Investments inviting ridicule

Investments inviting ridicule

20 Jun 2022

I am struck by the knowledge that the stock market hit its Covid panic low on 23 March 2020 (FTSE at 4994). That was the very day that the first UK lockdown was announced. This is a splendid example of how desperately keen share prices are to discount bad news. Because the actual news got much worse for much longer than anyone could have believed – but the low was already in for the stock market.

Today, it is hard to see how much worse the news could get for UK consumer shares or government gilts. So here are some deservedly unpopular ideas that might just pay off.


National Express (buses and coaches) 217p

Since the beginning of March it is an amazing fact that three of the four UK listed bus (& train) companies have received takeover bids

Stagecoach – bid 105p (now unconditional) vs March low 76p (38% premium)

FirstGroup – indicative bid of 163.6p vs 89p in March (84% premium)

Go-Ahead – bid of 1500p vs 550p in March (173% premium)

That leaves only National Express which is now just a bus company (plus a few trains in Germany). It is huge (£2.7 bn in revenues this year)  and supposedly in the sweet spot for new transport habits (out of those wicked cars, people, and get on board with the monarchs of the road).

It raised £235million from shareholders in May 2020 at 230p per share and the price has gone nowhere (now 217p). It plans to restore a dividend in 2022. It has hedged its fuel costs 100% for this year, 64% of 2023 and 25% for 2024.

It has guided to a 7% operating margin in 2022 (10% in 2019). 

I do not love this company but it has the potential to benefit from a certain scarcity value.

Halfords (auto centres and bikes) 157p

Another theoretical sweet spot – second hand car servicing and cycling.

This statement of the bleeding obvious last week sent the shares down by 20%.

While rising inflation and declining consumer confidence will naturally present short-term challenges for any customer-facing business like ours, we remain confident in Halfords’ long-term growth prospects. 

Halfords has no debt (apart from retail leases), a market cap of £345 million and the business generated free cash flow of more than £150m in 2019 and 2020 (some cycling windfalls in the latter). 

It is paying a dividend of 9p for a yield of 5.7%. 

Kingfisher – (DIY)  241p

Another giant (revenues of >£13 billion) with B&Q and Screwfix in the UK and Castorama and Brico Dépot in France. France has been a problem for a long time (leading to the unkind comment that Kingfisher is in the twelfth year of a five year turnaround plan) though it improved last year.

The company has £860 million of cash, no debt apart from retail leases, and a pension surplus inducing it to pursue the annoying habit of buying back its own shares but it pays 12.4p a share in dividends (5.1% yield)

I doubt if any of these shares will be tipped in the press (with the possible exception of National Express on speculative) grounds. 


Gains on gilts are free of capital gains tax (presumably dating from the days when funding the government was considered to be a patriotic act). As yields rise, more and more gilts are significantly out of the money (trading below issue and redemption price, because so many were sold with negligible coupons in recent years).

My daughter has inherited some cash and is understandably above all concerned with its preservation (Bitcoin being judged a little too warm).

I am firmly suggesting that she buys a gilt such as TG 31 0.25% which is selling for c.82 and which will return 100 when it matures on 31 July 2031. That’s 22% tax free over nine years (plus the negligible coupon). This should suit someone of her age and capital structure. 

For those of us with less time to enjoy our money there is TR 26 0.375% selling at just over 92 which will return 100 on 22 October 2026. (The Bank of England was selling this above par (i.e. 100) last August which illustrates starkly how its funding conditions have deteriorated). 

I am not by any means saying that gilts are going up from now. They may well fall much further but these investments have effectively guaranteed outcomes.  

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