Is The Commodities Party Over?

By Heather D'Alton Dec 14, 2005

*** Vodafone's waning allure

*** Hedge fund managers? Try hedge fund journalists instead

*** Warren Buffett takes a chance...what next for commodities?...Sell in May...and more        

-------------------   – Not even the allure of a £4.5bn share buyback this financial year, or a doubling dividend could convince Vodafone shareholders to hang onto their stock. The telecoms group shed 5% on Tuesday, to close as the top FTSE loser.

– So what happened? Despite Vodafone reporting earnings before interest, tax, depreciation and amortisation (Ebitda) of £10.9bn – up from £10.7bn last year, chief executive Arun Sarin warned that tougher competition could push margins lower. Meantime the outfit's Japanese business continues to struggle, even though a new management team has been selected to turn things around.

– So with heavyweight Vodafone down – and the entire telecom sector falling 4% - it's no surprise the blue chip index floundered on Tuesday. The FSTE 100 shed 7 points to close at 4,982. The FTSE 250 inched up 0.2%, trading at 7,001, while the All Share index fell 0.1%.

– On the other side, Scottish Power closed as the top blue chip gainer, as the group said it has finally rid itself of its wobbling US acquisition, PacifiCorp...to Warren Buffett, no less. PacifiCorp was sold to MidAmerican for $9.4bn after seven years of poor performance. So what went wrong for the group? And what does a PacifiCorp-free Scottish Power mean for shareholders?

– Yesterday Scottish Power gained 6%, to close at 469p – a 4 year high for the group.

– M&S shareholders must have been expecting the worst: as the group's share price rose 2% despite reporting an annual profits slump of 19%. According to the retailer, pre-tax profits fell to £618m for the financial year, down from £763m the year before.

– 'The outlook remains challenging, with tough economic and competitive conditions expected to continue,' M&S said yesterday. 'We have made good progress, however, there remains much to do.' Shares traded at 342p by London's close.

– And mid-cap airliner easyJet shed 4% as the group reported that pre-tax losses widened to £22m, from £19m last year, due to the high cost of oil. According to Europe's second-largest budget airline, higher crude costs added £18m to fuel costs last year. easyJet's shares closed at 238p yesterday.      

-------------------    – 'They're grotesquely overpaid, they have few scruples', and what they do is horribly risky, says MoneyWeek's Tim Price. Sound familiar? No, they're not hedge fund managers...they're the journalists who write about hedge funds. And these people are more powerful than you think, says Tim. They can and do employ clichés; recent 'wild swings in investor pessimism' can be attributed to them; and they're unregulated too.

– Is the bull market in commodities coming to an end? Whatever the answer, be aware: even a modest slowdown in China will have a huge impact on the commodity prices – with the industry facing a turbulent six months, says the Absolute Return Partners. What does this mean for investors? Well, perhaps that short-term weakness in the asset class could make it an attractive buy now.

– 'Sell in May and go away': that's how the saying goes. But just how accurate is this? More so than you'd think, says Brian Durrant in The Daily Reckoning. Moreover, it's somewhat easier to come up with the evidence for the May effect than it is to come up with a plausible explanation. Does that mean you need to sell your shares immediately? Not necessarily, says Brian. There's more to it than just that.

Published in Stock markets | More articles by Heather D'Alton

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