MIDAS SHARE TIPS: The rise (and fall) of Britain's biggest household names - Should you stick with these five firms or is it time to sell?
The stock market has been battered and bruised in recent years, hit by regulation, tough economic conditions and investors’ love affair with American shares.
However, it is still worth around £3.7 trillion and millions of us own a piece of it. According to official data, UK households own almost 11pc of the London stock market, a collective stake valued at £400billion.
Many private investors have acquired shares in household name businesses, whether these are companies that were privatised such as BT and National Grid, or familiar High Street firms such as Marks & Spencer and Sainsbury’s.
Fashion stakes: M&S's Six-month figures to September showed a 6% uplift in sales to £6.5bn and a 17% surge in profits to more than £400m, far better than brokers expected
One advantage in holding shares like these is that investors can see how well or badly a business is doing, especially if they use its services.
The revival in M&S shares, for example, has been driven in large part by an improvement in its women’s fashion, which shoppers can see for themselves.
Many investors will have held these shares for a long time, perhaps even since receiving them in the privatisations in the 1980s and 1990s.
‘Buy and hold’ can be a sensible strategy. Most companies have ups and downs – the important question is the long-term direction of travel.
Trading frequently also means more dealing costs, which can take a bite out of returns.
But hanging on to shares out of apathy or neglecting to keep track of your portfolio is not a sensible approach. It’s worth checking in on a regular basis and considering whether long-standing investments still make sense.
So which of these popular shares remain good value today and are any past their sell-by date?
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It’s good to talk
Almost 40 years have passed since BT was privatised, a watershed moment in the stock market and one that put Margaret Thatcher’s government on the map.
More than 3bn shares were put up for sale and the general public ended up with a third of them.
Four decades later and BT is still one of the UK’s most widely held shares, with 614,000 individual shareholders, including me.
Four decades since privatisation and BT is still one of the UK’s most widely held shares, with 614,000 individual shareholders, including me
We have not been particularly well served. BT shares began trading on December 3, 1984, with the shares priced at 130p each.
By the turn of the century, they had soared to more than 1000p. Today, the stock is changing hands at 149.8p.
BT's privatisation put Margaret Thatcher’s government on the map
The decline reflects years of lacklustre growth, increased competition and a company that often seemed more like a sprawling mess than a streamlined operation fit for today’s world.
Chief executive Allison Kirkby is determined to change that.
Appointed at the start of this year, she wants to make BT simpler, more focused and better able to deliver for shareholders and customers.
She has a challenge on her hands. Six-month results to September, released this month, showed falling sales, declining profits and rising debt.
In August, Indian billionaire Sunil Bharti Mittal’s Bharti Enterprises became BT’s largest shareholder, acquiring almost 25 per cent of the company, for around £3billion, from struggling telecoms magnate Patrick Drahi.
BT shares have risen by around 10p since Mittal’s investment was disclosed so he has already made more than £100million from the deal but he maintains he is in it for the long term.
Dividends have bolstered overall returns but BT has been a disappointing investment.
Now seems the wrong time to sell, however.
Kirkby has an impressive pedigree and Mittal’s presence on the register suggests he sees value in the business.
That makes BT a hold for now.
Tell Sid
The privatisation of British Gas in 1986 involved one of the most memorable advertising campaigns of all time.
The slogan, ‘If you see Sid...tell him’, was designed to persuade ordinary people to buy shares – and it worked like a dream.
Would-be investors queued for hours to join in the fun and 1.5m of them ended up with stock, paying 135p a share.
Tell Sid: The privatisation of British Gas in 1986 involved one of the most memorable advertising campaigns of all time
British Gas was split in half in 1997. The oil and gas exploration arm was renamed BG Group, now part of Shell.
Tell Sid: The privatisation of British Gas in 1986 involved one of the most memorable advertising campaigns of all time
British Gas, the energy supplier and boiler installer, became known as Centrica on the stock market and, even though many early investors sold out, the group still has almost half a million shareholders on its register.
They received dividends last week of 1.5p a share.
But Centrica profits plunged in the first six months of this year and the rest of 2024 may be even worse.
The share price has slumped by around 25 per centover the past 12 months to 120p. It has been on a roller-coaster ride since the 1990s, soaring to nearly 400p in 2013, sliding to 70p during the pandemic and recovering sharply last year before current woes emerged.
Some City brokers believe the shares have potential at current levels but Dan Coatsworth of broker AJ Bell is less enthusiastic.
‘It’s a big business with a market-leading brand, but that doesn’t automatically make it a good investment,’ he says.
Investors who have been there from the start have enjoyed plenty of dividends and, through a series of complex transactions, now own shares in Shell and National Grid, as well as Centrica itself – boosting their overall returns.
Boss Chris O’Shea is also keen to pay decent dividends, with 4.6p a share payout pencilled in for 2024, rising to 5.3p next year.
Some may choose to hold on for those payments alone. But short-term challenges remain for this business.
Plugged in
National Grid is a little different from other privatised stocks.
The energy transmission firm became an independent quoted company in 1995 and investors in seven regional electricity companies automatically received shares in the business. Many still own their stock, as do some of the original investors in British Gas.
This makes National Grid one of the most widely held shares on the market, with more than 640,000 individual investors.
National Grid became an independent quoted company in 1995 and investors in seven regional electricity companies automatically received shares in the business
They have done rather well. National Grid has bought, sold and merged with several other businesses.
The shares have risen around six-fold to 987.8p since flotation and investors have received generous dividends to boot.
Half-year results this month were complicated, not least because boss John Pettigrew has just sold a chunk of the business – the Electricity System Operator responsible for balancing supply and demand – to the Government.
National Grid also needs urgently to upgrade its network, as renewable power plays an increasing role in Britain’s energy system.
Pettigrew duly raised £7billion from shareholders in May, said the company would be spending a hefty £60billion on improvements over the next five years and unveiled a fall in the dividend from 53p to 45p for the year to next March. Shares sank on the news but have regained much of their poise.
Pettigrew’s plans are expected to deliver growing revenues and profits. Most analysts believe the stock should rise to more than £11 as a result.
For National Grid’s army of small shareholders, sitting pretty would seem the best option.
New investors might also choose to snap up a few, especially if there are any signs of short-term weakness in the price.
Feeling sparky
Stalwart: Marks & Spencer has spent nearly 100 years on the stock market
Marks & Spencer has spent nearly 100 years on the stock market, and remains a popular share to this day. Most quoted companies attract some individual shareholders. M&S has more than most.
Not only does the retailer boast around 145,000 investors but many are deeply engaged with the business, in good times and in bad.
The shares topped £7 in 2007. But in little more than a year, they had tumbled to less than £2. Its fortunes waxed and waned thereafter, as consumers and investors fell out of love with M&S.
Now, chairman Archie Norman and chief executive Stuart Machin are turning the business around.
Six-month figures to September, revealed just a fortnight ago, showed a 6 per cent uplift in sales to £6.5billion and a 17 per cent surge in profits to more than £400million, far better than brokers expected.
Not one to sit on his laurels, Machin believes there are big opportunities to do better. And he also seems to recognise the contribution that individual investors make.
The company set up a Shareholder Panel in 2016. Under Machin, discussions between investors and management have become more frequent.
Shares have sparkled since he was appointed, soaring almost four-fold in little more than two years to £3.72.
But Chancellor Rachel Reeves’s decision to raise National Insurance contributions from employers is unwelcome. Machin, however, has plenty of self-help measures to pursue, which should ensure continued growth.
A payment of around 5p is expected for the year to next March, rising to more than 6p a share the year after. Investors who have seen their holdings surge may be tempted to sell some stock and splurge on Christmas goodies, perhaps even at M&S. But they should not sell out completely as these shares should continue to motor.
Taste the difference
Sainsbury’s is the UK’s second-largest supermarket chain.
But it battled for years with a value problem, considered more expensive than Tesco and less luxurious than Waitrose or M&S.
Chief executive Simon Roberts has taken bold steps to attract shoppers and persuade existing customers to buy more.
Struggles: Sainsbury’s battled for years with a value problem, considered more expensive than Tesco and less luxurious than Waitrose or M&S
Half-year results showed some progress. Sales were up, profits rose.
Nonetheless, there was no increase in the interim dividend, maintained at 3.9p, and sales fell at Argos, acquired in 2016.
Roberts also admitted that Reeves’s move on National Insurance will hit Sainsbury’s hard and prices may well have to rise.
Where does this leave the 40,000 shareholders?
The stock has been a volatile performer, priced at £2.46 in 2014, rising and falling since then, but changing hands today at £2.48.
Roberts is keen to do better and brokers believe sales, profits and dividends should increase from here.
Frustrated investors might choose to sell but, with signs of progress at the half year, they should probably stick with the business.
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