It’s been a week of two halves. Thankfully the worse half came first and we are heading into the weekend on a positive note. The nerve-jangling summer is starting to fade into history.
We are admittedly not out of the woods yet. Latest projections from the International Monetary Fund suggest that global economic growth will be an anaemic 3.1% this year. I am scornful of IMF pronouncements, but with three quarters of the year gone even the IMF should be able to get it right. China is shrinking further and Brazil, once hailed as one of the BRIC nations that would drive growth, is in a recession that is likely to run into next year as well.
So we are relying on the old favourites, the US and our own domestic economy, to keep things going with a little, but not a lot, of help from the Eurozone which, with the exception of Greece, has held up much better than the British press would have us believe. Whatever happened to the collapse of the French economy under socialist president Francois Hollande?
We should be greatly encouraged that UK unemployment is falling, real wages are rising after six years of belt tightening, fewer shops are closing on the High Street and inflation is stuck around zero.
The FTSE 250 index, being more domestically orientated, has held up better than the more global FTSE 100 but there could still be better prospects among the midcaps rather than the blue chips. If you want to think big, as I generally do, then there are solid dividend payers such as in utilities and the likes of Glaxo (GSK), which I hold.
Resource stocks and oils seemed to have hit the bottom, though I remain deeply sceptical about the bounce-back in Glencore (GLEN). So far my punt on Rio Tinto (RIO) has worked out very well but I wouldn’t chase that particular stock any higher just yet.
Sell in May is generally bad advice, though it worked spectacularly well this year. As investors buy back into the market, that other fictitious notion, the Santa Claus rally, may prove just as prescient. This year, I believe, Santa Claus really does exist.
The Domino Effect
Over the years Domino’s Pizza (DOM) has sprung some stunning surprises, usually the sort that send the shares soaring, as happened this week. A really strong first half has been followed by an even better third quarter despite Domino’s being up against strong comparatives from last year.
Domino’s has demonstrated how to embrace the age of technology and use it to advantage. Revenue through digital channels was 35% ahead of the third quarter last year and more than 75% of sales in the year to date have been online, with more than half of these placed through apps.
Although apps are one technological step too far from the real world for me, I bump into – or rather, they bump into me – enough people glued to phones, tablet and other devices to realise this is the future, as Domino’s did quite some time ago.
Apparently the sponsorship of TV soap Hollyoaks has “enhanced brand saliency” but as long as the company is better at delivering pizzas than it is in delivering the English language shareholders will not complain.
The shares have travelled relentlessly upwards over the past 12 months, from below 600p to top side of 1,000p, which puts a lot of good news in the price. Shareholders should hold on. You deserve your reward. I can’t make out a case for buying at more than 1,000p at this stage but the shares could be worth looking at on any weakness.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice.
