U-turn for Aston Martin shareholder and Future fights back

“The fact that China and the US are restarting trade talks gives some reassurance to investors and triggers a small rally in stocks around the world. However, there are plenty of other negative factors to consider which explains why equity markets aren’t experiencing massive surges,” says Russ Mould, Investment Director at AJ Bell.

“The trade war is far from over, which means a continuation of uncertainties hanging over the market. Economic data from Asia is also acting as a headwind for the markets. The latest manufacturing data from China fell short of market expectations and the new round of Japanese manufacturing data also disappointed.

“The FTSE 100 managed to climb 0.9% to 7,493 on Monday morning, principally down to Royal Dutch Shell riding higher following a small increase in the oil price, and strength among banking shares."

Aston Martin Lagonda

“The normal practice for private equity companies is to buy assets low and sell them high. What’s slightly unusual is when they start to rebuild stakes soon after reducing the size of their investment. And that’s the situation now for Italian group Investindustrial which is in the market for more Aston Martin shares.

“Investindustrial is a private equity group and Aston Martin’s largest shareholder. Having sold some of its holding at the car manufacturer’s IPO last September at £19 a share, Investindustrial is now seeking to buy more shares, albeit at nearly half the price.

“Private equity companies often use IPOs as a way of providing a partial exit for an investment. They regularly do well at these stock market floats by getting a higher price than they originally paid to own all or part of a business privately. Doing a U-turn and rebuying stock in the market is untypical behaviour.

“Shares in Aston Martin have been falling since its IPO as investors didn’t like its large investment plans and questioned its aggressive growth strategy. Investindustrial must see significant long-term value in Aston Martin at the current price if it wants to buy up to 3% more of the business less than a year since it reduced its stake.

“A company like Aston Martin needs patient shareholders as its expansion plan is likely to require a fresh injection of cash in order to hit the growth goal. And the fact that it has gone bankrupt seven times in its history illustrates how volatile Aston Martin’s growth path has been.”

Future

“Publishing group Future is on the comeback trail as it guides for full year results to be ahead of expectations.

“The company behind titles such as Tech Radar and Total Film has enjoyed a heady ascent in the last couple of years which took it from small cap status all the way up to the FTSE 250.

“However, by lifting itself above the parapet it was there to be shot at. Sure enough, less than a week after its promotion to the mid cap ranks was confirmed the boutique research firm Stockviews published an aggressive ‘sell’ note on the company, knocking the share price for six.

“Stockviews said market expectations were too elevated, results included too many recurring items, the definition of cash flow was questionable, the remuneration policy encouraged aggressive acquisitions to hit earnings targets and its monetisation strategy was damaging the media brands in its portfolio.

“Future has a platform which enables it to monetise specialist content through a mixture of e-commerce, getting content users to click through to partnered retailers, events and online advertising. The plan is to feed newly-acquired assets into this platform.

“Newspaper and magazine publishers continue to battle falling sales and have struggled to get readers to pay for their relatively generic content, but consumers have shown a greater willingness to pay for specialist and niche content which they are unable to get elsewhere.

“Future needs to get the balance right between making money out of the hobbyists who read its publications and ensuring they don’t feel exploited.”

These articles are for information purposes only and are not a personal recommendation or advice.