Taking stock as UK shares hit snooze, and Fulham Shore toasts reopening success

“UK stocks have spent much of the past week trading sideways with a lack of real catalysts to push them firmly in either an upwards or downwards direction and today’s modest move higher for the FTSE 100 is very much in that vein,” says AJ Bell Investment Director Russ Mould.

“A relatively quiet period for corporate and economic announcements represents a good opportunity to take stock of 2021 so far.

“It has been five months of investors fluctuating between optimism over the recovery, concern over the state of the Covid-19 pandemic and fears the economy will overheat resulting in rampant inflation.

“A key feature has been a recovery in UK assets which, even before Covid struck, had been largely underperforming their main global counterparts since the Brexit vote in 2016.

“The drivers for the renewed interest in UK stocks have been the successful vaccine rollout and accompanying reopening of the economy, and some encouraging noises from the corporate world as firms have updated on their first quarter trading.

“The pound is at its highest level in three years against the dollar at $1.42, while the FTSE 250 and FTSE Small Cap indices, which have more of a domestic focus, have outperformed both the more globally-orientated FTSE 100 and some other major stock markets around the world, notably the technology-heavy Nasdaq index which had previously been on a supercharged run.

“Whether this trend can be sustained may come down to the battle between vaccines and variants and if the UK can stick to a road map which would see nearly all coronavirus restrictions lifted in a little over three weeks’ time.”

Source: Sharepad, data to 28 May 2021.

Fulham Shore

“Fulham Shore has proof of the pent-up demand for visiting restaurants. For the first full week since people were permitted to dine inside, the company has achieved 92% of like-for-like sales versus the same period in 2019 despite its restaurants having Covid-related capacity restrictions.

“The best test for the company is whether this latest strong demand can be sustained. Anecdotally, some barbers and hairdressers have said their shops were initially busy when restrictions were lifted in April, but then they suffered a lull for two or three weeks until people’s hair grew a bit and customers came back for another trim.

“While it’s fair to say that it only takes a day for people to feel hungry again, there could be a similar cycle for restaurants where diners wait a few weeks or even a month before frequenting their favourite establishments again.

“Fulham Shore could be at an advantage, however. Quite a big chunk of its restaurant estate has outside tables and the immediate weather forecast is for a few weeks of sun, meaning people could be out and about, ready to dine al-fresco style at places such as The Real Greek.

“The company is pressing ahead with expansion plans, implying that it is confident about trading for the rest of 2021 and beyond. There are some good deals to be struck with landlords eager to fill empty premises, meaning Fulham Shore could soon reap the rewards of investing at a time when there is still some uncertainty.

“The casual dining industry has also seen a reduction in overall capacity, meaning the supply/demand balance is looking more favourable for companies still operating. Many brands have disappeared in recent years, meaning those still standing could emerge even stronger in the medium term.”

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