Wall Street slumped again overnight and UK stocks are volatile again, but M&G has provided a rare moment of positivity after these annual results.
Markets are continuing their steady but sharp declines in the absence of either a resolution to the Ukraine conflict or a return of risk appetite.
Reverberations from the possibility of a ban on Russian oil sent the price of black gold higher once more, and up by 63% in 2022 alone. The implied effect on inflation tempered any possibility of the buying of growth stocks, with the Nasdaq taking another lurch lower by almost 4% - and down by 18% in the year to date – sending that index into bear market territory since its recent November high.
The Dow Jones also suffered from an evaporation of appetite, now down by 9.7% in the year to date and in correction territory, joining the S&P500 which has lost 11.9% this year.
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The oil price also ate into the shares of airline, travel and leisure stocks, as supply concerns dominated any previous thoughts of a gradual economic recovery. Investors remain on tenterhooks as the conflict continues to unfold, with the possibility of further sanctions having second order effects in some sectors.
Despite its strong exposure to the oil and mining sectors, the FTSE100 has also succumbed to the temporary desertion of risk assets, now having declined by 6.2% in the year to date. While there remains an element of defensiveness within the index, the more broad brush writedowns have yet to find a natural floor and are unlikely to do so until such time as there is some clarity or even a resolution to the conflict.
Buyers like M&G
M&G (LSE:MNG) has further underlined the strength of its capital position, boosted by an increase of 16.7% in revenues. With a coverage ratio which stands at 218%, the company has announced a share buyback programme of £500 million in addition to maintaining the dividend payment. The yield of 10.3% is not only the highest in the FTSE100, but is also a clear invitation to income-seeking investors, as opposed to growth investors who have not been rewarded in recent times.
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Indeed, a share price decline of 11% over the last year compares with a gain of 3.6% for the wider index, as the company has struggled to convince investors that its recent spate of acquisitions will carry limited execution risk. Even so, there is little doubting the scale of the company’s ability to generate cash and alongside the achievement of £145 million of cost savings a year ahead of schedule, the company is well placed for further progress.
The burgeoning wealth market both at home and abroad remains firmly in the company’s sights. The increase in assets under management in the period may offset some of the disappointment of a decline in pre-tax profits, with the company clearly stating its intentions, having emerged fully from the demerger from Prudential (LSE:PRU). The share price has been unable to make progress since the demerger in October 2019, but given that it immediately flew into the pandemic and latterly the Russia/Ukraine crisis, supporters of the stock will unquestionably be taking the long-term view.
In the meantime, M&G’s prodigious cash generation should underpin the modernisation and digitalisation required in parts of its legacy business, with the warm market reaction to the numbers something of an oasis in the current landscape.
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