5 investment tips for April 2016


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Take Real Care with Real Assets

Giles Rowe, Chief Executive and Chief Investment Officer at Henderson Rowe, investment tips:

In our portfolios we have a corner for “real assets” – property and commodities – and there may be some interesting opportunities coming into view investors will have to take real care. Although high-end London property has cash backing thanks to “tax-efficient” inward investment of £100bn over the last six years, even super-prime valuations are now vulnerable and the sector overall is generally leveraged and illiquid. It is therefore very sensitive to shifts in the direction of background growth and to interest rates.

Brexit is a factor here, though a weak pound could encourage foreign investment. UK REITs and housebuilders began to sell off in the third quarter of 2015 but have since won back some ground. Yields are tempting, 3% to 4%, and Price to Book is below 1x for REITs. The UK is late cycle, though housebuilders still see strong demand; Europe is interesting and less saturated with investment.

Elsewhere, commodities and energy stocks are hated amid foundations, charities and other politically-sensitive institutions divesting their fossil fuel investments on principle. Low oil and gas prices have slashed rig counts and US crude production is set to fall 1.7m barrels per day from 2015’s 9.7m to 8.0m by 2017. There is so little good news that we are beginning to reinvest in oil stocks with decent cash flow cover.

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