries – effectively stopping fans watching the broadcasts with a decoder card in other member states – is "contrary to EU law".

At present, Sky's practice is to charge significantly more for access to Premier League football in the UK than in some other European countries, even though there are set-top box cards available on the open market that enable access to competing European services.

However, the company has some strong supporters, as the FA Premier League is currently sitting on a £1.6bn three-year deal with Sky, and is thought to have made more than £1bn from selling TV rights outside of the UK for the same period.

So while this EU ruling might have some impact on Sky's profits for the remainder of the current Premier League deal, it may not affect stock prices going forwards. But make headlines and short-term market movements, it did.

Stock shift: BSkyB shares fell 3.3pc to around £6.35 after the verdict was announced.
On writing this piece, they were up at £6.61.


Wolseley (WOS)

The UK's biggest building supplier reported a return to profit and said it was prepared for Britain to slide back into a recession within six months, reported the Daily Telegraph this week.

Ian Meakins, chief executive, said he was "pretty confident" about the company's finances after reporting a pre-tax profit of £391m compared with last year's £328m loss.

The world's largest building supplies group, with operations in the US and Europe, reported a £172 million uplift in underlying profits this week to £66 million for the year to the end of July. The full-year results also revealed a total dividend of 45p per share.

Yet despite the positive news, the share price fell – perhaps due to cautious view on the near-term outlook due to economic pressures.

However, the company is in good shape, citing debt reduction and robust cash flow, and the conclusion is that they are a decent cyclical to have in an investment portfolio.

Stock shift: Despite the positive news, the share price fell 2.2% in early trade and languished around £15. But the fall was short-lived – at time of writing they were worth £16.38 each.

More from Mindful Money:

Nature of the beast

Market crash: Headlining and tweeting our way to volatility

Beware TV reporters offering investment advice about stock market falls

What is driving market volatility?

Sign up for our free email newsletter here.

Leave a Reply

Your email address will not be published. Required fields are marked *