Understandably, previous investors in this company upon reading the title may be keen to suggest I visit a well-qualified mental health professional. However, recent results signal that a reversal of fortunes may be on the cards.

Broadly, Capita’s areas of activity can be divided into three segments: software, outsourced services and IT services, all of which are forecast to grow for the foreseeable future.

Recent history

Shortly after taking up his position as chairman in 2016, Sir Ian Powell appointed Jon Lewis as CEO to solve the nascent difficulties that were becoming increasingly apparent.

Following an initial assessment, Lewis announced a profit warning, dividend suspension, a £700m rights issue, cost cutting, a disposals programme, details of poorly performing contracts and a pensions deficit of around £380m.

If this wasn’t enough to send the share price plummeting, a number of blue chips – including British Airways – opted to retain in-house operation of services rather than renew contracts with Capita. 

The present

Now Lewis is over a year into a three-year turnaround programme and things are not so bleak. As a result of the rights issue and sale of non-core assets, debts have been reduced to more manageable levels.

Problem contracts such as those with the British Army and the NHS are turning a corner. Also, further evidence of management effectiveness has been provided by the revamping of the contract with Mobilcom-Debitel – one of Germany’s largest mobile and telecoms products providers.

Announced on the recent half year results conference call was a host of savings already made and further economies scheduled to take effect in the year ahead.

Whilst it is true that revenue has declined slightly, this is the result of the loss of low-margin government contracts. In fact, much of lost revenue was replaced by higher-margin contracts.

Capita recently announced that it has signed a contract worth £525m over 12 years to modernise and support improvement to the operational effectiveness of the Ministry of Defence’s fire and rescue service. Also noteworthy were the nine contract wins for six police forces in the USA, this against stiff competition.

Valuation

Right now, Capita trades at a compelling valuation and better value than other growth stocks. Perhaps the most commonly used investor tool, the P/E ratio, is less than ten. On top of that, earnings per share is on an upward trend. Given that the latest results gave the share price a boost of 15%, it would seem that now is the time to buy the recovery story.

The post At today’s share price, I believe Capita is a double-your-money stock appeared first on The Twelfth Magpie.

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Bryan owns shares in Capita. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Have you ever seen the words “disruptive business model” and “law firm” in the same sentence? Probably not, but in the case of Keystone Law, it’s certainly appropriate.

So what’s different?

In the past, newly qualified lawyers got a job in a law firm and toiled away for untold years until they had the opportunity to buy into the partnership of their firm.

Nowadays, things have changed because the cost of buying into a firm doesn’t give such a great return. Enter stage left Keystone Law Group. This company offers lawyers with existing clients the chance to become self-employed and receive 75% of the fee income they generate.

How’s the new model working out?

Well, from a standing start in 2002, the firm is now one of the top 100 law firms in the UK and is still growing rapidly. The last set of annual results showed a whopping 35% increase in revenue and an astonishing 57% rise in profit before tax.

Future growth also looks assured since the number of fee-generating lawyers increased by more than 20% in the last financial year.

Going forward

It is often quipped that there are two certainties in life: death and taxes. For me, there is a third. All of us, especially businesses, need the services of lawyers at some point in time. Herein lies another of the attractions of Keystone Law Group.

Can you believe that the total addressable market for Keystone’s services is a substantial £9 billion? Given that the company reported annual revenues at £42.7 million, there is room to grow to say the least!

Valuation

It is true that at first glance the price-to-earnings ratio looks a bit steep at 34. However, given the growth trajectory, I believe it’s more than reasonable.

The truly startling valuation matrices, though, concern profitability. Take the return on capital figure, which measures how effectively company cash is used to produce income. For Keystone, it’s almost 30%!

For comparison, one of the most profitable companies in the world, Microsoft, has a return on capital ratio of 19.5%, and this figure is considered laudable.

For dividend investors, there was further bounteous news in the annual report. In line with company policy, two thirds of profit after tax was distributed to shareholders. Considering the potential for capital gain, the current yield is a generous 1.7% at the time of writing.

To sum up

Keystone Law Group is changing the way legal services are delivered to both individuals and businesses and making a handsome profit in the process. I’m certain that an investment in Keystone will lead to long-term growth for people saving for a well-deserved retirement.

The post Think your State Pension will be too small? Here’s a share I believe will help appeared first on The Twelfth Magpie.

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Bryan has no position in any company mentioned in this article. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This enormous gain has, I’m sure, put a cheery smile on many an investor’s face. What some commentators are describing as the longest bull run in history is, however, showing worrying signs of drawing to a close…

Yield curve

In recent months, the most talked-about signal of a slowdown has been the inverted yield curve. In brief, an inverted yield curve is a very unusual interest rate phenomenon in which long-term bonds have a lower yield than short-term bonds of the same credit quality, which is the complete reverse of normal.

An inverted yield curve has been a very accurate predictor of recent economic downturns. Those investors with long memories can testify that an inverted yield curve preceded the recessions beginning in 1980, 1990, 2001 and 2008.  And we have just had an inverted yield curve!

Government bonds

Can you imagine giving your money to someone to do with as they choose and having to pay that person to accept your cash? Think that is crazy? Think again, because that is exactly what is happening in the government bond market at the moment.

With very few exceptions, two-year government bond rates for European countries are negative. Take Switzerland for instance: the yield for these bonds is about minus 0.85%. Even for Slovenian bonds, you will get around minus 0.45%.

Why, you may well ask, are big-money investors prepared to pay a government to take care of their cash? What do they know that small investors don’t? The fact that interest rates are in negative territory is a disconcerting and worrisome sign indeed.

The European picture

The recent announcement by The European Central Bank (ECB) to add fresh monetary stimulus to the flagging European economy was also deeply troubling.

Those who have read my article on gold will understand that the price of the metal rises when there is severe uncertainty about the direction the stock market is heading. Upon the disclosure of the impending stimulus, the price of gold went parabolic, rising from $1,350 an ounce to reach a peak of around $1,450 an ounce in just a few days.

The briefing by the ECB included a hint that the already negative benchmark interest rate of minus 0.4% may actually be reduced still further! In addition to the inverted yield curve, the action of central banks lowering interest rates is another leading indicator of future poor returns for stocks.

Now what?

It is possible that the world economy is about to go pear shaped since many credible alarm bells are suggesting that markets are heading south. Still, a trade deal announcement at the G20 summit in Japan may give a welcome reassuring boost for investors. Nonetheless, if you are apprehensive about the future direction of shares, there are relatively safe stocks in the UK market I believe may weather a storm.

The post Investors need to take these harbingers of doom seriously! appeared first on The Twelfth Magpie.

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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Back in 2014, the share price was around 3190p… and today it’s also around 3190p! The income in 2014 was £11.15bn and the latest figures for 2019 actually show a fall in revenue to £10.75bn – hardly attention grabbing…

The future promise

As I see it, the fortunes for Johnson Matthey now look set to perk up quite a bit. The cornerstone for this upbeat assessment is a product line known as eLON, which represents a range of state-of-the-art lithium battery materials.

The prospects for the lithium battery sector continues to shine, with demand from companies that produce electric cars, laptops and other high-tech devices expected to soar over the coming decades.

An early signal of a brighter future was given in the most up-to-date annual report. Robert MacLeod, Chief Executive, reported a more-than-healthy increase of 17% in its “New Markets” segment, which includes eLON.

Also encouraging was the recent five-year agreement with Lithium Werks, a leading battery producer, to supply the eLON range for the next generation of Lithium Werks’ products. To give some idea of the scale of the opportunity, this relatively new private company has supplied in excess of 200 million batteries to more than 200 customers since its inception in 2017.

There is another segment of Johnson Matthey’s business showing continuing signs of an uptick in revenue. For its world-beating clean air catalytic converters, there was a rise of 11% in revenues. This despite a decline in automobile production, which surely highlights JMAT’s market-leading position.

A spur for further growth of the converter business comes in the form of clean air legislation to be enforced in China and India in the very near future. In advance of the legislation, Johnson Matthey is investing for growth by building production facilities locally in order to satisfy the impending demand.

Bargain territory

Given the potential for an improvement in both revenue and profits, the price-to-earnings ratio is a mere 13.1 – certainly not overvalued!

Also noteworthy is the fact that although there has been a rather lacklustre performance on the revenue front, investors have been treated to a consistently rising dividend. From 72.2p a share in 2014, the dividend is now 85.5p, representing an average increase in the dividend of around 3.7% a year. The present dividend, at the current share price, represents a yield of 2.8%.

In short

Johnson Matthey is on the threshold of a marked improvement in earnings and, right now, the price of its shares is not excessive. If Johnson Matthey interests you, it’s not the only British industrial set for growth in the near future.

The post This sleepy FTSE 100 company may soon wake up and this is why I’d invest now appeared first on The Twelfth Magpie.

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• With a 6% yield and a P/E of just 7.4, is this share a screaming buy for a second income?

Bryan has no position in any company mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

On the 1^st of May this year, prior to the release of Land Securities’ annual report, the share price stood at 920p. At time of writing, despite an increase in the dividend, the shares have fallen to 826p. This represents about a 10% drop in only 7 weeks, which is hardly a ringing endorsement of the company’s future prospects by Mr. Market.

What’s causing the fall?

Broadly, Landsec’s portfolio of properties encompass retail, leisure, office and residential. With the exception of residential, all of these sectors are under exceptionally intense pressure.

Undoubtedly, Landsec’s retail segment is suffering the most due to the success of e-commerce sites such as Amazon. In addition to Amazon, there are a variety of new companies chipping away at markets traditionally supplied by “bricks and mortar” retailers. Witness the booming profits of the British online fashion retailer Boohoo compared to sliding earnings at former giants of fashion such as Arcadia and Ted Baker.

Even big ticket items such as furniture are not escaping the steady forward march of web sales. Nowadays, a relatively new American company, Wayfair, offers buyers the opportunity to purchase all manner of household goods at low cost via its website.

The result of the slump in the popularity of big name retailers was laid bare in the annual results released by Landsec in May. Revealed was a sizeable loss brought about by the demise of such companies as Homebase and Poundworld. Further pain is expected as a consequence of the well-publicized tribulations at Arcadia and Debenhams. If these losses were not bad enough, Landsec’s retail portfolio also experienced a sharp drop in value.

I imagine everyone on the planet is by now aware that the UK is leaving the European Union. Since the announcement, there has been an unfaltering stream of news indicating the repercussions for the office sector of this divorce. Regular reports have appeared telegraphing the intensions of the behemoths of banking and insurance that they will expand their offerings on mainland Europe and downsize their London operations. I think it’s fair to assume that Brexit is a negative development for Landsec.

An indicator of further trouble comes from the unlikely source of the annual reports of one of the world’s biggest hotel groups, InterContinental Hotels Group. Despite rising revenue, there has been a marked decline in gross profits as the hotelier struggles to compete with Airbnb and others. This is certainly a nasty omen for the hotel segment of Landsec’s stable of assets.

To sum up

Current trends do not herald a reverse of fortunes any time soon for Landsec’s share price. Thus, I advocate wariness to investors considering Landsec for its attractive dividend of 5.8% – there are plenty of alternatives for a safer dividend out there.

The post Why I’d sell this FTSE 100 company ahead of its interim results appeared first on The Twelfth Magpie.

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Bryan Williams has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group, InterContinental Hotels Group, Landsec, and Ted Baker. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It is my contention that faith in gold is generally misplaced. Having said that, investors who choose to put their trust in gold are in good company. One of the most successful hedge fund managers, Ray Dalio of Bridgewater Associates, maintains around 10% of his flagship fund invested in gold, citing political and inflationary risks.

In contrast, the most famous investor of them all, Warren Buffett, has frequently voiced his disdain for gold. He counsels investors to keep calm and take a long-term view. He insists that while it is tempting to sell when markets are falling, it is better not to give in to the collywobbles.

The gold story

Beginning with the severe contraction that occurred between 1980 and 1982. This recession was exacerbated by central banks revving up interest rates in order to crush inflation. As expected, the price of gold rose in lock step with inflation and soared from around $200 an ounce in 1979 to reach a peak of around $650 an ounce in 1980. However, during the depths of this slump, the price fell back to about $400 an ounce.

Subsequent to periods of economic growth, there were bear markets in 1990 and 2001, neither of which were noted for raised inflation. Conspicuously, the price of gold barely budged during these downturns.

Many investors remember the rocketing price of gold leading up to the financial meltdown that started in 2007. During those dark days there was talk of a collapse of the banking system and bond defaults. Also, Investors in national bonds faced the real prospect of haircuts on their principal. At that time, the price of gold surged from about $300 an ounce in 2002 to almost $2,000 an ounce 10 years later.

In summary, recent history confirms the hypothesis that gold does rise during periods of inflation and extreme uncertainty. Whilst this is true, history also shows that in the absence of these two factors, gold offers little benefit.

In the long term?

Here, the evidence is unequivocal. Since its inception in 1984, the FTSE 100 has risen around 620% whilst gold has gone up by a fraction of this over the same time frame. If the highest price ever reached for gold is used, then we get to about a 400% rise. Of course, if dividend gains were included for the FTSE 100, the gulf between the two would be considerably greater.

How things look at the moment

Right now, rather than an inflationary environment, there is talk of deflation, which does not bode well for gold. Yes, there is currently a lot of friction on trade issues, but it’s my belief that the present impasse will soon be resolved and these matters will fade into memory. For concerned investors there are some stocks that may offer a measure of reassurance.

The post The reasons why I believe investors should avoid gold in a recession appeared first on The Twelfth Magpie.

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What are the numbers?

Since 2013, revenue has grown from €1.78bn to reach €4.37bn according to the 2018 report released in February of this year. This represents a rise of a massive 146%. Or to put it another way, a compound annual growth rate (CAGR) of over 19%; not too shabby.

Holders of the shares have also had stellar improvements in the dividend. Over the same period, the company increased its payout from 0.14c to 0.42c a share, a CAGR of an incredible 24.5%.

Finally, a favored metric for investors, the return on equity (ROE) is an astonishing 20%. For those unacquainted with ROE, this figure shows how well a company’s bosses are deploying the shareholders’ capital. For any business, the higher the ROE, the better. For comparison, the ROE figure for Barratt Developments is 16.6%.

So what has driven this amazing expansion?

Well, I would say that there are three main reasons: astute acquisitions, developing a worldwide presence and the company’s predominant position in providing particularly high-demand products.

One of the key product lines for Kingspan is the supply of thermal insulation panels and boards. These days, with the focus on saving energy to either heat or cool buildings, insulation is an important factor and is driving demand. Over the years, the company has bought or invested in local suppliers of these thermal materials, thus allowing for an expanding global footprint for its wares.

Most recently, companies in Spain, Poland, Finland, India and Brazil have been purchased, giving ever greater opportunities to develop. The company has also invested in the Middle East, which has a very large market for thermal insulation. Visiting places such as Dubai, visitors may wonder at the cost of keeping shopping malls and other buildings at what seems to be a near zero temperature whilst outside its often around 40 degrees Celsius.

Peruse any magazine about information technology and you are bound to read the words “data centre” at some point. These data centres are essentially very large buildings filled with computers and servers that allow for companies such as Amazon and Facebook to provide their services. In recent years, there has been an explosion in the number of these facilities around the globe. Within these buildings, one essential element is a raised floor to allow for the vast quantities of cabling required for them. Another shrewd addition to the Kingspan stable was Tate Access Floors, a world leader in the supply of such computer room flooring.

It is also worth noting that whilst Kingspan’s product lines may appear to be low tech, the company’s stated aim is to spend 1% of revenue on research and development. This means that a hefty €43m is currently spent on maintaining its market-leading position, which bodes well for the future.

To sum up

A series of canny investments and the development of a global presence has led to remarkable growth for this company. It’s my firm belief that additional acquisitions and further worldwide development will prove a winning combination for investors.

The post I’d ignore buy-to-let to invest in this stock for capital gain and income instead appeared first on The Twelfth Magpie.

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• How much could Barclays shares pay in dividends by 2028?
• With a 6% yield and a P/E of just 7.4, is this share a screaming buy for a second income?

Bryan does not have positions in any company mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Bodycote’s forte is metal thermal processing or, to put it simply, heating and cooling down metal to give it the requisite characteristics. Actually, most metal-based products undergo some form of heat treatment to ensure that they are fit for purpose. As a subcontractor, the company provides a vital link in the manufacturing process for virtually every market sector.

As you may imagine, many organisations have the capacity to carry out the mature processes involved in heat-treating metal parts. Where Bodycote fits in is offering more advanced procedures, which are the culmination of more than 100 years of experience and research. These advanced techniques are often based on proprietary technology and are employed when more precise heating and cooling are necessary.

As with everything these days, the march of technology is relentless, even in the business of heating metal. Within the specialist technologies division of Bodycote are half a dozen highly differentiated, early-stage technologies with high margins. For these state-of-the-art techniques, Bodycote is either the market leader or one of the top players. A review of the latest annual report reveals that this division is growing at a healthy 12% annually and no doubt contributed to the increase in profitability.

Financials

Back in 2014, the company rewarded investors with a dividend of 14.4p per share. Holders of the stock for year ending 2018 enjoyed an additional 19.0p, which represents a whopping 31.94% increase. Net profit has also seen stellar increases. Again, for the year ended 2014 profits were £79.4 million, however, by 2018, profits grew by almost 30% to reach £103.2 million. A similar picture for revenue was also experienced. For the same period income rose from £609.1 million to reach £728.6 million.

On top of the technological attractions for investing in Bodycote, there are some healthy numbers to consider. Whilst many manufacturers have enormous debts, Bodycote is debt free with around £30 million in the bank. In addition to the cash, the company has a revolving £230 million credit facility to fund expansion or to pay for its stated goal of acquiring bolt-on businesses. Those who wish to put their hard-earned cash to work may also wish to mull over the growth in revenue, profit and dividend over the last five years.

It is not enough to have superior technology when you are a critical part of the supply chain for manufacturers. Suppliers need to be close to their customers so that costs can be competitive and components can be delivered in a timely manner. To this end, Bodycote has established over 180 locations in 23 countries from which to support its clients. Naturally, having such a huge worldwide presence represents a considerable advantage for many global enterprises.

For investors fretting about the impact Brexit will have on British companies, Bodycote may offer some degree of comfort. Even though Bodycote is a British company, 92% of the group’s revenue is obtained outside the UK.

To sum up, Bodycote’s technological lead in metal processing, an excellent financial condition and a truly global footprint make a compelling case for investment.

The post Why I highly rate this world-beating UK growth-and-income stock appeared first on The Twelfth Magpie.

More reading

• Up 1,146%! 7 things I’ve learned from the stunning Rolls-Royce share price comeback 
• 4 steps to building a £38,456 retirement income with ISA shares
• How investing in a Cash ISA could cost you a comfortable retirement
• How much could Barclays shares pay in dividends by 2028?
• With a 6% yield and a P/E of just 7.4, is this share a screaming buy for a second income?

Bryan has no position in any company mentioned in this article. The Motley Fool UK has recommended Bodycote. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Let’s begin with the company’s business model. The principal activity of the company is the acquisition of healthcare property in the United Kingdom and the Republic of Ireland. Specifically, it focuses on the ownership of freehold or long leasehold interests in purpose-built healthcare facilities, which are leased to general practitioners, government healthcare bodies and other associated healthcare users. As you may correctly surmise, the ultimate guarantor of rents paid is the government; certainly an added bonus.

Those familiar with Warren Buffett will know that one of the key requisites for any of his investments is a top-drawer CEO. It is easy to understand why, since in the long term, profitability cannot be sustained with poor management. At the helm of Primary Health Properties is just such a consummate professional in the shape of Harry Hyman. This Cambridge-educated accountant founded the company in 1996 and has been the managing director ever since.

The management team at PHP have consistently driven the company from success to success. This has been true during good times and bad. Whilst the financial meltdown in 2008 is becoming a distant memory, it’s worth remembering that during this period, PHP increased its dividend and annual revenue improved.

More recently, Hyman and his talented crew have shown conspicuous ability. Upon review of the 2013 annual report, the company had a portfolio of 259 properties worth £941.6 million, a revenue of £42 million and an annual dividend of 4.8p a share. According to the most recent annual report released in February 2019, total assets are now valued at £1.5bn, revenue is around £76.4 million and the dividend has increased to 5.4p per share. Particularly noteworthy for dividend investors, the increase in payout represents an average annual increase of 2.1%.

Those who have been followers of this company may remember the merger that took place in 2013 between PHP and Prime Public Partnership (PPP). At that time, PPP was around a third of the size of PHP. This union produced numerous cost benefits, which have led to positive rewards for shareholders. The experience gained by Hyman’s team will now be applied to the recently announced merger with MedicX.

Given PHP’s business model and the success of the PPP acquisition, it would seem an opportune time to consider PHP for the long haul.

The post 1 cheap FTSE 250 dividend stock I’d buy for my Stocks and Shares ISA today appeared first on The Twelfth Magpie.

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Bryan does not own shares in any company mentioned in this article. The Motley Fool UK has recommended Primary Health Properties. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.