Granted, the stocks don’t trade at the lower end of that range. They could go lower. But the balance sheet only had £47m in net debt at last count, so there’s no pressure even in the event of a recession.
In addition, Springfield’s £46m acquisition of fellow Scottish builder Mactaggart & Mickel earlier this month is structured so that three-quarters of the payment will be made over five years, in line with the number of homes sold, as analysts believe the deal should boost profits. increase in 2023 and 2024, all other things being equal.
We’ll stay with Springfield. Delay.
Questor says: wait
Ticker: SRP
Share price at closing: 131.5 p
recession warning
The admission by Federal Reserve chairman Jerome Powell that the US economy could be plunged into recession is refreshingly honest. The question now is how investors can tell if he’s right, especially since where America is going, the world tends to follow.
Economic data looks more ominous. US retail sales and home launches are declining as interest rates and mortgage rates rise rapidly. However, all economic data is by definition retrospective and therefore of little use to policymakers or portfolio builders, so the Fed’s ‘data-dependent’ stance should be treated with caution.
Concurrent indicators such as purchasing manager indices and sentiment surveys can provide more up-to-date data. In that regard, the US NFIB indicator for smaller companies is a concern. The 29 million or so smaller US companies employ more than 98 percent of their employees, and the latest NFIB reading in May fell below the 48-year average of 98 for the fifth consecutive time.
Past dips below 10 have warned of the US recessions of 1991-92, 2001-02 and 2008-09, although there have been the occasional false alarms.
Those who believe in free financial markets may prefer to rely on their collective wisdom. A drop in the price of each of the copper stock indices of smaller companies, such as the Russell 2000 and the UK’s FTSE Small Cap, and the US Dow Jones Transportation Index makes for a grim-looking trio.
“Doctor Copper” is a good guide to global economic health as the metal’s toughness and conductivity mean it’s used in so many industries. Smaller companies are usually much more sensitive to their local economy.
And Richard Russell’s Dow theory argues that industry can’t do well if shipments do poorly, because weak transportation inventories imply goods fail to ship because of a build-up of inventory, weak demand, or both. In contrast, a sharp rise in transport stocks indicates good demand as shelves and forecourts need to be replenished and newly manufactured products moved.
All of this happens when Western central banks raise interest rates, begin to reduce quantitative easing, or both. That’s not a great combination and central banks will undoubtedly change course at some point and start easing (and pressing) again. Doctor Copper, small caps and the carriers will probably sniff this for analysts and economists, if history is any guide, so keep an eye out for them.
Russ Mold is an investment director at AJ Bell, the stockbroker
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