Brexit is on

Arguably the biggest consequence of the election outcome is that the Conservative Government can now pursue it’s campaign pledge to ‘Get Brexit Done’ and leave the EU by the end of January.

After so much uncertainty for so long, this outcome has seen sterling soar to its highest level against the dollar in 18 months — good news for UK-focused companies, hence why the FTSE 250 is showing big gains this morning. The rapid rise also has implications for the FTSE 100 given that the vast majority of companies in the top tier generate most of their earnings overseas. The index is still up strongly, but the gains are less pronounced.

Big winners

Another development is that those companies on Jeremy Cobyn’s wishlist for nationalisation are now safe. These include battered postal service Royal Mail, energy provider Centrica and communications giant BT. No surprise then that these are some of the biggest winners today.

Of course, this relief rally does not necessarily mean that these companies are suddenly worthy of your cash. Royal Mail must address declining letter volumes; Centrica must deal with the rise of nimbler competitors; BT still has its pension deficit. A rising tide lifts all boats temporarily, even those with a few holes. 

Other winners worthy of mention include housebuilders such as Persimmon and financial heavyweights such as Lloyds Bank and Barclays, perhaps due to the likelihood of a speedy Budget. In the FTSE 250, investment platform AJ Bell was among the top risers, presumably because people will now be more willing to put their money to work in the stock market.

So it’s safe to invest? 

Certainty on Brexit will be welcomed by businesses, even if departing from the EU isn’t what many wanted. From this point of view, Johnson’s win does make life easier for market participants in the short term.

Here at the Fool UK, however, we’re in it for the long term. By this, I mean that we recognise that the political world is in a constant state of flux and trying to predict anything is asking for trouble. The 2016 referendum result surprised many. Few believed Donald Trump would win.

Boris Johnson’s victory will be cheered by those in the City for now, but that’s not to say that the positive momentum we’re witnessing today will continue. One prediction I can reliably make is that investors always find something to worry about.

It’s important to recognise, for example, that our actual departure from the EU is merely the first stage of Brexit and that there are many more hurdles ahead for Boris Johnson to negotiate, all within an extremely tight deadline. A no-deal EU departure still can’t be ruled out. The outlook is clearer but no less difficult.

For this reason, I think it’s best to focus on what research has consistently shown, namely that equities have provided the best returns over time; more so than bonds, property or commodities like gold. 

Last night’s result will generate cheers and tears. For Fools, however, the script is the same: buy a diversified bunch of great companies at reasonable prices and learn to sit on your hands. 

The post Boris Johnson wins a massive majority. Is it now safe to invest? appeared first on The Twelfth Magpie.

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Paul Summers owns shares of AJ Bell PLC. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Trading has “remained strong” since the end of H1, according to the £3.5bn-cap online giant, “with a record performance across the Black Friday weekend.” Somewhat unsurprisingly, Boo has therefore continued to trade “comfortably in line with market expectations,” suggesting an earnings upgrade could be just around the corner.  

Despite no longer being a holder of the stock, I continue to see this as a classy outfit and certainly one I’d own over peer ASOS, thanks to its bullet-proof balance sheet and the high returns generated on the capital it invests.

The fact that new additions Karen Millen, Coast and MissPap have all been integrated — and initial ranges “very well received” — is also both unsurprising and a further endorsement of the company’s growth strategy. 

As usual, the only drawback to owning a top growth stock like this is the high valuation (57 times earnings before markets opened this morning). While I don’t think owners should necessarily jump ship yet, I’d be tempted to wait until after some inevitable profit-taking has occurred if I were intent on building a position from scratch. 

Also bucking the trend

Another exception to the all-retailers-are-suffering ‘rule’ has been jewellery seller Ramsdens (LSE: RFX). Revenue from this part of its business rose 22% to £5.5m over the six months to the end of September.

But this market minnow is more than just a play on our love for things that sparkle. Having exchanged £340m to more than 500,000 customers over the reporting period, income from its currency exchange business was up 15% to £8.4m — not bad considering how weak sterling has been as a result of our EU departure being delayed. 

The rise in the price of gold over the period was also reflected in the £4.1m gross profit made on precious metals purchases, up 57% compared to the same period in 2018. A 17% increase (to £4.3m) in income at its pawnbroking arm rounded things off nicely. 

All told, revenue and underlying pre-tax profit improved 30% and 12% respectively, with CEO Peter Kenyon saying the company “remains confident” of meeting its full-year expectations following a “solid start” to H2. Given that it’s growing its estate at a time when many retailers are closing stores, this looks very achievable.

Three new sites were opened during H1 with another added since the end of the reporting period. Four stores were also captured following the demise of rival The Money Shop. Despite these outlays, the company continues to boast a strong balance sheet with net cash of £12.3m. 

But Ramsdens is more than just a prudently-managed growth story. It’s also a great income stock, evidenced by today’s 13% increase to the interim dividend (to 2.7p per share).

Before this morning, analysts had penciled in a 7.24p per share total cash return in FY20, covered 2.8 times by expected profits. That equates to a very satisfying yield of 3.6% based on today’s share price. 

I’ve been a holder of Ramsdens for some time now and, based on these numbers (and the fact that the shares still trade on a little under 10 times forecast earnings), there’s no danger of me selling anytime soon.

The post Boohoo isn’t the only growth stock defying the retail doom and gloom! appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Ramsdens Holdings. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo group. 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.

A majority win for the Conservatives will likely result in shares rallying since this provides investors with a bit more certainty that Brexit will happen, perhaps as soon as the end of January (although further negotiations will be required after we’ve left).

A win for Johnson wouldn’t necessarily be good news for all stocks though. Those who generate the majority of their earnings overseas  — a big chunk of the FTSE 100 — might not be in demand as much of those with a domestic focus as a result of a rebound in sterling.

A Labour win, however unlikely some believe this to be, could mean chaos in the markets for several reasons.

Firstly, Corbyn has said he’ll attempt to agree a new deal with the EU, which will then be put to the people in the form of a second referendum. Whether you agree with this or not, it does mean more delay which, in turn, could put investors off investing in the UK. 

Secondly, a Labour government could oversee the re-nationalisation of several industries, including energy, water and rail. Even a part-nationalisation of BT has now been proposed. As such, anyone invested in companies operating in these areas could see the value of their shares hammered. 

Even those not holding these stocks could be hit with a new financial transaction tax and a rule stating that employees of firms above a certain size should be given a proportion of their company’s shares.

Of course, it may be that there’s is no clear winner. Such a scenario would be equally concerning for the markets since, again, it simply prolongs uncertainty. Sterling would likely fall, as would the share prices of UK-focused companies.

How to prepare

Clearly, no one knows for sure what will happen. We can, however, prepare. I would use the time between now and 12 December to review how your money is allocated.

Those nearing retirement and fully invested in equities, for example, may want to ask whether they could stomach a (temporary) hit to their wealth or whether they might need exposure to other assets such as bonds, property and gold. If it’s the latter, then a bit of rebalancing will be required. It won’t allow you to escape a market shock entirely, but it should allow you to sleep at night. 

With regard to specific companies, I’d continue to avoid (or ensure I wasn’t too exposed to) anything that looks vulnerable to re-nationalisation. Although these stocks will likely soar if Corbyn were beaten, that’s not reason enough to buy them now. Foolish investors should be primarily focused on holding a diversified bunch of great companies for the long term, not making a quick buck. Returns should certainly not be reliant on the outcome of political events. 

Lastly, I’d also make sure I’ve got some cash on hand if markets fall. Times of panic are, after all, the best time to go shopping for stock, particularly related to quality businesses that have been trading on hitherto excessive valuations.

The post The Christmas election outcome could batter or boost your wealth. Here’s what I’d do now appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. 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.

The party’s reasoning is that the creation of a new company — British Broadband — would help resolve the problems of slow internet connection, particularly in remote and rural areas, that pale in comparison to the speeds offered in other countries. It also estimated families would save £30 per month on bills.

According to shadow chancellor John McDonnell, this move would cost £20bn and involve nationalising those divisions of BT that are relevant to broadband: Openreach, BT Technology, BT Enterprise and BT Consumer.

Maintenance costs — expected to be around £230m a year — would be funded through a tax on technology companies such as Alphabet (the owner of Google), Amazon, Facebook and Apple. 

As part of this pledge, existing shareholders in the FTSE 100 firm would be compensated with government bonds. A promise was also made that pensioners with money invested in BT would not suffer financially as a result of this proposal. The actual amount received would be decided by MPs at the time the company is re-nationalised.

BT’s shares were down almost 3% as markets opened this morning, before recovering. Should Foolish investors regard this initial reaction as a reason to jettison their own holdings? Not in my view.

Difficult and expensive

Selling in a panic is never a great idea, especially if you identify as a long-term investor (which, here at Fool UK, we believe the vast majority of people should be). Moreover, there are already a few issues with the proposal as I see it.

First, the one-off £20bn cost mentioned — while more than the £5bn promised by Boris Johnson for improving broadband access — does look exceptionally modest considering the huge amount of money that would be required to upgrade infrastructure to offer the entire population broadband access for nothing. Indeed, even BT’s still-fairly-new CEO Philip Jansen has already said the cost would likely be around £100bn.

Aside from this, details on the ‘tech tax’ are also pretty sketchy as things stand and it can be presumed Labour would also face huge opposition from other telecoms providers that use Openreach.

Lastly, it’s worth remembering that 10 years is a very long time in the political world. McDonnell himself has labelled the plan “visionary“, suggesting to me that, despite the big fanfare expected when the party officially announces the pledge today, it wouldn’t be a priority if the party came to power next month.

Wake-up call

Notwithstanding all this, last night’s news is a reminder of the need to thoroughly review your portfolio at regular intervals to ensure it reflects your desired asset allocation (i.e. how your money is spread in shares, bonds, property, gold etc) and risk tolerance.

This is particularly the case if you rely on the chunky dividends many of the companies Labour has already earmarked for re-nationalisation, should it emerge victorious on 13 December (e.g Royal Mail, National Grid).

The fact BT wasn’t previously on its list of targets should be a reminder that nothing is ever guaranteed and that embracing diversification to some extent is a must, even if it means compromising returns.

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Paul Summers has no position in any of the shares mentioned. 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 is just one reason why, despite today’s encouraging half-year numbers, I’m continuing to avoid FTSE 100 income favourite SSE (LSE: SSE).

Return to profit

This morning, the blue-chip revealed a 15% rise in adjusted pre-tax profit to £263.4m over the six months to the end of September. On a reported basis, this came to just under £129m — a clear improvement on the near-£285m loss logged from the same period last year. 

In addition to returning to profit, SSE also reported expenditure had been in line with expectations — down 19% to £638.2m — with almost 70% of this related to investment in regulated electricity networks and renewable energy. On a related note, the £13bn-cap revealed poor weather over the autumn had allowed its wind farms to produce more electricity than expected, meaning “renewable output for the year to date is slightly ahead of plan.“

Elsewhere, the sale of its struggling energy services business to Ovo Energy for a cool £500m is expected to complete in early 2020, so long as it’s given the green light by regulators. 

Not for me

Some may scoff at the idea of Corbyn becoming PM. Personally, I think the last few years have shown that nothing can be ruled out. Even SSE acknowledged “some headwinds remain in the sector” as a result of the ongoing political uncertainty.

If Labour were to take power, then it seems reasonable to suggest companies such as SSE would quickly fall out of favour with investors. And if the new government were to act on its likely manifesto pledge, it’s unlikely shareholders would receive fair value for any of the companies being targeted. 

But there are other reasons why SSE just isn’t for me right now. Having enjoyed a fairly decent 2019 so far, the shares currently change hands for 15 times forecast earnings. That may be roughly on par with the FTSE 100 as a whole, but it’s on the more expensive side relative to industry peers.

I also remain uneasy with the state of SSE’s dividend. Today, the company said it would be reducing its interim payout to 24p per share, with the view to distributing a total of 80p per share over the full year. The latter may translate to a chunky yield of 6.2%, but it’s worth highlighting that profits are expected to barely cover this cash return, even after the aforementioned cut. 

This isn’t an absolute disaster from an income perspective — low cover is common for firms working in traditionally defensive sectors. Nevertheless, a lot does appear to be riding on the company’s earnings bouncing back to form and things beyond its control (e.g. the weather) remaining favourable. It’s also worth mentioning that SSE continues to be weighed down by a whacking amount of debt that’s been steadily climbing since 2015. 

In sum, SSE isn’t without its attractions, but I do feel there are better, less politically exposed options in the large-cap arena for those looking for reliable income. 

The post An uncertain election outcome means I’m avoiding this FTSE 100 dividend stock appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. 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.

International vs domestic exposure

As has been the case since the EU referendum in June 2016, the FTSE 100 has benefitted from its international status. Although its constituents are listed here in the UK, they are mostly exposed to economies outside of the UK and, in many cases, Europe. This means that their earnings carry significant currency risk, which has worked to their advantage in recent months following the depreciation of the pound.

Since the election, the pound has weakened. It is down around 2% versus the US dollar. This is good news for the FTSE 100, since it means international earnings gain a positive currency translation. That’s the key reason why the FTSE 100 is up at the present time, rather than down to reflect the political uncertainty which the UK now faces.

Looking ahead

While the FTSE 100 has risen following the election to a level close to its recent high, it does not appear to be too late for investors to buy into it.

Of course, the political risk facing the UK remains exceptionally high – even after Theresa May has met the Queen and formed a minority government/struck some kind of deal with the DUP. Minority governments are usually relatively weak governments, since they are ultimately unable to pass legislation as they wish without the support of other parties.

With Brexit talks set to commence shortly, the risk of difficulties for a minority government is exacerbated. Even within the Conservative Party there are major differences on how Brexit talks should progress. Therefore, the chance of an ineffective government which is essentially impotent are increased.

This could lead to greater political risk, possibly another election and, crucially, a weaker pound. As mentioned, a depreciation of sterling would be good news for the FTSE 100, and could help it to make record highs over the medium term.

Global risks

While the UK economy is one of the largest in the world, the reality is that the FTSE 100’s future outlook is more closely aligned to the performance of the global economy. With China’s transition towards a more consumer-focused economy continuing to gather pace and the US on the cusp of higher spending which could boost its economic growth rate, the global macroeconomic outlook remains relatively positive.

Coupled with weaker sterling, this could create ideal conditions for further rises in the value of the FTSE 100. Therefore, even with political risk now higher in the UK, buying the FTSE 100 could be a shrewd move.

The post The election result makes now the perfect time to invest in the FTSE 100 appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. 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.

Therefore, if Labour’s momentum continues into Thursday’s election, the party could gain a considerable number of seats. While this may be viewed as a positive event by many voters in the UK, investors may think otherwise.

Sterling

Perhaps the most obvious impact of a strong result or even a victory for Labour could be a decline in the value of sterling. While many of Labour’s policies may prove to be successful in the long run, ultimately they represent a major change from the status quo. For example, Jeremy Corbyn plans to nationalise a number of industries, including energy suppliers and rail companies. This could create a significant amount of uncertainty and even fear among investors, as they look ahead to which other companies and industries could become state-owned.

The Labour party is also seeking to change tax rates. While they may only effect top earners directly, increases to corporation tax could lead to lower business confidence in future. The UK’s status as a popular place for international companies to do business may come under pressure, which could lead to further downgrades in the UK’s economic outlook.

Just as the aftermath of Brexit saw a weaker pound emerge, a Labour victory could do likewise. That’s not because the policies they are seeking to adopt will necessarily be unsuccessful in achieving their objectives, but rather because they represent change. Investors have historically been averse to major change.

FTSE 100

The effect on the FTSE 100 of a strong Labour result or even victory in the upcoming election is possibly less clear than for sterling. One the one hand, increased uncertainty and fear among investors could cause sentiment towards UK-focused stocks to come under pressure. However, on the other hand a depreciation of the pound could lead to rising profitability and share prices for international companies which report in sterling.

Overall, though, the decline in investor sentiment is likely to more than offset the gains made by a possible depreciation of sterling. Although the FTSE 100 is made up of international companies, many of its incumbents still rely on the UK for a sizeable part of their sales and profitability. Furthermore, if business confidence in the UK falls after the election result, it could lead to a knock-on effect in Europe and the rest of the world at a time when risks to world growth are already high.

Looking ahead

While a Labour victory may be unlikely, a strong campaign by Jeremy Corbyn has made the outcome of the election harder to predict. A good performance by Labour could lead to falls for the FTSE 100 and for sterling, which may create significant uncertainty for investors in the short run. However, while this may be a challenging period, it could present a buying opportunity for investors who can focus on company fundamentals, diversity and, most importantly, the long run.

The post Why the pound and the FTSE 100 are set to sink if Jeremy Corbyn wins the election appeared first on The Twelfth Magpie.

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National interest

Yet these are not normal circumstances. The stocks barely moved at all. And this probably tells you everything you didn’t know already about the result of the election on 8 June. Labour’s chances of winning are even lower than you thought they were, and this has implications for how you trade shares during the next few weeks of political campaigning.

According to yesterday’s leaked manifesto, Labour leader Jeremy Corbyn would bring Royal Mail back under state control. This comes less than four years after its massively oversubscribed flotation in October 2013. That would normally be seen as share-price-shattering news. So what happened? Royal Mail rose 0.62%. Investors simply aren’t worried.

Slow lane

The Labour manifesto also pledged to take energy back into public ownership, with central government control of the natural monopolies of the transmission and distribution grids. So farewell then National Grid, privatised in 1995 and now with a market cap of £38bn. Its share price did fall yesterday but only by 0.67%, which hardly suggests an enterprise in mortal peril.

Another pledge is that rail networks will be nationalised as each private franchise expires, with publicly owned bus companies set up. That could mean a bump in the road for National Express which recently quit UK rail through its sale of c2c to Trenitalia but still runs extensive coach operations. As does FirstGroup, one of the largest bus operators in the UK, with a fifth of the market outside London. So did the share prices go sharply into reverse? Hardly. National Express dipped just 0.24% while FirstGroup rose 0.92%.

Low energy

It is all a long way from former Labour leader Ed Miliband’s short-lived glory days. His threatened energy price freeze in 2015 marked the start of a tailspin for British Gas owner Centrica from which it still hasn’t pulled out. Yesterday, we discovered that his successor wants to bring parts of the energy industry into public ownership and introduce a local, socially owned energy firm in every area. He also wants an “immediate emergency price cap” to make sure dual fuel bills stay below £1,000 a year.

Centrica did slump yesterday, its share price falling 5.41%. Was that down to Corbyn? Apparently not. The culprit was JPMorgan Cazenove, which downgraded the stock from overweight to underweight, and warned of a looming price war. Investors are also fretting about Prime Minister Theresa May’s proposed price cap. They aren’t concerned about Corbyn.

Back to the future

Labour’s manifesto has been attacked for returning us to the 1970s but some of the measures are actually popular, notably bringing the railways back under public sector ownership. However, the City, which would normally oppose these plans, hasn’t even bothered to take a view.

Investors just assume that none of this will happen, because it considers Jeremy Corbyn and his divided party to be wholly unelectable. Even the share price of shale frackers, also targeted, were unmoved. Investors can afford to dismiss the prospects of the Labour victory, and this means they shouldn’t bother positioning themselves for a Conservative win either. Theresa May’s landslide is already completely priced-in.

The post Did these stocks just predict the 2017 general election result? appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any shares mentioned. 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.

The pound has picked up, and that’s about all that lies behind it. The companies listed in London are valued on the wider international stage effectively in dollars, regardless of what currency they actually report in, which is why indices move in the opposite direction to the pound — after all, the fall in the pound following the Brexit vote was the main force behind the FTSE’s rise over the past months.

The election is widely expected to yield an increased Conservative majority, and the international confidence inspired by a stronger government is almost certainly behind the rise in sterling, but what does it mean for investors?

Short-term bargains

In the short term, a downward dip in the FTSE gives us a nice opportunity to top up on our shares — not as great as the big dip that followed the referendum, but still welcome. But it’s the long term that really counts, and I reckon an election now will bring significant benefits for shareholders in the years before and following our exit from the EU.

Now, I reckon the vote to leave the EU was a big economic mistake — but the decision is made and there’s no going back. We have to make the most of the bad hand we’ve been dealt.

We should treat Brexit as almost the only thing that matters, and many believe the best possible outcome from the election is a strengthened moderate Conservative majority. 

With a tiny majority right now, there’s a real fear that hardline eurosceptic backbenchers and those still hanging on to the Remain ideal could scupper the UK’s chances of getting the best possible deal in our negotiations — any delay to any part of the necessary dealings could make an already-tough two-year timescale impossible to meet.

We need a good deal

Hardliners pushing the “no deal is better than a bad deal” mantra could be the biggest danger currently facing the future of the UK’s public listed companies.

Leaving with no deal at all and having to face life under default World Trade Organisation rules on tariffs would be disastrous. It would kill any competitive advantage that British companies selling to and trading in the EU might currently enjoy. And though a better tariff agreement would surely be hammered out eventually, the damage would be done, and consumers and business partners would have switched to European competitors.

No, we desperately need to get the best deal on tariffs that we can — ideally no tariffs at all, but I’m probably being naive to hope for that. Because, as every economics student knows, tariffs harm both sides and ultimately do nobody any long-term good — they push up consumer prices, and they protect uncompetitive business that should be working harder to compete.

The truth is, most Conservatives, certainly the rank-and-file moderates, are very business-friendly, and what they want is the best deal possible for companies on both sides of the divide.

So, even though it pains my political ideals, for the sake of our long-term investing future I’m hoping for a strong majority of Conservative moderates — and I’m convinced that’s what we’re going to get.

The post Here’s how a snap general election could be seriously good for investors appeared first on The Twelfth Magpie.

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This sharp rise in share prices for the company is understandable as we’re now in line for seven straight weeks of non-stop general election coverage with struggling newspapers and broadcasters alike desperate to attract attention. For YouGov, which made its name years ago as a reliably accurate political pollster, this means plenty of free publicity as its latest weekly poll results are pored over by political commentators and included in myriad news reports.

Greater publicity and an uptick in custom polling contracts from media outfits and political parties should bolster what is already impressive growth for the AIM-listed small-cap. In the six months to January 31, the company’s sales rose 24% year-on-year in real terms and 8% when adjusting for the positive effects of the weak pound.

Smarter growth

And more importantly, operating profits rose a whopping 41% as the company benefitted from higher margins in each of its largest markets and refocused growth away from the relatively low-margin custom polling for which it is known.

Instead, the founder-led management team is concentrating on growing the data products & services divisions that provides companies with access to its poll results covering the effectiveness of ad campaigns, the buying habits of every major demographic and consumers’ brand perceptions, among other data points.

As these divisions merely sell companies data that has already been collected, rather than having to commission custom research, margins are considerably higher. In the latest half-year results, operating margins for the data divisions were 24% compared to only 12% from the custom polling division.

This is why investors should be ecstatic that these more profitable data divisions accounted for all of the company’s growth in the past half year, with a 23% rise in constant currency like-for-like sales during the period. It’s also possible that this rapid growth is entirely sustainable as the company’s 32 worldwide offices are well positioned to provide locally relevant data to the roster of multinationals such Google, Facebook, Walmart and Bank of America it already counts as clients.

So what’s the verdict?

Investing in AIM-listed firms such as YouGov is always risky, but the company does have a few key characteristics that should lessen investors’ worries. For one, it is solidly profitable and has been for some time. This has helped maintain a very healthy balance sheet that recorded £15m in net cash at the end of January. And the company is still led by co-founder Stephan Shakespeare, who owns 7.1% of the business so has significant skin in the game.

At 25.7 times forward earnings, the firm’s shares aren’t cheap. But with earnings growing at double-digits and Theresa May’s snap election set to increase sales in the short term and brand awareness in the long term, this may be a great time to take a closer look at YouGov.

The post Theresa May just did this growth stock a huge favour appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (C shares) and Facebook. 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.