Leading market commentator David Buik tells interactive investor who he thinks the winners will be this year and where the FTSE 100 will finish 2018.
Which blue chip shares does Panmure Gordon think will be winners in 2018?
They're not as obvious as they were because we had a foreign exchange play throughout 2016 when the pound fell against the dollar by about 18% and 12% against the euro. That's ironed itself out by the pound becoming stronger in the last six months, and we are also very, very concerned about the possibility of companies not delivering the level of profitability that we thought we might.
But anyway we pulled out of the sack , Barrie Cornes, our analyst is very keen on this because it's doing extremely well in the United States now again, and also is measuring up well against in Asia. And also some of the pensions schemes that are on offer in this country, we think make it an extremely attractive prospect.
Apart from that I think you can look at the banks because if we are going to get some level of interest rate increase, and also the fact that we are going to see more international business become more fragmented, which could focus a little bit more on the domestic banks, perhaps it might be possible to look at ahead of the possibility of a sale of about £3 billion worth of assets in 2019. And the other one I think we'd have to focus on is probably because healthcare is becoming extremely important, and there's an awful lot of money being invested in the development of it.
What are your favourite mid-cap or smaller company shares?
Well they vary enormously. I'd also like to talk negatively about one or two of them as well, but in the technology stocks, I think probably , which is a company that Panmure Gordon brought to the market, Peter McNally our analyst, is very keen on this going forward.
For the pharmaceuticals, , Dr Julie Simmons recommended us something that she would very much like to look forward to.
And we've got , which is a company that has done extremely well in 2017, and we are hopeful that despite issues, as I say, as regards valuations in terms of being able to deliver profitability, we're extremely keen on as well.
Apart from that, on the negative sides of things, one of the areas that I think, well, because margins are so thin, we've got a slightly negative approach, which of course Mark Irvine-Fortescue thinks about . And the same in the defence sector, where Sanjay Jha, our analyst there, feels that isn't perhaps not quite what it should be.
But on the whole, this will be, 2018, a time for stock picking. And there are a lot of other good companies out there that I'd like to recommend, , which is again a company that our retail analyst, Mark Irvine-Fortescue also recommends.
Are there any issues, such as valuations, that might cause a correction in 2018?
Definitely, because we've seen, particularly in North America, some very, very frothy valuations and the PE ratio in the Dow is somewhere about 24%, 18% in the S&P 500 and something like 26% the Nasdaq, and they are all very frothy in Hong Kong, 31%.
Valuations are going to be the real problem here, and we wouldn't be at all surprised to see some kind of a correction, because we don't think the level of profitability that we've seen, and growth that we've seen from companies, can be sustained at these levels.
So, if there was a correction of five to 10% amongst the main indices, it wouldn't remotely surprise us. In the case of the , we think that's a stock picker because it's going to be geared entirely to the value of the pound. And we think the real value would be selecting really positive companies out of the 250, which is where the growth will come if it's going to come at all in the United Kingdom.
The FTSE 100 did better than you predicted this time last year. Where will it end in 2018?
Where will it end in 2018? My guess is that it will end, you know, it's about 7,000 at the moment, and we think it probably could be down as low as 6,800.
What's top of your Christmas list?
I think LoopUP. I'm very keen on technology stocks, particularly those that offer something that other people don't have, and this is a company, you know, that we're really interested in and they will do extremely well.
This is the transcript of a video filmed in December. To watch the original video, please click here.
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