AJ Bell Shares magazine 12 December 2024

Three important things in this week’s magazine

What to expect in 2025

Discover

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Did you know that we publish daily news stories on our website as bonus content? These articles do not appear in the magazine so make sure you keep abreast of market activities by visiting our website on a regular basis.

Over the past week we’ve written a variety of news stories online that do not appear in this magazine, including:

The best performing stocks this year

Find out the names which did best from different market cap segments of the UK market.

technological advantages that it is very hard for rivals to unseat them.

However, not all monopolies are so successful. For one, you need to have a product or a service for which there is strong and continuing demand.

Just look at the latest sale of rough diamonds by Anglo American (AAL)-owned De Beers which, while not quite the monopoly it was in the 20th century, still controls a big chunk of the diamond market.

The company was forced to cut prices by 10% to 15% in its last auction of 2024 due to sliding demand and competition from artificial or labcreated diamonds.

Hardly the best backdrop for current owner Anglo to try and carve out the business through an IPO or sale, but also an indication of why it doesn’t see a place for the business within the wider group.

Another historically monopolising force, oil producers’ cartel OPEC+, seems to have lost its historic strength amid faltering demand and the discovery of new sources of supply.

The group’s decision to delay its planned output increase by three months to the end of April 2025 barely registered with oil traders.

Some of the most successful businesses of our time (and all time in fairness) are effective monopolies (or perhaps part of a duopoly or triopoly) with such dominant market positions they are able to enjoy significant pricing power and generate above-average margins and returns on investment.

This type of situation can be overturned in two main ways: either competition emerges, attracted by the returns on offer, to knock the established businesses off their perch or, alternatively, regulators intervene.

There are continuing attempts by competition authorities to address the power of the Magnificent Seven cohort with several facing regulatory pressures, although to date these have made a limited impact on the dominance of their respective markets.

These businesses are now so embedded into our everyday lives and have such deep pockets and

Dividends are in focus for Martin Gamble this week as he takes a look at the biggest increases in declared FTSE 350 company payouts in 2024 and what lies behind them. We also take the opportunity to reveal the bestperforming UK stocks of this year

Get set for next week when the Shares team will unveil its best stock ideas for 2025. We’ve got some big names featuring in our festive issue too – so make sure you get stuck into the bumper digital magazine when it lands on 19 December.

De Beers was forced to cut

Missing an Element in Your Portfolio?

Precious metals and rare earth minerals could be vital to many next-generation technologies, infrastructure and energy alternatives.

China eases monetary policy ahead of Trump 2.0 and global tariff war

Shares jump after politburo announces biggest policy change in over a decade

It may not seem much to non-China watchers, but the Communist party’s politburo has changed the wording of its stance on monetary policy for the first time since the 2007/8 financial crisis from ‘prudent’ to ‘moderately loose’.

Chinese and Hong Kong listed shares jumped, as did those of UK and European stocks which have large exposure to the region including miners Antofagasta (ANTO) and Rio Tinto (RIO), insurer Prudential (PRU) and luxury firms Burberry (BRBY) and LVMH (MC:EPA)

The top leadership of the party is set to meet to lay out the economic agenda for 2025, and in a statement the government said it would implement more proactive fiscal policies and looser monetary policy to ‘vigorously boost consumption, improve investment efficiency and expand domestic demand in all directions’.

There was also a pledge to ‘stabilise’ property and stock markets and a reference to the use of ‘extraordinary’ policy adjustments if necessary to boost the economy, all of which suggests the Chinese leadership is taking the threat of a trade war seriously.

In an interview with Bloomberg, ANZ Banking Group’s senior strategist Zhaopeng Xing described the wording in the government’s statement as ‘unprecedented’, while Exante Data senior strategist Martin Rasmussen said it showed the party leaders’ view on economic conditions ‘has shifted substantially’ in the last couple of months.

On top of the threat of a trade war, China’s economy has been struggling with falling prices, as shown by November’s PPI (producer price index), which measures the price of goods sold

by manufacturers and which fell for the 26th month in a row, eating into corporate profits and undermining the government’s efforts to grow the economy at a 5% rate.

At the same time, consumer prices hit a fivemonth low in November with inflation rising just 0.2% year-on-year compared with economists’ forecasts of a 0.5% increase according to a Reuters poll.

‘The Chinese economy continues to flirt with deflation, highlighting the inadequacy of the stimulus measures thus far in restoring private sector confidence, reviving domestic demand and putting growth back on track,’ commented Eswar Prasad, professor at Cornell University, in an interview with the Financial Times

The last time China adopted a ‘moderately loose’ monetary stance was between 2008 and 2010 when it tried to prop up the economy with massive amounts of government spending, a move it had vowed it wouldn’t repeat. [IC]

Budget impact on UK firms tops £1 billion as hiring slows

Increases to national living wage and national insurance adding to companies’ costs across several sectors

UK firms from the retail, leisure, hospitality, manufacturing, logistics and housebuilding sectors have said they will incur additional costs due to the increases in the national living wage and employers’ national insurance contributions announced in the Budget on 30 October. According to Reuters the total declared impact is now £1.1 billion.

Some of the sectors most affected include retail (the largest employer in the private sector with 4.9 million employees as of 2023), leisure and hospitality because of the volume of staff they employ operating on relatively low wages.

The changes could put additional pressure on already strained businesses and raise the stakes as the crucial festive trading period gets into full swing.

Popular pizza chain Domino’s Pizza (DOM) said on 9 December it will take a £3 million ongoing annual hit from the changes.

Supermarket group Sainsbury’s (SBRY), which employs around 150,000 people, said it was possibly facing ‘headwinds’ of £140 million.

Pub group JD Wetherspoon (JDW), which employs more than 40,000 people, said its annual costs would increase by an estimated £60 million

Post-Budget slowdown in hiring

in 2025.

Another pub group, Marston’s (MARS), which operates 1,339 pubs in the UK with about 11,000 employees, said it expects a £4 million impact due to wage inflation and another £4.6 million from additional employment costs in fiscal 2025.

Also heavily impacted is Royal Mail owner International Distribution Services (IDS) which employs nearly 130,000 people in the UK. The firm said national insurance changes will cost them around £120 million a year.

The latest figures on recruitment suggest the Budget is having a knock-on effect on hiring decisions.

Data produced by S&P Global on behalf of KPMG and the REC (Recruitment & Employment Confederation) shows employers are becoming increasingly reluctant to hire full-time staff.

During November demand for staff hit the lowest level since August 2020 amid moderating growth in permanent salaries.

Jon Holt, group chief executive and UK senior partner KPMG, says: ‘Businesses are having to weigh up the prospect of increasing employee costs following the Budget, which has led to an accelerated slowdown in hiring activity across the board.

‘While the data was already heading in that direction, permanent placements saw their steepest reductions in over a year last month, and temporary roles also saw a fifth consecutive decline.’

Easing wage inflation may be welcomed by the Bank of England as it weighs its latest decision on interest rates next week. [SG]

Why Rolex seller Watches of Switzerland has clocked up a 40% gain in six months

The luxury watch retailer has rallied on reassuring updates, US market share gains and a strong start to the festive season

Following a tumultuous two-anda-half year period in which the stock price plunged, Watches of Switzerland’s (WOSG) shares have rallied the best part of 40% in six months with the UK luxury watch and jewellery markets having bottomed out and US market share gains exciting investors.

Having spooked investors with a profit warning at the turn of the year, the absence of any further shocks from the Rolex-to-Patek Philippe purveyor has helped sooth sentiment towards the stock.

Led by CEO Brian Duffy, Watches of Switzerland’s earnings decline (5 December) for the half ended 27 October 2024 proved better-thanfeared and there was relief as the FTSE 250 firm left full-year 2025 guidance unchanged.

Management is drawing confidence from recently-improved sales momentum and some large showroom openings to come in the integrations of

Frasers shares down 30% yearto-date as Budget blues bite

The Sports Direct-to-Flannels owner faces relegation from the FTSE 100 following earnings alert

Shares in Mike Ashley’s retail empire Frasers (FRAS) have fallen more than 15% in one month and are down almost 30% year-to-date, with investors worried about the UK consumer outlook and potential distractions from a boardroom battle with Boohoo (BOO:AIM) and overseas acquisitions dragging on the stock.

An unexpected profit warning on 5 December, blamed on a Budgetinduced dip in consumer confidence, sent the shares sharply lower and this stock price plunge means Frasers will be relegated from the FTSE 100 for the first time in eight years on 23 December.

In its earnings alert, the Sports Direct-to-Flannels owner cut its year-

to-April 2025 adjusted pre-tax profit guidance from £575 million to £625 million, which would have represented 10% growth using the mid-point of the range, to £550 million to £600 million, meaning growth will be half the level it previously expected. Frasers pinned the downgrade on UK consumer weakness in the run up to, and following the Budget, which also forced the retail conglomerate to increase its cost forecast for the 2026 financial year.

The company posted an 8.4% drop in retail revenue to £2.46 billion for the half ended 27 October, driven by a reduction of 7.6% in UK sports retail sales and a 14.1% decline in premium lifestyle sales that will concern

two recent acquisitions - Italian luxury jewellery brand Roberto Coin and publishing firm-toluxury watch platform Hodinkee – and highlighted a strong start to the third quarter that includes Christmas. [JC]

investors as Frasers heads into the crucial Christmas period.

However, Frasers insisted it had been working hard on its Elevation strategy, strengthening global strategic brand partnerships, growing Sports Direct and its Frasers Plus loyalty and consumer finance business, and said it was starting to see the benefits from integrating recent acquisitions and its ambitious stock-reduction targets. [JC]

17 Dec: Chemring 18 Dec: IntegraFin

19 Dec: FIH Group

17 Dec: Vivendum

19 Dec: Time Finance

Can Chemring profit play catch-up after slow start to the year?

Military equipment supplier has seen investors turn sceptical in recent months

Military equipment supplier Chemring (CHG) would seem to be well placed considering the recent escalation of geopolitical tensions and conflicts which have lifted sector peers.

However, the shares have fallen sharply during the last quarter of 2024. Investors are seemingly nervous about a back-loaded fiscal 2024 (to 31 October) after a particularly harsh winter in early 2024 put the freeze on some of its manufacturing.

October’s trading update did little to quell those fears and it means the stock is up just 3% this year, excluding dividends, hardly anything to write home about.

The company flagged at the time

consensus adjusted operating profit forecasts in the range of £70.8 million to £73.6 million, and judging by Berenberg’s apparent narrowing of its own estimate from £73 million in June to £71 million in October, perhaps investors should anticipate something towards the lower end of that range. That said, there’s been plenty of contract progress, both new orders and renewals, while Chemring is mulling expansion of its operations in Norway, with a seemingly supportive government environment out there. News on this, and the outlook, will likely dictate how the shares react to fullyear results, due 17 December. [SF]

Will Nike’s new broom reveal sweeping changes at sneakers giant?

The world’s biggest sportswear company needs to innovate and repair retail partner relationships after its direct-to-consumer strategy failed to deliver as hoped

Second-quarter results (19 December) from Nike [NKE:NYSE) will give Wall Street analysts a first opportunity to hear from new CEO Elliott Hill, tasked with turning round the world’s biggest sportswear company’s fortunes.

Shares in the struggling sneakers-to-soccer balls titan, which recently withdrew full year 2025 guidance amidst a major restructuring, have shed a third of their value in the past year and expectations are subdued heading into the quarterly print.

Alarmingly, key retail partner Foot Locker (FL:NYSE) recently downgraded (4 December) its full year 2025 sales and profit guidance on the back of weaker US sales, which offset a stronger European performance, echoing the same trends flagged by JD Sports Fashion (JD.) in its recent third-quarter update. Foot Locker blamed its quarterly sales and earnings miss on soft consumer demand and elevated promotions across the

marketplace, with CEO Mary Dillon citing ‘some more softness out of Nike’ in an interview with CNBC. Nike is paying the price for a direct-to-consumer strategy that saw it try to bypass JD Sports and other retailers and taking its eyes off the ball in terms of innovation, allowing running shoe rivals like Hoka, On and Asics to take market share. Former CEO John Donahoe wanted to bypass the retail middleman for part of Nike’s sales, but this direct-to-consumer strategy failed to deliver as hoped, so it will be interesting to see if there is a radical change in strategy under Hill.

Nike’s revenues fell 10% to $11.6 billion in the first quarter and the performance in North America and Greater China, where the sneaker giant’s sales have been flagging, will be in focus along with Nike’s inventory levels. [JC]

Concerns over global growth are rising as we approach 2025

Yet UK and US rate cut expectations have been dialled back significantly

Despite the political upheaval taking place in the Middle East, and to a degree in Asia, markets are likely to take their lead this week and next week from the inflation backdrop and the reactions of the world’s central bankers.

No fewer than nine G10 central banks are set to decide on their interest rate policy before the end of 2024, and markets haven’t entirely made up their minds what to expect.

Forecasts range from a 0.5% cut by the Peoples’ Bank of China to a 0.2% rise by the Bank of Japan.

As Shares went to pixel, investors were awaiting US consumer prices for November which were expected to show a slight acceleration in the headline rate of growth to 2.7% from October’s 2.6% but no change in the underlying rate from 3.3% in October.

Yet the Federal Reserve, which meets on 18 December, is still seen cutting rates.

Nonetheless, whereas markets had confidently forecast Fed rates falling to below 3% by the end of next year, those cuts are now ‘in jeopardy’ State Street’s global chief investment officer Lori Heinel told Bloomberg.

‘That’s what’s really tricky for investors right now,’ added Heinel. ‘It’s hard to know where the dust settles.’

The Bank of England is no longer expected to cut rates next week, due to the inflationary impact of the Budget which is seen adding as much as 0.6% to prices next year according to the OBR (Office for Budget Responsibility).

Before the Fed or The Bank of England, however, comes the European Central Bank, which is seen cutting rates by a minimum of 0.25% this week with further substantial cuts to come in 2025 due to a stagnant Eurozone economy. [IC]

VT Argonaut Absolute Return Fund is a great way to play market uncertainty

Manager Barry Norris has an excellent track record over a long period

VT Argonaut Absolute Return Fund (B79NKW0) 356.4p

Funds under management:

£212 million

With stock markets trading close to highs, rising geopolitical risks and uncertainties over a Trump administration, investors are understandably concerned about increasing stock market volatility.

A great way of playing both the upside and downside potential is to invest in the VT Argonaut Absolute Return Fund (B79NKW0), which aims to deliver absolute returns irrespective of the direction of the stock market.

The fund is managed by Barry Norris who has skilfully navigated difficult markets in the past, while also delivering positive returns in rising markets. For example, during the last six equity market selloffs, which have recorded average

Shares magazine • Source: LSEG

losses of 15.9%, the fund has delivered an average total return of 6.9%.

Norris has achieved this by running a concentrated portfolio of high conviction stocks on the long side, betting they will go up in value, as well as a short portfolio of names Norris believes will fall in value.

The fund’s performance has been negatively correlated to equity market returns and the Morningstar long/short peer group.

Since inception in 2009 the fund has achieved a total return of 256.5%, beating the European Stoxx 600 index (the fund is invested mainly in Pan European equities) and the Investment Association peer group return of 97.1%.

A DIFFERENTIATED FUNDAMENTAL APPROACH

Norris combines active bottom-up proprietary fundamental equity analysis with thematic and macro awareness. He invests by applying ‘first principles’ thinking, and he uses but ‘rarely relies on’ external research when conducting research.

Norris believes great ideas are rare and they should count which is why he holds a relatively

Argonaut Absolute Return

concentrated portfolio. While his approach is ‘high conviction’ by design, it is also flexible. ‘If we feel the facts have changed, we will change our positioning,’ explains Norris.

The manager sees analysing companies as a completely different skillset to creating a portfolio that reflects positive outcomes and therefore he is cognisant of the role both play in investment success.

Managing risk and avoiding large drawdowns are keys to compounding returns and Norris often finds that rejecting an idea is more important than selecting investments, which speaks to the manager’s disciplined mindset.

Short selling requires a unique and differentiated skill set, according to Norris, which often means many long/short strategies end up being long-only. Norris insists his short book is the greatest source of the fund’s risk adjusted returns.

Finally, he accepts that mistakes and error are part of the territory and represent opportunities to learn. ‘Our investment process is a product of 25 years of learning, refinements, and occasional mistakes. We are always looking to get better,’ states Norris.

HOW IS THE FUND POSITIONED?

The latest factsheet shows the fund was up 9.4% in November comprised of a strong 11% return from the long book and 1.5% decline in the shorts, taking the year-to-date advance to 13.2% and the five-year compound annual growth rate to 14% a year.

November’s performance contrasted with the prior month when the long book lost 1.8% and the shorts made a positive contribution of 3.2%.

Norris is fond of quoting Wristen’s law, which states: ‘Capital will always go where it’s welcome and stay where it’s well treated. Capital is not just money. It’s also talent and ideas.’

Around a year ago Norris started taking a closer look at Argentina following the election of economist Javier Gerardo Milei as president. His policies have completely changed the economic landscape for the better and this is reflected in the country’s stock market which is up 261% in the last year.

VT Argonaut Absolute Return Fund

Norris has exposure to Argentinian bank Grupo Financiero Galicia (GGAL:BCBA) which is up 47% in the last six months and shale driller YPF (YPFD:BCBA) which was one of the best performing longs in November, gaining 53%. Other big contributors last month were music and podcast streamer Spotify (SPOT:NYSE) which gained 25% and Anglo-Iberian airline and British Airways owner International Consolidated Airlines (IAG) which was up 23%.

The best performing shorts were Austrian semiconductor outfit AMS-Osram (AMS2:VIE) which fell 34%, and mRNA vaccine maker Moderna (MRNA:NASDAQ) which dropped 19%. The worst performing short was troubled US car rental group Hertz (HTZ:NASDAQ) which raced 68% higher. Ongoing charges on the fund are 0.86%. [MG]

Table: Shares magazine • Source: Argonaut Capital Partners

This is an excellent opportunity to buy

Gamma Communications

Telecoms tech outfit is a compelling, sensibly run business with plenty of scope for upside

Gamma Communications (GAMA:AIM) £16.36

Market cap: £1.55 billion

‘Out-competing both large and small rivals for years, this is a telecoms technology rarity growing at a pace that is far out-stripping its peer group.’

This was what Shares wrote about Gamma Communications (GAMA:AIM) back in 2018 when the shares were trading at 518p. It’s been a consistent favourite of ours over the years and we have pitched it as a Great Idea a couple of times since, making money for willing buyers each time.

Today, the price is more than three-times that level, yet they remain at a comparable valuation, a 12-months forward PE (price to earnings ratio) 17.8 versus 17.3, clearly illustrating how EPS (earnings per share) have rapidly grown over the years, from 30p in 2018 to 67.2p in 2023. Analysts are forecasting 84.5p for 2024 (to 31 December) and 91.9p in 2025.

Communications

Chart: Shares magazine • Source: LSEG

WHAT DOES GAMMA DO

With a track record for under-promising and overdelivering, we see Gamma as a unique business in the integrated IT and communications space using cloud technology. Already enjoying a strong growth trend, the pandemic hastened most organisations in their shift to embrace cloud flexibility and cost efficiency, yet Gamma has a habit of out-competing both large and small rivals in what is increasingly known as the unified communications-as-a-service industry, or UCaaS for short.

There was a slowdown in the post-pandemic pace of growth, as that demand spike regressed to the mean, but Gamma already has significant scale with a strong track record for developing in-house communications solutions. We expect the company to continue expanding its product and service offering and building out its Eurozone footprint, creating an increasingly compelling value and service-based proposition.

Traditionally UK-only, Gamma has expanded into markets in Spain, Holland, and Germany over the past few years through sensibly priced acquisitions. Returns on capital run at around 18%, implying that the company spends its money wisely.

The shares hit a 12-month high of £17.20 in the weeks following first-half results in September.

Revenue and operating profit rose by double digits, helped by positive underlying growth and a solid contribution from acquisitions, and the firm raised its guidance for fullyear profit and EPS to the top of the range of analysts’ estimates.

‘Gamma has achieved another strong set of results, marked by robust revenue growth, stable margins, and strong cash generation,’ said chief executive Andrew Belshaw at the time.

WHY INVEST NOW?

Gamma has achieved another strong set of results, marked by robust revenue growth, stable margins, and strong cash generation”

shares (commercial companies) listing category on the Main Market, paving the way for FTSE 250 membership and share buying by FTSE 250 trackers and ETFs, which should provide solid support for the stock.

‘The company is in the process of appointing advisers and subject to FCA approval, expects to move to the Main Market in mid-2025,’ Gamma said in September. Being on London’s Main market will help improve trading liquidity and further enhance Gamma’s reputation and market penetration as Gamma continues to grow in different jurisdictions. More news could come as early as January 2025. It would also allow Gamma to tap a far deeper pool of investment capital should it need it.

Over the past five years, Gamma has thrown off more than £292 million of free cash flow on £255 million net profit, allocating just £91 million to capital expenditure.

Currently valued by the market at £1.55 billion on AIM, Gamma would go straight into the top half of the FTSE 250 Index if it was a main market company, and investors can look forward to a promotion in 2025.

The company has held talks with its largest shareholders and Gamma is eyeing an equity

This tells us that if the company continues to pursue relatively small bolt-on acquisitions it shouldn’t need extra funding, but it will have the option to tap investors in its back pocket should particularly attractive opportunities emerge.

Gamma is a compelling, sensibly run investment opportunity with scope for positive surprises and investors should buy the shares. [SF]

Gamma enjoys very strong free cash generation

Games Workshop shares are up 17% in little more than a month

Strong trading lifts stock but market underwhelmed by Amazon deal for now

Games Workshop (GAW) £139.20

Gain to date: 16.5%

We (once again) flagged the attractions of fantasy miniatures outfit Games Workshop (GAW) in October, arguing the company had rediscovered its growth mojo and was set to leave the logistics problems it endured during the pandemic behind it.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

It may have been a little more than a month since we added Games Workshop to our Great Ideas portfolio but already there has been an early endorsement of our investment case.

In a typically sparsely worded statement on 22 November the company noted trading since 8 September is tracking ahead of expectations and provided new financial estimates for the half year to 1 December.

Games Workshop now estimates first-half core revenue at actual exchange rates should increase by a tenth to not less than £260 million and sees licensing revenue of more than £30 million compared with £13 million in the prior year.

Pre-tax profit is estimated to be not less than £120 million, equating to a 25% year-on-year gain.

And, ahead of a 31 December deadline, Games Workshop announced it had agreed creative deadlines with Amazon (AMZN:NASDAQ) for TV and film adaptations based on its Warhammer

Games Workshop (p)

Games Workshop (p)

Jan 2024 Apr Jul Oct

Chart: Shares magazine • Source: LSEG

Chart: Shares magazine • Source: LSEG

40,000 universe and an option to subsequently licence broader Warhammer Fantasy IP (10 December).

Investors seemed relatively underwhelmed, perhaps reflecting the fact any resulting productions will take several years to bring to the screen.

WHAT SHOULD INVESTORS DO NOW?

This is a unique asset on the UK stock market. It benefits from a devoted fanbase which could be extended by the Amazon tie-up bringing its content to a broader audience. On that basis we think the shares continue to have exciting potential, with the next potential catalyst provided by first-half results on 14 January. [TS]

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Discover the FTSE 350 firms which delivered the biggest dividend increases in 2024

Hiking capital returns to shareholders is often a sign of increasing confidence in the future

Dividends are a key component of successful investing whether taken as an income to support retirement or reinvested to compound future total returns.

With interest rates set to fall as inflation is gradually brought back under control dividend yields will become more competitive as a source of income compared with income from cash and bonds.

In this article we scour the FTSE 350 for the companies which have increased their dividends the most over the last 12-months rather than focusing on the highest yielders or the biggest absolute dividend payers. To identify our list we screened for the largest increase in the most recent annual dividend declared. We have not included special dividends.

THE RESETTERS

A good example and top of the list of biggest dividend increases is private hospitals group Spire Healthcare (SPI) which hiked the dividend by 320%. Having suspended dividend payments during the pandemic, the company is in the process of bringing the payout back to pre-Covid levels.

In the same camp is low-cost airline and holidays operator EasyJet (EZJ) which recently (12 November) revealed full year profit growth of 34% amid strong consumer demand.

The pandemic forced many companies to reduce or suspend their dividends, which means some of the biggest increases should be seen in the context of rebuilding the payout back up to a sustainable level.

The 2024 dividend was increased by 169% to 12.1p per share and the company expects to payout 20% of headline profit in 2025, implying another 10% hike to 16.2p according to consensus analysts’ forecasts. That would equate to less than half 2019’s payout of 37p, which was two-times covered by earnings, equivalent to paying out half of earnings per share. The new shareholder returns policy revealed at the start of 2024 left the door open for further increases beyond 2024.

Both are examples where the dividend remains shy of pre pandemic levels.

Hotels company PPHE (PPH) suspended its dividend during the pandemic but has quickly

returned to the prior level of payout.

The dividend was hiked by 140% to 36p per share, reflecting an enhanced interim payout of 16p per share and final dividend of 20p, in line with a strong bounce back in business performance.

Consensus forecasts call for a further 27% increase in the dividend over the next two years.

THE ACCELERATORS

The banks were allowed to stay open for business in the pandemic and while many reduced the size of the payout they have since quickly moved the dividend up beyond where it was before Covid.

The steep increase in interest rates was also initially helpful as it fed into widening net interest margins, boosting profit and cash flow. In recent times the banks’ cost of funding deposits has also moved up, reducing some of the benefit of higher net interest margins.

Asia focused banks HSBC (HSBA) and Standard Chartered (STAN) have increased their dividends by 90.6% and 50% respectively. This pushed both banks’ dividends beyond 2019 levels.

Interestingly, both banks have managed to do this while paying out less of their earnings compared with before the pandemic which, speaks to the strong profit growth notched up in recent years.

In 2019 HSBC earned $7.4 billion of net profit or $0.58 of earnings per share and consensus forecasts for the year to the end of December 2024 calls for $23.7 billion of profit and $1.30 of earnings per share.

Primark to sugar and food ingredients

conglomerate Associated British Foods (ABF) only skipped its dividend in 2020 and has since quickly built it back up to beyond where it was in 2019, hiking by third in its last financial year to the end of August.

If consensus forecasts are met for 2025 the dividend will grow a further 9% to 68.6p per share, close to 50% higher than before the pandemic and 2.8 times covered by expected earnings.

Investors often question the logic of the operating different businesses within one corporate structure, but the controlling Weston family have always maintained that the diversification benefits are worth it, as it proved during the pandemic when many retailers saw their earnings collapse.

A CONSISTENT APPROACH

Take a casual look at the dividend track record of Hikma Pharmaceuticals (HIK) and the pandemic does not seem to register for the maker of generics, injectables and branded drugs.

The dividend steadily increased in high singledigits during lockdown, and in the financial year to 31 December 2023 the company hiked it by 29% to $0.73 per share. Consensus forecasts see the dividend rising by 3% in the current year to $0.75, some 60% above the $0.47 paid in 2019.

Hikma’s resilient portfolio of global businesses not only provided defensive qualities during the pandemic but now seem to be firing on all cylinders. In February 2024 the board said it intends to progressively increase the dividend reflecting confidence in the long-term growth prospects of the group.

Martin Gamble Education Editor

The Trump wildcard, AI, valuations, crypto and more WHAT TO EXPECT IN 2025

By The Shares team

Predicting what will happen to the global economy and markets over the next 12 months is hard enough at the best of times, but with Trump’s election victory on 5 November that job has become even more difficult.

As Deutsche Bank’s head of global economics and thematics Jim Reid put it, the outlook is no longer ‘business as usual’ which opens up a much wider range of potential outcomes for the global economy and financial markets.

Trump’s habit of making up policy on-

the-hoof means we really are in unknown territory as far as a whole host of issues goes but in this article we aim to bring some clarity to the key themes which could dominate in 2025.

WILL THE REALITY LIVE UP TO TRUMP’S RHETORIC ON TARIFFS?

A big factor which will drive the direction of markets in 2025 is the extent to which Donald Trump’s rhetoric on tariffs translates into action – is it simply a negotiating stance or a genuine programme for government?

WILL BITCOIN GET TO $200,000 in 2025?

Cryptocurrencies grabbed investors’ attention once again in 2024 with poster child Bitcoin smashing through the $100,000 level for the first time on 5 December.

Bernstein has forecast the cryptocurrency could get to $200,000 in 2025 with the vocal support from US president Donald Trump and some of his key cabinet picks a major factor. The establishment of a national Bitcoin reserve could be a significant catalyst.

However, this asset class has proved unpredictable and volatile in the past so it would be dangerous to look at Bitcoin as a ‘one-way bet’. Cryptocurrencies will push themselves

further into the mainstream in 2025 as ‘investor sentiment toward crypto assets reach a turning point’ says Dovile Silenskyte, director, digital assets research at ETF provider WisdomTree.

‘This movement reflects growing confidence in the long-term potential of cryptocurrencies and a deeper recognition of crypto as a valuable tool for portfolio diversification,’ adds Silenskyte.

The FCA (Financial Conduct Authority) is looking at the regulation of the cryptocurrency market with around 12% of UK adults now owning crypto and 93% aware of it. Currently it is not possible for UK investors to buy exchange-traded funds tracking cryptocurrencies. [SG]

Taken at his word, the impact on the global economy could be dramatic but what Trump says and what he ends up doing could be two different things.

The problem for market sentiment is the threat of tariffs could hang over investors like a sword of Damocles with, as Deutsche Bank observes, Trump’s unpredictability resulting in a situation where we will only find out in real time how he balances different priorities in office.

There may be a measure of clarity after Trump’s inauguration, particularly if he delivers on a recent promise to introduce 25% tariffs on Mexico and Canada and increase tariffs on China by 10% on day one of his presidency.

This pledge came just after the unveiling of Scott Bessent as Treasury secretary pick for the new administration.

the specifics of tariff applications – countries, products, magnitude, and exclusion – significantly impacting corporate margins and stock valuations.

If tariffs are introduced on anything like the scale promised, they would likely prompt titfor-tat responses from outside the US and put upward pressure on inflation.

Asset manager Pictet says: ‘Our assumption is that roughly 50% of what Donald Trump proposed during the election campaign will be implemented. The four key policy areas to monitor are: trade, taxation, immigration and deregulation. Their combined overall impact over the next four years should be inflationary although tax cuts and deregulation will boost sentiment and growth.

It had been hoped this selection signalled a greater measure of pragmatism on tariffs –Bessent commented earlier in 2024 that ‘the tariff gun will always be loaded and on the table but rarely discharged’.

On the campaign trail, Trump floated the idea of a 60% tariff on goods from China and a blanket tariff upwards of 10% on all imports into the US as part of a drive to boost domestic manufacturing and raise cash to support government spending elsewhere.

The devil may well be in the detail, with

‘So far, the market has only priced in “Good Trump” i.e., deregulation and tax cuts. However, two big tail risks are underpriced: an all-out global trade war and a surge in bond yields due to concerns around the US deficit and/ or the economy overheating.’

Similarly, Robeco argues: ‘We think Trump will mainly use the tariff threat as a bargaining chip and that it will be toned down in practice. Yet, when implemented, these tariffs still act as a tax on the domestic consumer (cooling consumption from above-trend levels). In addition, restrained immigration (we don’t envisage mass deportation) could also prompt higher inflation.’

WILL 'MADE IN AMERICA' POLICIES LIFT US SMALL CAPS

The Russell 2000 index of US smaller companies has already outperformed its large-cap S&P 500 counterpart since Trump’s election victory in anticipation of his policies, like tariffs on overseas goods and tax cuts, being supportive.

BNP Paribas note consensus forecasts are for this part of the market to deliver 30% earnings growth in 2025 and 2026 while also highlighting that valuations are low relative to those for their large-cap counterparts.

The investment bank comments: ‘For decades after China’s admission to the World Trade Organisation (WTO) in 2001, US companies were focused on outsourcing production to lower-cost nations to improve profits. Industrial production stagnated in the US, while it rose

sharply in China.

‘We see potential for that trend to reverse in the coming years. During the pandemic, having supply chains and manufacturing far from home created difficulties for US firms and many are looking to ‘re-shore’ production.

‘Rising geopolitical tensions and protectionism are other catalysts, abetted by the financial support from the federal government’s CHIPS Act and the Infrastructure Investment and Jobs Act.

‘We believe a multi-year cycle of capital expenditure driven by re-shoring initiatives lies ahead. US small caps should benefit from this trend as they are more levered to domestic investment and economic cycles.’ [SG]

Deutsche Bank’s economists currently expect core PCE inflation, the Federal Reserve’s preferred measure, to remain at or above 2.5% over the next two years.

This, in turn, is expected to lead the Fed to halt rate cuts: Deutsche Bank sees US rates at 4.375% by the end of 2025 and remaining above 4% through the whole of 2026, a striking prediction given the investment bank had seen rates dropping below 4% in 2024 this time last year. The consensus does expect a greater volume of cuts for now, as the chart shows.

This backdrop is likely to be supportive to the dollar, which has already enjoyed a big Trumpinspired rally. Swiss private bank Lombard Odier says: ‘The US dollar will likely emerge as a beneficiary of the new Trump administration and its policy priorities in 2025.’

That in turn could pressure on commodity prices although Lombard Odier thinks gold could be an exception. ‘Lower central bank rates reduce the opportunity cost of holding gold as a nonyielding asset. Central bank buying to diversify reserves from dollars, in part as a response to geopolitical developments, should also keep supporting gold prices. A stronger US dollar is a headwind for gold, but we do not think it will prevent individual investors increasing investment flows into gold.’

In terms of the impact of tariffs on Europe, asset

manager Fidelity estimates a partial implementation of the tariffs floated by Republicans would knock as much as half a percentage point off German and Eurozone GDP. [TS]

WILL THE AI THEME SHIFT IN 2025?

If it sounds like AI (artificial intelligence) has dominated the stock market conversation for ages, remember, it was only two years ago that OpenAI launched ChatGPT (November 2022). Back then you could have snapped up shares in AI chip poster child Nvidia (NVDA:NASDAQ) for less than $17. What a gift, yet they didn’t look like it then, trading on forward PE (price to earnings) of 44.

ARE US SHARES TOO CONCENTRATED AND EXPENSIVE?

US stocks outpaced the rest of the world again in 2024 with the S&P 500 index bursting through the 6,000 barrier thanks to the strong performance of AI boom beneficiaries and the prospect of lower interest rates. Federated Hermes has raised its year-end target from 6,000 to 7,000, though Morningstar cautions US valuations are ‘expensive based on our stock-level valuation models and top-down expected return estimates’.

Goldman Sachs Asset Management observes the US equity market is near its highest level of concentration in 100 years and warns investors this level of mega-cap market dominance is not sustainable: ‘With the performance of the S&P 500 index strongly dependent on the prospects of a small number of stocks, passive allocations to US large cap indices may pose risks to broader portfolios.’

Heading into 2025, skittish investors could look to regions outside the US to achieve better risk-adjusted returns, but Fidelity International’s Niamh Brodie-Machura believes US stocks will outperform the rest of the developed world on earnings. ‘A landmark Republican election victory is likely to reinforce American exceptionalism,’ says BrodieMachura. ‘Even before November’s poll, we expected US corporate earnings to increase by 14% in 2025, beating most other regions and the global average in terms of growth, return-on-equity, and the level of net debt. The election has fanned optimism in the market that the coming year will prove pro-business, pro-growth, and pro-innovation.’ Nevertheless, the Fidelity sage stresses investors will have to be ‘more discerning in where they look this year’. [JC]

That led to some talk last year of an AI bubble, yet Nvidia’s earnings have ballooned 10-fold since full year 2023 (to January), if market forecasts are right for 2025, a measure of just how early on the AI journey we are, how quickly things can change, and how making the rights long-run calls can hand investors huge pay offs.

There have been other winners –Palantir (PLTR:NASDAQ) jumped 300% plus, beating even Nvidia’s 191% – but many investment experts, including Blue Whale Growth’s (BD6PG78) Stephen Yiu still believe the best returns next year will remain concentrated around infrastructure plays, such Nvidia, Broadcom (AVGO:NASDAQ), TSMC (2330:TPE) and Applied Materials (AMAT:NASDAQ), for example.

up with demand, allowing corporates greater freedom to embed AI tools into existing products and services.

‘Those companies that drive revenue and/or expand operating margins will not only provide earnings growth today but will help those companies to either dig or widen their economic moats to bolster returns on invested capital for years to come,’ says Morningstar’s Dan Kemp.

‘AI infrastructure is the foundation of future economic expansion,’ says Nigel Green of DeVere Financial Advisory, and so the likely leaders of market returns.

The challenge for 2025 is for AI to broaden out, something Morningstar analysts predict as GPU (graphics processing unit) capacity starts to catch-

BlackRock expects the AI boom to continue to boost US stocks and economic growth next year as the theme broadens out, at odds with those that call US markets and tech stocks expensive.

It is hard to argue that the US is at the centre of AI innovation, a hegemony that restrictions on China and few European bleeding edge specialists are unlikely to challenge. Private markets could also play a crucial role through 2025 in funding innovation and development.

‘We stay risk-on and go further overweight US stocks as the AI theme broadens out,’ BlackRock says. [SF]

WILL INVESTMENT TRUST CONSOLIDATION CONTINUE AND WILL DISCOUNTS NARROW?

2024 proved to be a record year for M&A (mergers and acquisitions) across the investment trust sector against a backdrop of stubbornly-wide NAV (net asset value) discounts and increasing pressure on sub-scale funds. Consolidation is the dominant theme in investment trusts and is accelerating as boards heed shareholders including wealth managers who want larger, more liquid and cost-effective trusts that can hopefully deliver better returns. With activists also sniffing around the sector, analysts believe this mergers trend is only set to continue in 2025, though negative consequences are that some good strategies will go to the wall next year in this process of creative destruction and choice for investors will be reduced.

Culling the supply of investment company shares, alongside consolidation, should help

narrow discounts, which sat at a historically wide at 15.3% at the end of November 2024 but have narrowed over the last year as interest rate cuts got underway and the Trump trade boosted performance towards the end of 2024. Helpfully, the cost disclosure rules have been suspended, with new rules being implemented next year, which should hopefully help to narrow stubbornly wide discounts in 2025.

In terms of REITs (real estate investment trusts), the commercial real estate market has seen valuations stabilise and actually increase slightly in 2024, and experts expect this trend to continue in 2025 along with rising rents. The catalyst for a re-rating, however, lies with lower gilt yields which will depend on the speed with which the Bank of England reduces interest rates. [JC]

IS THE UK MARKET WELL-PLACED FOR 2025?

With a small manufacturing sector, the UK is less vulnerable to tariffs than other countries so the main drivers for the market next year are likely to be inflation and interest rates.

The Bank of England may cut rates more slowly than other central banks as the OBR (Office for Budget Responsibility) is forecasting a 0.5% rise in inflation to 2.6% as a result of Budget policies, with changes to employers’ NICs (national insurance contributions) in particular meaning the price of some goods and services will remain ‘sticky’.

Economic growth is seen accelerating to 2% in 2025 from 1% this year thanks to the large, sustained increase in spending, taxation and borrowing delivered in the Budget, before slowing to 1.5% in future years.

Net public borrowing is expected to increase by

an average of £32 billion in each of the next five years, which the OBR described as ‘one of largest fiscal loosenings in recent decades’, as current and capital spending of roughly £70 billion is offset by tax policies which raise revenue by around £36 billion per year.

Real household disposable income is expected to rise by an above-average 1.25% in 2025 due to wage increases, before stalling for two years as wage growth slows and taxes increase.

This, together with falling interest and mortgage rates, paints a relatively positive picture for UK consumption, so discretionary spending on small-ticket items should remain fairly resilient next year.

Turning to forecasts for the market, Pictet Asset management’s chief strategist Luca Paolini believes the UK is a ‘cheap stagflation play’ where banks, utilities and small-caps should do well next year, and he is bullish on gilts and short-dated corporate bonds.

Analysts at Morningstar argue on a stock-level basis and a top-down basis investors will get better risk-adjusted returns from the UK than the US next year with small-caps offering greater value than large-caps.

Housebuilders top their list of sector calls, having been ‘through the wringer’ due to the pandemic: the team sees as much as 50% potential upside thanks to lower mortgage rates and supportive government policy. [IC]

DISCLAIMER: Steven Frazer, who contributed to this article, has a holding in Blue Whale Growth.

FROM CURRENCIES TO STOCKS AND COMMODITIES, SAXO BANK'S OUTRAGEOUS PREDICTIONS FOR 2025

Just to add some spice to our outlook feature, we always like to include Saxo Bank’s annual ‘outrageous predictions’, which are a series of events that, while they are pretty unlikely to happen, ‘would send shockwaves across financial markets’ if they did.

The first prediction, which is fairly outrageous but can’t be discounted, is that incoming president Donald Trump tanks the US dollar due a combination of tariffs, inflation and budget cuts.

As companies scramble to find alternatives means of payment, cryptocurrencies and gold soar even further against the dollar.

The only upside is for firms who have reshored production to the US and gain an advantage from the weak dollar.

While on the topic of currencies, Saxo predicts sterling will rise above the €1.27 level to recoup all its ‘Brexit discount’.

‘Fresh fiscal policy winds are blowing in the UK, where the new UK Labour government announced budget priorities ahead of 2025 that avoided the most growth-damaging types of tax hikes on income, while trimming the least productive public sector spending in moving to shrinking its deficits’, suggests the bank.

This encourages domestic demand and investment and sees UK markets post a ‘strong’ performance next year.

Meanwhile, the share price of Nvidia (NVDA:NASDAQ) could be ‘supercharged’ as availability improves for its Blackwell chip which is capable of driving a 25-fold increase in AI calculations per unit of energy consumed over the prior generation of chips.

With Nvidia becoming the most profitable company of all time, and its market value becoming double that of Apple, the company could attract regulatory scrutiny and attempts to break up its quasi-monopoly.

As climate change breeds more devastating weather events in the US, the bank predicts a large insurance company will fail for the first time as insured losses spiral to ‘many multiples’ of the $40 billion caused by Hurricane Katrina.

One US insurer, which has seriously underpriced policies in the affected region, finds it has insufficient reserves or reinsurance in place causing panic across the industry.

As the government moves to avoid contagion, Berkshire Hathaway (BRK.B:NYSE) sails serenely on and uses its surplus capital to gain market share.

Lastly, the bank sees OPEC collapsing as sales of gasoline and diesel decrease around the world and its multi-million barrel per day production cuts become an irrelevance.

‘With some members already cheating production quotas to grab what income they can and export demand falling, a majority quickly realise the jig is up.’

Amidst the in-fighting, key members leave the organisation and max out production to ensure market share, driving a large drop in oil prices, to the benefit of airlines and manufacturers but leading to the closure of expensive shale oil production in the US.

UK Budget? US election? Responding to big events

• Major macroeconomic events will move markets, but their effects are often unpredictable

• We don’t make blanket calls on major events unless we have a clear view, but we think carefully about the potential impact on the portfolio

• Markets tend to act first and adjust more rationally over time

In common with most fund managers, here at Shires Income PLC we spend most days focused on the minutiae of companies but, in the short-term, external events can overwhelm company specifics. October and November have been particularly lively, with a landmark UK Budget quickly followed by a clean sweep for Donald Trump and the Republicans in the US election.

Both events have prompted a raft of speculation on the likely impact for interest rates, inflation, specific sectors and individual companies. They have both moved markets: in the UK, AIMlisted companies saw a bounce from lower-than-expected inheritance tax changes, while in the US the ‘Trump trade’ delivered a higher Dollar, rising Bitcoin and a bounce in US smaller companies. The problem is that in both cases, the longer-term outcome is still largely unclear.

This underscores the problem of incorporating macroeconomic changes into portfolio decisionmaking. While we can have an approximate idea of what Donald Trump may do in office – lower taxes, higher tariffs, more deregulation – the details are seldom sufficient to build

an investment case for or against individual companies.

THE UK BUDGET: DIFFICULT TO MAKE PREDICTIONS

In the UK, the budget was ‘tax more, spend more, borrow more’ in its approach, but its long-term effects are difficult to judge. It appears likely to deliver a small GDP uplift in 2025, which the Office for Budget Responsibility estimates at 2%. From there, it becomes more difficult to make predictions: the budget measures should be mildly inflationary, with the uplift in National Insurance likely to be passed on in consumer pricing. Interest rates might come down at a marginally slower pace as a result. None of it is likely to move the dial for fundamental performance of holdings in our portfolio significantly.

However, that is not to say the budget measures don’t matter. The National Insurance rise, for example, is likely to have an impact on companies in the longer-term, particularly peopleheavy businesses such as travel and leisure, retail, or even industrial sectors such as the housebuilders.

In turning a vague and unpredictable macroeconomic factor into a portfolio decision, we would need to look at how much of a company’s cost base comes from its labour force, how much of its business is based in the UK. We need to understand whether companies have sufficient pricing power to be able to pass higher costs on to their customers, and what can be done to mitigate the impact.

Some retailers, for example, will be able to pass on higher costs

immediately. They may have customers that are relatively priceagnostic, and implementing changes is easy. Others may be caught in longer-term contracts with customers, so passing on price rises can only be done with a lag. We talk to all our companies as we make these decisions: they are often the best judge of the likely impact of external changes.

The important factor about this approach is that it is bottom-up. We try not to trade sectors and make blanket calls on what’s going to happen. Often the market will react with a ‘big picture’ view first, but then take a more nuanced view as the reality for individual companies emerges. We want to make sure we are ahead of that process.

US ELECTION: HOW WILL THE TRUMP AGENDA PLAY OUT?

The US election can still have an impact for the UK market. Many companies in our portfolio sell into the US market, or have US companies as part of their supply chains. The US market ‘mood’ will affect sentiment elsewhere and the strength or

otherwise of the US economy is important for global economic strength. As such, the US election result matters, but it is difficult to make definitive predictions on how the Trump agenda will play out.

Certainly, in his last presidency, Trump did a lot of what he said he was going to do – he lowered taxes, implemented tariffs and sought to tackle excessive regulation. This time round he says he will, once again, implement higher tariffs, lower taxes and tackle excessive regulation. Higher tariffs and lower taxes are inflationary. This may be partially offset by deregulation. It should be good for growth in the US in the shortterm, which is why US markets and the Dollar have responded positively. Again, the longer-term is more difficult to predict. If the US runs

Important information

a higher budget deficit, could government bond yields rise, raising the cost of borrowing and, potentially, depressing the Dollar? Will Trump follow through with onerous tariffs? Or is it an opening salvo for the selfstyled deal maker?

Again, our response at Shires Income is to start at the company level, looking at where companies we hold have exposure to the US, and whether it is vulnerable to tariffs. For example, we think areas such as mass-market consumer goods where there are obvious US equivalents are likely to be vulnerable – tariffs will hike prices and make them less competitive. However, those with a differentiated product or technology may not be as exposed.

As yet, we haven’t moved much around in response to the budget

Risk factors you should consider prior to investing:

• The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.

• Past performance is not a guide to future results.

• Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.

• The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.

• The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.

• The Company may charge expenses to capital which may erode the capital value of the investment.

• There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.

• As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bidoffer spread can widen.

• Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit

or the US election. We’re quite defensively-positioned, so may lag a strongly ‘up’ market – as has been seen in response to Trump’s victory – but our view is that the market tends to act first and adjust more rationally in time.

In making decisions, we have plenty of resources at our disposal. We have a strong macroeconomics team that give us timely views on what a political change might mean for the economic outlook, interest rate expectations and inflation. We have access to external economists and strategists, and we also speak to companies. That all comes together in a single view. However, we are careful not to get caught up in the immediate speculation around a specific event, no matter how huge, but carefully weigh its real, long-term impact on the individual companies we hold.

risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.

• With funds investing in bonds there is a risk that interest rate fluctuations could affect the capital value of investments. Where long term interest rates rise, the capital value of shares is likely to fall, and vice versa. In addition to the interest rate risk, bond investments are also exposed to credit risk reflecting the ability of the borrower (i.e. bond issuer) to meet its obligations (i.e. pay the interest on a bond and return the capital on the redemption date). The risk of this happening is usually higher with bonds classified as ‘subinvestment grade’. These may produce a higher level of income but at a higher risk than investments in ‘investment grade’ bonds. In turn, this may have an adverse impact on funds that invest in such bonds.

• Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London, EC2M 4AG, authorised and regulated by the Financial Conduct Authority in the UK.

Find out more at www.abrdn.com/shrs or by registering for updates

Discover the stocks which outshone the rest in 2024

From large-, to mid-, to small-caps these names have been in heavy demand with investors

The UK stock market has performed robustly over the past year, with several companies standing out significantly. In this article, we will examine the topperforming large-cap, mid-cap, and small-cap stocks of 2024, dissected across four different market valuation categories. £5 BILLION+

market response that stands testament to chief executive Tufan Erginbilgic’s ‘tough love’ approach to optimising the firm’s commercial operations and grinding out cost efficiencies.

With planes back in the air and disruption to travel from the pandemic firmly in the rear-view mirror, the firm’s traditionally lucrative engine sales and long-run servicing contracts has got returns on investment and margins in a much healthier state, and crucially, investors back on side.

As many analysts had predicted, 2024 was a banner year for the Big Four high-street banks especially Barclays (BARC) and NatWest (NWG).

The interest rate cycle finally turned, stoking demand for loans and mortgages, but rather than easing quickly as had been expected, the Bank of England took a more cautious approach which meant lenders were able to maintain their net interest margins.

Both banks also grew their UK loan and deposit base with Barclays buying Tesco Bank and NatWest buying Sainsbury’s [SBRY) personal loan, credit card and deposit portfolio.

Private equity firm 3i (III) was one of the best performers, posting a gain of more than 50%, which for a company which started the year with £15 billion of assets was no mean feat.

The standout performer in the portfolio was once again Benelux discount retailer Action, which keeps delivering impressive results, adding almost £2 billion to the value of 3i’s holding.

Table: Shares magazine • Source: Sharescope, data to 3 December

After a stellar 2023, aeronautical engineer RollsRoyce (RR.) has once again rallied hard during 2024 as the company worked tirelessly on recovery. A

International sports betting firm Flutter Entertainment (FLTR) has had the wind in its sales in 2024, driven in part by its decision to move its main listing to the New York Stock Exchange in May, reflecting investor hopes the business will

attract a higher valuation.

2024 has seen British Airways owner International Consolidated Airlines (IAG) put in a better performance than European competitors. Not only have shares gained 75% year-to-date but the airline group continues to see strong customer demand in the North Atlantic region, Europe, and Latin America. A recently announced €350 million share buyback reflects the long-term prospects of the business and confidence in the strategy and business model.

Convenience foods maker Greencore (GNC) served up a tasty 134% share price gain as margin improvements, profit upgrades and debt reduction powered a re-rating and the sandwiches-to-salads supplier rewarded investors with buybacks and a return to the dividend roster. Dalton Philips-led Greencore, which supplies UK supermarkets, coffee shops and convenience retailers, has delivered an impressive comeback after being hard-hit by the pandemic where fewer office workers nipped out to buy its sandwiches at lunchtime.

After an unconvincing start to listed life, Trustpilot (TRST) really hit its stride in 2024, putting up the sort of attractive and reliable growth numbers to justify the early hype. It leaves the firm’s shares ending the year at close to record highs but lots of investors will be happy to continue backing a business that promises plenty more to come as it reaps the rewards of the model’s network benefits from a platform that now hosts more than 300 million consumer reviews across hundreds of thousands of websites.

Building services group Morgan Sindall (MGNS) has continued to confound analysts this year by beating forecasts and raising its outlook.

In the latest example, the company revealed in October that thanks to ‘material profit growth ahead of expectations’ at the Fit Out division, full-year earnings would be significantly above estimates, leading to a rash of upgrades and a further rally in the shares.

The simple truth is that what powered Zegona Communications (ZEG) in 2024 is the same story as last year – the shock €5 billion acquisition of Vodafone’s (VOD) Spanish operations in September 2023. That said, there’s been plenty of operational progress this year, particularly around securing a 50-50 joint venture with France’s Orange and Spain’s MasMovil Ibercom to create a joint fibre network company that will reach 11.5 million premises.

Latin American silver and gold miner Hochschild Mining (HOC) has been boosted by strong precious metals prices and operational progress which has lifted output from Peru and Brazil.

Shares in annuities specialist Just Group (JUST) have enjoyed an excellent year as a surge in corporate pension deals helped drive big earnings upgrades.

Nigerian oil and gas producer Seplat Energy

Feature: Top performing stocks

(SEPL) received a boost as it moved closer to completing its protracted acquisition of assets from US oil major ExxonMobil (XOM:NYSE), which will result in a step change in the company’s production profile.

commercial and corporate loans, and as of September was profitable on an underlying basis in line with its guidance.

Investors have been excited by increased cash flow, strong gold prices and a recent acquisition at Pan African Resources (PAF:AIM). The company’s Mintails project in South Africa is now up and running and the $52.4 million acquisition of Tennant Consolidated Mining Group could provide gold production from Australia from the second quarter of next year.

Instant service vending equipment maker ME International (MEGP) delivered its fourth consecutive year of double-digit profit growth in 2024, driven by the continued rollout of its automated Revolution laundry machines.

The company installed a record 1,111 machines in the year across 211 locations largely in France and the UK, driving 21% revenue growth in constant currencies. The laundry division generates higher margins than the photobooth business and is expected to be a key driver of future profit growth.

Shares in online greeting cards-to-gifting platform Moonpig (MOON) rallied 61.4% as debt reduction progress and reassuring trading updates soothed sentiment towards a pandemic-era winner whose trotters are now on a firmer footing. A wellreceived capital markets day (16 October), where Moonpig set out its ambition to return to double digit annual sales growth and return surplus cash to shareholders, sparked further gains.

Currys’ (CURY) stock sparked up 57% in an eventful year for the electricals retailer, which delivered a number of profit upgrades after rebuffing opportunistic takeover bids from US firm Elliott Advisors. The TVs, laptops and mobile phones sellers’ turnaround under CEO Alex Baldock continued to impress, with updates highlighting market share gains in tough markets. With new AI-enabled computers exciting customers, Currys could be in for a very Merry Christmas.

Table: Shares magazine • Source: Sharescope, data to 3 December 2024

It has been a remarkable year for ‘challenger’ financial Metro Bank (MTRO), which has undertaken a strategic pivot away from consumers with the sale of its £2.5 billion residential mortgage portfolio.

The bank is now focused on higher-yielding

Payment services and delivery platform Paypoint (PAY) has cashed in big time this year on the twin trends of convenience shopping and parcel delivery.

Its terminals connect millions of consumers with over 60,000 retailers and small businesses, while its Collect+ service offering ‘first and last mile’ delivery has been a big hit with online buyers and sellers.

Mobile gaming business and app store Mobile Streams (MOS:AIM) has got investors very excited by the promise of a casino and sports betting business in Mexico in which the company invested. The company has been a returns graveyard for years, which hasn’t stopped some betting the house on that changing.

One of the biggest success stories in the smallcap market this year has been Roadside Real Estate (ROAD), whose shares have almost quadrupled.

The Abingdon-based firm, which buys and develops commercial property for its clients, recently signed a £70 million deal to acquire 12 sites from low-cost supermarket group Lidl, build stores and lease them to the German group for 25 years with annual inflation-linked rent increases.

A string of small-cap resource stocks have shone in 2024. Global Petroleum (GBP:AIM) has been in demand as it works towards a potential farm-in agreement for its oil and gas exploration licence offshore Namibia. There have been multiple big discoveries in the country’s Orange basin this year.

Mining outfit Kore Potash (KP2:AIM) has been energised by the introduction of a new management team looking to progress its Kola

project in the Republic of Congo.

Oil and gas minnow PennPetro (PPP) shares rose sharply in July in anticipation of drilling in Texas but are currently suspended pending the delayed release of its most recent annual accounts.

Helium firm HeliumOne (HE1:AIM) got investors very excited at the start of the year on successful drilling in Tanzania, although the stock has drifted in the interim.

Communications equipment specialist Filtronic (FTC:AIM) has seen its shares gain a staggering 290% in 2024 as it continues to benefit from its relationship with Elon Musk’s space exploration company SpaceX. The company is looking to expand into the LEO (low-earth orbit) satellite communications market which is ‘a very important growth driver’ say analysts at Cavendish.

It’s hard to know what to make of injection mouldings minnow Carclo (CAR), which seems to periodically get microcap investors excited without ever delivering much, from an operational point of view. Better profits potential seems to have done the trick this year, although its margins are all over the place and returns on investment dismal.

By The Shares team

My Financial Life – the key savings and investment decisions in front of you in your 40s

By your fifth decade you really need to start thinking carefully about plans for retirement

As part of AJ Bell’s Money Matters campaign which is focused on helping all women feel empowered to live their best financial lives, we’re putting together a series of articles breaking down some of the particular considerations depending on your age.

This article is all about your 40s, a decade when people are often considered as entering their peak earning period but also a decade which for many women is filled with compromise, change and no small number of financial potholes to navigate.

EVERYONE’S EXPERIENCE WILL BE DIFFERENT

The first thing to say is that no two financial lives are the same, but women’s financial lives do tend to be different to men’s primarily because they’re still the main caregiver, the party most likely to take time out of the workplace or to cut back on hours in order to look after children.

While the percentage of women who don’t have children has remained pretty consistent since the 1970s (from 14% to 16%) the age at which women have their first child has been steadily increasing with the latest data from the ONS finding the most common age is now 31.

So, there will be plenty of women at least in the early part of their 40s with children in primary school which means the care conundrum is likely to stay front and centre for at least some of this decade.

Men’s careers, earning potential and investment journey tend to follow a pretty straight line but women have to think slightly differently.

For some the trajectory will be pretty linear, for others that graph might look more like an Alton Towers roller coaster. Whatever your path, just remember that doing something is better than

doing nothing.

For women working part time they might not qualify for auto enrolment in a workplace pension, and many may find their 40s chock full of other financial pressures, from the aforementioned childcare to school fees and potentially higher mortgage payments.

WORTH PLANNING FOR RETIREMENT

But your older self will thank you if you can find even a small amount of cash to invest in a pension now, so you aren’t solely relying on the state pension when you retire.

One of the biggest mistakes women of every age make is to think that there’s not point investing unless you’ve got a decent chunk of cash to play with.

Make sure you have a conversation with your partner about more than which streaming subscriptions should be renewed and who is responsible for putting the wash on this weekend.

A very rough rule of thumb is to take the age at

which you started to save into a pension and halve it; that should be the percentage of your salary you contribute each year, so if you have never saved into a pension and you’ve just turned 40 –that’s 20%.

Right, first don’t panic if you’re just starting out because many people – both men and women –are in the same boat because they prioritised other things like actually getting on the housing ladder.

But second, even £25 a month can blossom into a meaningful nest egg if it’s given almost 30 years to mature.

Pensions should be front and centre in your investing decisions by this point in your life, even if retirement still seems like a heck of a long time away.

With just over half of women surveyed by AJ Bell telling us they didn’t feel they had enough in their pension pot to see them comfortably through their retirement, it’s clear there is a lot of work still to be done and your 40s is a great time to take stock.

PENSIONS NOT THE ONLY CONSIDERATION

However, pensions shouldn’t be the only consideration. If you’re one of the millions of people who have found their mortgage payments increase substantially over the past couple of years, you might also have made some difficult decisions which you need to keep revisiting.

Of late interest rates have taken an unexpected

My financial life 40s check list

1. Keep track of your mortgage – if you extend the term will it be paid off before you plan to retire?

2. If you’ve not started a pension, it’s not too late and even a small amount every month can make a big difference.

3. Think about how much cash you have –could your longer-term goals be better served by investing rather than saving.

4. Make a will – it’s too easy to keep putting it off.

5. Check in at least once a year on your finances to keep them fit for the future.

and uncomfortable jump up which pushed many homeowners to consider extending their mortgage term in order to bring down their monthly repayments to a more manageable level.

In the short term that could be the best solution, but it will come with a price in the form of higher interest payments and the potential that you could still be paying off your mortgage well into retirement.

That’s not necessarily a bad thing as long as it’s something you plan for and bear in mind if you

Danni Hewson: Money Matters

ever look at those calculations about minimum living standards for retirement which crucially don’t consider any rent or mortgage costs in their numbers.

And we also know that women like cash, in fact they hold significantly more cash ISAs than men (though on average they have slightly less in those accounts) and they hold a greater percentage of cash in their investment portfolios overall.

CASH CAN BE PART OF THE JIGSAW

Cash can be a really important piece in your financial jigsaw, but it shouldn’t be the whole picture especially when it comes to saving for life moments.

Help towards a house deposit for your kids, paying for a future wedding, even helping with university fees are likely to be shorter term goals than funding your retirement but if the time horizon is longer than five years you should consider whether your money would work harder for you if you invested it.

There are plenty of smart options to consider from a stocks and shares ISA to a Junior ISA to help your kids start on their own investing journeys.

If you do keep a significant portion of your savings in cash, make sure you keep checking the interest rate you are getting on that cash and keep a careful eye on your personal savings allowance, no one wants an unexpected bill from the tax man.

The key at any age is to make a plan, and whilst a busy 40-year-old probably is incredibly time poor, setting aside a few hours over a couple of weekends can make a huge difference.

Financial wellbeing is a way to give yourself and your family more choices and a quick health check even once a year can keep you keep fit for the future.

DISCLAIMER: AJ Bell, referenced in this article, owns Shares. The author (Danni Hewson) and editor (Tom Sieber) of this article own shares in AJ Bell.

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Five key lessons to note from 2024

Can the same trends which drove markets last year be sustained?

It’s ingrained in us as investors that the best way to get superior, risk-adjusted long-term returns is to distance ourselves from the crowd and seek out value.

That approach has always needed courage and patience, and 2024 has proved to be a particularly fierce test of this discipline for the simple reason that what worked last year worked well again this year.

It did so because the consensus macroeconomic view played out exactly as expected – inflation cooled, there was no deep economic downturn (or even a downturn of any real kind) and interest rates started to fall.

In sum, equities did well (again), led by technology and AI-related names (again), with the result that the US stock market outperformed, spearheaded by the Nasdaq (again).

Japan’s benchmark indices did better than those of Europe, which in turn generally did better than those of the UK, while emerging markets lagged (even as China put on a bit of a wiggle towards the end of the year).

Holders of benchmark, 10-year government bonds lost money for the third year in four on both sides of the Atlantic, while commodity prices rose on average for the fourth year in five. Oil did poorly, gold did well, and Bitcoin went bananas (again).

These trends leave 2021-22 looking like a postCovid-19 aberration and suggest the long-term trend of cheap energy, food, goods, labour and (above all) money that began in the early 1980s is reasserting itself.

It’s therefore worth thinking about what happened in 2024 and why, and whether these trends are set to continue into 2025 and beyond.

COOLER INFLATION

Inflation dipped back to, and even briefly below, central banks’ 2% target in the UK and EU and nearly got there in the US based on the official

consumer price index and the US Federal Reserve’s preferred personal consumption expenditure benchmark. That gave central bankers the room they needed to start cutting interest rates.

That said, much of the improvement in inflation came from oil and energy, as well as goods, where unblocked supply chains helped supply and the lagged effect of higher interest rates took some of the edge off demand.

Services inflation remained sticky and could yet prompt workers to demand more in the way of pay increases, so perhaps central banks shouldn’t be too gung-ho just yet.

Headline inflation rates cooled as hoped in 2024

Chart: Shares magazine • Source: Office for National Statistics, US Bureau of Labor Statistics, European Central Bank. US and UK based on

US

powered global growth

Shares magazine • Source: FRED – St. Louis Federal Reserve database

STEADY GROWTH

A global recession failed to materialise in 2024, despite disappointing growth from China, Japan, Germany and France (four of the globe’s seven largest economies).

India took up some of the slack, the UK emerged from 2023’s shallow downturn and the US once more led the charge.

The Biden administration’s CHIPS and Inflation Reduction Acts buoyed output and American consumers kept spending, helped by rising house and stock prices.

America’s latest debt-ceiling breach gave no-one pause for any particular thought, even as the deficit soared, and presidentelect Trump’s plan to raise revenues through tariffs has provoked as much concern as it has positive comment.

If Elon Musk succeeds in cutting US government spending, and Trump rolls back the Inflation Reduction Act, there could yet be some (unpleasant) unintended consequences.

INTEREST RATE CUTS GALORE

A tally of 175 interest rate cuts worldwide in 2024, compared to just 28 rate hikes, tells a clear story.

The UK, Japan and China all added fiscal stimulus to fresh monetary impetus, and you could argue

the US did as well given how the Federal deficit grew by another $1.8 trillion to an all-time high of $36 trillion.

The question for 2025 is whether a combination of sticky inflation, steady growth and ballooning government debts (and rising sovereign bond yields) crimp central banks’ room for manoeuvre and force the pace of rate cuts to slow or, at the extreme, come to a halt.

Interest rate cuts gained momentum in 2024

Chart:

BITCOIN AND GOLD BOTH SHONE

Gold and (most spectacularly) bitcoin set new all-time highs, while silver hit a twelve-year high.

Such demand for havens does not sit comfortably beside equities’ core scenario of cooling inflation, steady growth and lower interest rates.

It may be the result of fears that central banks are playing fast and loose with inflation, or that ever-growing sovereign debts are persuading them to cut rates (and ease governments’ interest bills) whether they feel it is appropriate or not.

President-elect Trump’s enthusiasm for all things crypto, his planned deregulation drive and the departure of Gary Gensler from the SEC (Securities and Exchange Commission) mean bitcoin is up 40% in barely two months, helped by what can be seen as increasingly reflexive ETF flows (the higher bitcoin goes, the more buyers appear), in a clear win for momentum over value investors.

Bitcoin has headed up, up and away (as has gold)

Source: LSEG Refinitiv data

SOVEREIGN BONDS DID POORLY

Another slightly discordant note comes from the sovereign bond market, and this matters

because the 10-year bond represents the local risk-free rate and thus the benchmark minimum return which is acceptable from any investment.

Yields on 10-year paper rose (and prices fell) despite interest rate cuts, suggesting the bond vigilantes are becoming nervous over governments’ debt piles in the US, UK and EU.

The question is whether there is political or public appetite for the tax increases and spending cuts needed to fix them, in the absence of growth or inflation reducing those growing debt-to-GDP and interest bill-to-total spending ratios.

Anyone who bought 10-year bonds in 2020, when central banks were indiscriminate buyers thanks to COVID-fighting QE schemes, has suffered, to perhaps offer a reminder that valuation always matters – in the end.

Sovereign bond yields rose (and prices fell) in 2024

In January, we shall look at what the key macroeconomic trends in 2025 may be and how they in turn could shape the performance of investors’ portfolios.

How to invest for children this Christmas

The options for parents and grandchildren looking to build a nest egg

Lots of parents and grandparents default to cash when saving for their children or grandchildren, but most have a very long time until they will give the money to the children, meaning investing can be a great option.

If we look at someone saving £1,000 a year from birth of the child until the age of 18, they’d hand them almost £8,000 more if they invested the money and earned 5% return a year after charges, compared to a hypothetical 2% return from cash. But where should you start?

PICK AN ACCOUNT

When you’re starting out it might feel a bit confusing picking the right account. A Junior ISA is a good option for many: you can pay in up to £9,000 a year, the money is ring-fenced in the child’s name and it’s locked up until they turn 18.

However, if you want a bit more flexibility or think you might want access to the money before your grandchild’s 18th birthday, you could just save the money in your own ISA. It means you’ll have to use up some of your own £20,000 ISA allowance, but that is only an issue if you think you’ll max out that limit for your own savings. The money isn’t ring-fenced and you access it at any time – which is both a pro and a con. If you’re worried you might dip into the money it may be better in a Junior ISA, but if you want the flexibility to access it if you need to, it might be a good option.

Your longer-term option is a pension for your child: a Junior SIPP. You can save up to £2,880 in this account, which will get topped up with tax

relief from the government to £3,600. But it’s a very long-term option, as your child won’t be able to access the money until they reach retirement

THE TAX BENEFIT OF GIFTING

Gifting money is a great way to move the assets out of your estate for inheritance tax purposes. Everyone can pass on an estate worth up to £325,000 free of inheritance tax, and some people are eligible for an additional £175,000 limit if they are passing on their main home. But after that the estate will have to pay 40% tax. If you know you’re going to hit this threshold and can afford to part with money now, moving money out of the estate while you’re alive can save tax in the future.

Anyone can gift up to £3,000 a year, as well as extra amounts when certain people in the family get married, without it being considered for inheritance tax purposes. Any gifts over that amount will be subject to the seven-year rule, which means that if you were to die inheritance tax is due on a sliding scale until seven years have passed.

Any gifts over that amount will be subject to the seven-year rule, which means that if you were to die and your estate was worth more than £325,000 inheritance tax would be due on a sliding scale until seven years have passed.

Personal Finance: Investing for kids this Christmas

age. However, if you made just one contribution of £2,880 at birth and it grew by 5% a year, your child would have a pot worth £46,500 by the age of 57 – showing the magic of investment growth and compounding.

PICK A WAY TO SAVE

You can choose whether to make a lump sum investment for your grandchild or spread the money throughout the year. You can set up monthly investing for the children in your life and contribute a small amount each month. Many investment platforms will allow you to start regular investing from as little as £25 a month. You can always pause it one month if you need to skip a month, but it means you don’t have to actively log in and invest money every month. If set up from birth, a £25 a month contribution could give them a pot worth £8,800 by the time they are 18 based on them achieving a 5% return.

At the other end of the spectrum, the Junior ISA limit is a whopping £9,000, and any grandparent fortunate enough to be able to put that amount away for their child each Christmas would be handing them a £266,000 present on their 18th birthday, assuming the same 5% investment returns a year. However, for many grandparents that will be a pipe dream and even squirreling away a little money each festive season will be enough to help your grandchild out when they’re 18.

PICKING INVESTMENTS

When it comes to picking investments the first question is whether you want to pick the stocks yourself or outsource that task to a fund. If you opt for funds, you’ll want to weigh up using an active fund manager or a passive fund. There’s no right answer to this, it comes down to preference. Put simply, a passive investment approach will cost you less but will only track the performance of the market – never outperform it. With active management you’re paying more to have a fund manager pick stocks for you, but the hope is that this will generate a higher return.

There’s no need to sit entirely in one camp, you could mix the two approaches. For example, having a broader UK stock market tracker and then using an active fund for a more specialist

area. Another option is to pick a multi-asset or ‘all-in-one’ fund, which can be active or passive and invests in a mixture of different assets, meaning you only need invest in one fund that is already diversified, rather than picking lots of different investments.

When investing for your children it’s important to think about the timeframe. If they are young, you could have up to 18 years until they will access the money. This makes for a decent investment horizon and means you could potentially take more risk with the money, as you have time to ride out the ups and downs of the market. Conversely, if your child is closer to 18 you might want to take less risk or even stick to cash.

THREE FUNDS FOR INVESTING FOR CHILDREN

1. Fidelity Index World (BJS8SJ3) – A low-cost passive fund that tracks the global stock market and gives exposure to hundreds of companies around the world. A good option to form a well-diversified core of your portfolio and only costs 0.12% a year.

2. Liontrust Sustainable Future Global Growth Acc (3003006) – Many grandparents may want to invest in a sustainable fund option for their grandchild’s future. The Liontrust team have been investing in sustainable and responsible funds for a long time and this £1.4bn fund invests in companies around the world that provide or produce sustainable products and services. It costs 0.85% a year.

3. JP Morgan Emerging Markets Investment Trust (JMG) – For grandparents who have a longer time horizon or want to take more risk, emerging markets could be an option. Run by a fund manager with three decades of experience, this trust invests in around 70 large companies in the emerging markets. It costs 0.79% a year.

By Laura Suter AJ Bell Head of Personal Finance

WHO WE ARE

EDITOR: Tom Sieber @SharesMagTom

DEPUTY EDITOR: Ian Conway @SharesMagIan

NEWS EDITOR: Steven Frazer @SharesMagSteve

FUNDS AND INVESTMENT

TRUSTS EDITOR: James Crux @SharesMagJames

EDUCATION EDITOR: Martin Gamble @Chilligg

INVESTMENT WRITER: Sabuhi Gard @sharesmagsabuhi

CONTRIBUTORS:

Dan Coatsworth

Danni Hewson

Laith Khalaf

Laura Suter

Rachel Vahey

Russ Mould

Shares magazine is published weekly every Thursday (50 times per year) by AJ Bell Media Limited, 49 Southwark Bridge Road, London, SE1 9HH. Company Registration No: 3733852.

All Shares material is copyright. Reproduction in whole or part is not permitted without written permission from the editor.

Shares publishes information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters. Comments published in Shares must not be relied upon by readers when they make their investment decisions. Investors who require advice should consult a properly qualified independent adviser. Shares, its staff and AJ Bell Media Limited do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

Members of staff of Shares may hold shares in companies mentioned in the magazine. This could create a conflict of interests. Where such a conflict exists it will be disclosed. Shares adheres to a strict code of conduct for reporters, as set out below.

1. In keeping with the existing practice, reporters who intend to write about any securities, derivatives or positions with spread betting organisations that they have an interest in should first clear their writing with the editor. If the editor agrees that the

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