The Financial Grimes: Burford Capital and cheap trackers
This top City analyst reviews the financial sector stocks making headlines today.
12th August 2019 10:34
by Jeremy Grime from ii contributor
This top City analyst reviews the financial sector stocks making headlines today.
Jeremy Grime spent 15 years as a financial sector analyst, working at Altium Capital, RBC Capital Markets, Panmure Gordon and most recently as Director of Research at finnCap. Jeremy is also a qualified accountant.
Jeremy's blog is written with more experienced investors in mind. However, we have included a brief glossary at the bottom of the page to help those less familiar with some of the language used. For more on key financial metrics and valuation ratios click here.
The Rise of the Trackers
- This interesting chart from Bloomberg shows the growth in market share of the ETF tracking funds since 2014.
- Conclusion Perhaps Standard Life Aberdeen (LSE:SLA) should look at launching an ETF portfolio. It gets harder to differentiate as fund managers get larger. In this new world only the specialist of the scaled can survive. But the scaled need to be offering cheap products such as ETFs. Standard Life Aberdeen are still calling themselves value investors, which is the wrong style in a low interest rate world, as well as the product being more expensive than ETFs.
Burford Capital – Market Manipulation RNS
Share Price: 860p
Mkt Cap: £1,858 million
Conflict Disclosure: No Holding
Burford Capital (LSE:BUR) is a litigation finance company, providing funds to bankroll expensive lawsuits.
- Statement Burford has found evidence of market manipulation after a weekend when Gotham City published its concerns over the answers given on the Burford analyst call, which included concerns that Burford stated they "are lawyers; therefore we are trustworthy". I am tempted to do a twitter poll on who agrees with that statement. They believe that spoofing and layering may have occurred, and that share price declines were not caused by actual shares traded.
- Valuation The shares remain at 1.4X book value, which equates to a PER of 6.8 and yield 1.4%
- Conclusion It looks like instead of investing in other third-party litigation cases, they are now intent on investing in their own, thereby rendering the shares almost uninvestable. Especially when the directors have bought stock recently, thereby intending to capitalise on this apparent market manipulation.
| Glossary | |
|---|---|
| PBT | profit before tax |
| EPS | earnings per share |
| DPS | dividend per share |
| ROE | return on equity |
| EBITDA | earnings before interest, tax, depreciation and amortisation |
| PER | price earnings, or PE ratio |
| Yield | dividend yield |
| FCF | free cash flow |
| NAV | net asset value |
| Price/Book (PB) | a company's share price versus what it owns |
| Book Value | a company's worth after subtracting debts and liabilities from assets |
| AUM | assets under management |
| FUM | funds under management |
| OTC | over-the-counter |
| FCA | Financial Conduct Authority |
| ESMA | European Securities and Markets Authority |
For information about Jeremy's 'deep dive' company analysis, you can email him at jeremy@charltonillingworth.co.uk
Jeremy Grime is an independent equity markets analyst and freelance contributor, not a direct employee of interactive investor.
These articles are provided for information purposes only. Â Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. Â The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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