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Experienced Investor

Top investment tips for 2018

Cherry Reynard
Written By:
Cherry Reynard
Posted:
Updated:
21/02/2024

Ian Forrest, investment research analyst at The Share Centre, chooses five equities, an investment trust and an ETF that could flourish in 2018:

Unilever – for lower risk investors

“It’s an exciting time for this consumer goods giant as it is implementing a new strategy which aims to improve sales growth, lower costs and increase returns to shareholders through raised dividends. Indeed, the company acknowledge that it intends to return the €6.8bn it acquired through the recent sale of its spreads division to shareholders unless more appealing acquisition opportunities arise.

“The company continues to see better growth in emerging markets such as India and China but it doesn’t stop there. The group has its sights set on bigger things and remains keen on expanding in emerging markets, it is expecting to spend €1-2bn on acquisitions next year to target further growth in China and Eastern. Unilever has a defensive appeal for investors seeking lower risk as sales of everyday, essential household goods tend not to be significantly affected by changes in background economic circumstances.”

WPP – for medium risk investors

“WPP is the bellwether of the advertising industry and as such is widely regarded as a global economic barometer. There’s no denying that 2017 proved to be a difficult year for the company, reflected by the shares having their biggest drop in over a decade in reaction to news of future sales cuts. Nevertheless, in 2018 we believe the group has the potential to benefit from big sporting events, such as the FIFA World Cup. Additionally, the growth in online media and new technology continues at a fast pace which should help open up avenues for growth over the longer term. This is reflected in the fact that new media-related business is WPP’s fastest growing area.

We see the core attraction of the group being the steady progress it is making in emerging markets. Indeed, 30% of the group’s revenue now comes from these countries and their growing importance to the company looks set to continue. When you add these factors to historically attractive ratings, improving dividends, a high prospective dividend yield of 4.5% and a steady flow of acquisitions, we believe the shares are worth drip-feeding into.”

Amino Technologies – for higher risk investors

“AIM-listed company Amino Technologies produces hardware and software products designed to enable broadband providers to offer television and other services to consumers.

The advent of the internet, and now rising levels of bandwidth available to consumers thanks to the spread of fibre-optic cables, are a couple of the reasons for an increase in demand for television services delivered via set-top boxes (IPTV). Over the next 12 months it should continue to benefit from the increased availability of bandwidth and a continued customer preference for more interactive entertainment experiences.

“The group targets a range of sectors including the hotel and hospitality industry, where its software allows guests to access media such as music and movies on demand. Moreover, good cash generation provides options for further growth in 2018 whether that’s through investment in the business or acquisitions. Investors may also want to recognise the good 3.8% prospective dividend yield which is supported by a progressive dividend policy.”

Iomart – for growth seeking investors

“Iomart was involved in cloud computing long before it became fashionable. It is one of the UK’s leading companies in an industry that is expected to grow fairly rapidly as businesses and consumers generate more data and become comfortable with having that data located offsite.  Essentially, Iomart facilitates data hosting services so that clients and the end user can have access to data and web services in a secure manner while reducing costs and complexity. Investors should recognise that the group expects the creation of data to be exponential for some years to come.

“This is a business which is operationally geared, and it can take more business for relatively little cost. The group has partnerships and programmes with some of the largest computing businesses in the world such as Microsoft and Dell and there’s further promise in regards to hosting government departments as well as targeting smaller acquisitions. The shares have made steady progress over recent years helping cement our belief that the long term prospects have not fundamentally changed.”

HSBC – for income seeking investors

“Income seekers in the banking sector have been hit hard in recent years. However, HSBC has remained a significant payer and now there are clear indications that the group is starting to benefit from its restructuring programme. Indeed, the shares have outperformed the FTSE 100 so far year to date and are up around 12%, compared to a 4% rise in the top index.

“HSBC, which is the largest of the UK’s banks, has a mix of business and geographical spread, and is keen to promote the “pivot to Asia” strategy, which it hopes in the long run, will see it emerge from a difficult period for the sector. Indeed, around 70% of its profit now comes from Asia. During the next 12 months, lower loan impairments and rising interest rates in the US could also aid its performance.”

Other investment opportunities

“Exchange traded fund offers investors market diversification within a single product. The iShares MSCI Emerging Markets UCITS fund is one that features on our list of preferred ETFs and offers investors the chance to take a broad base approach to investing in emerging markets. The fund invests directly into constituent shares using an optimised/sampled methodology and, at the time of writing, has net assets under management in excess of $4.5bn. It has closely tracked the underlying index over the last three years with high correlation and low tracking error statistics compared to its peers. Investors should appreciate that the fund has a distribution yield around 1.5% which is paid out quarterly and it has a total expense ratio of 0.75%. This is a fund suitable for investors seeking a mixture of both income and growth and willing to accept a higher level of risk.”

“If investors want to opt for an investment trust, then the Monks Investment Trust could be a good bet for 2018. The trust was launched in 1929 and has been managed by Baillie Gifford throughout most of its history. However, recently there was a change at the helm with Charles Plowden taking over in 2015 in an attempt to improve performance and a focus on long-term global equity growth. There has been a noticeable increase in Emerging Market exposure and momentum seems to be behind him as so far the performance has improved significantly, pushing the fund to a premium rating and attracting an increased following amongst retail investors. Monks seeks to meet its objective of achieving capital growth through investment principally in a portfolio of international quoted equities. Therefore, investors looking for actively managed global exposure may well find this a suitable investment.”