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Seven stocks for the long term – MoneyWeek

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Withinourthemeofsocialproperty,wehaveinvestedinAim-listedDawnayDaySirius(DDS),whichisdevelopingofficespaceforsmallbusinessesinGermany。

ThishasbeenasuccessfulmodelintheUKbutisunderdevelopedinGermany,wheretheeconomicbackgroundisstrongandpropertyvaluationsstillattractive。

Attheotherendofthespectrum,Ifeelthelastfiveyearsofoutperformancebymid-capstockshasleftcertainanomaliesinthemarket。

Thestrongperformanceofmid-sizedstockshasbeenpartlydrivenbyawaveofbidactivity;thishaslargelybeenduetotheavailabilityofcheapmoneytoprivate-equityfirmswithsignificantamountsofliquiditytoinvest。

Thiswaveofbidspeculationsawmanylargerstocksleftbehindbecausetheywereconsideredlesslikelytobecometargets。

Thedisparityinvaluationhasbecomeobvious。

Thelargest20stocksintheUKnowyield3。

9%,comparedwith3。

2%fortheFTSE250,apremiumofover20%。

Bankstocks,suchasLloydsTSBorHSBC,arenowyieldingover5%withwell-covereddividends,whileinthemid-capmarketsuchhighyieldsareonlyseenwhereadividendcutisquitelikely。

I’vebeenaddingtosomeoftheseunderperforminglargerfirms,includingVodafone(VOD)andAviva(AV)。

GlaxoSmithKline(GSK),meanwhile,hasbeenvictimofpoornewsflowaboutAvandia,itsleadingdiabetesdrug,butisnowvaluedonap/eratioof12。

5withadividendyieldof4%,whichistwicecovered,andanundergearedbalancesheet。

Thisyearbondyieldshavebeencreepinghigherandoverthelastcoupleofmonthsrisk-aversionhasrisensharply。

Thiscouldcutoffsomeoftheliquiditythathasdrivenbidactivityinthemid-sizednamesandresultinaflighttoqualityinsomeofthelargerstocks。

Forme,thisisparticularlytrueofbanks,telecomsandpharmaceuticals,andgiventhesearelargesectorswithintheindex,thisshouldbesupportiveofthemarketasawhole。

ThestocksGeorgeLathamlikes

Stock,12mthhigh,12mthlow,Now

SheffieldInsulation,1,488p,895p,1,258pSuperglass,220p,200p,216pEAGA,236p,203p,213pDawnayDaySirius,e1。

13,e0。

85,e0。

89Vodafone,175p,100p,155。

5pAviva,951p,655p,668pGlaxoSmithKline,1,993p,1,205p,1,276p

NakedTextNakedText


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