Analysis & comment – Page 10

New Year bargains?

2023-01-012023-01-02 FIRE v London13 Comments

I did a post in June, some way into a miserable year in the stockmarkets, and wondered in print whether any key stocks could be considered cheap. This post is a follow up post.

What happened next?

My post featured 13 stocks. The thrust of my post was that these stocks’ prices had mostly fallen for a reason – very few of them got a clean (green) sheet suggesting they were ‘cheap’ at the time. And, surprise, those 13 stocks mostly fell after my post. Of the 13, 8 dropped and 5 rose.

I’m interested to note that the four most favoured stocks on my grid were four of the five that went up.

The only clean sheets ‘cheap’ stock last June was Unilever. At that point, it was at £36, which bought you a stock on a P/E of 16, 33% below its peak, with 7% revenue growth and a dividend yield of over 4%. That looked good value, and indeed since then it’s risen 16%.

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Half my deathbed’s ISA has disappeared

2022-12-162023-04-25 FIRE v London13 Comments

This post is late.

More than six months late.

The UK’s tax-free savings accounts (ISAs) operate on an annual cycle. Each tax year, starting 6 April, a UK tax payer gets another £20k annual allowance. ISAs are the tax wrappers that administer this allowance. Any account in an ISA wrapper sees all its gains and income become tax free – not even disclosable on a tax return. You can put most type of investment into ISA accounts, certainly including UK/US/EU listed securities. That makes a “stocks & shares” ISA account the number one fundamental of UK taxpayers’ investing, aside from (in some cases) a pension.

£20k might not sound like that much, but if you have £20k to play with as a 20 year old, and you invest it in equities under an ISA, and always reinvest returns, you can expect your investment to appreciate very significantly. At 7% average return it will double every ten years. So by the age of 60, four doubles later, that original sum would be worth £320k (before taking into account inflation). Now imagine that at age 21 you have a fresh £20k to play with. And at age 22. And so on.

I only realised how imperative ISAs were about 15 years ago. But since then I have made topping up my ISA accounts for both myself and Mrs FvL an annual imperative. I try to do this as early in the tax year as I can – in fact I usually start hoarding cash a few months before the start of the tax year in April. And I typically publish a blog post when I achieve it. This tax year, this is that blog post. It has taken me until December to scrape up the £40k readies.

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Nov ’22: Inflation may have peaked

2022-12-04 FIRE v London7 Comments

We ended November in the UK with the same prime minister that we started with. That makes a change on October and September. Moreover, our chancellor of the exchequer (Finance Minister, in any other country!) remained in place too. A sigh of relief at these green shoots of stability could be felt all over the place – not least the political podcasts and Op Ed columns.

The UK government released its well signposted ‘Autumn Statement’, having successfully previewed almost every key measure in it. Bankers bonuses remain uncapped, but almost all the other moves from Truss/Kwarteng have been reversed. Notional tax rates are unchanged, but thresholds are either fixed or have been reduced, so there is a bit more tax to pay all round.

The main changes for me are the drop in the 45% tax threshold by £25k, and the corporation tax staying ‘high’ at 25%. The reduced 45% tax threshold adds 5% x £25k i.e. £1250 of tax to my annual tax bill, and corporation tax being 6% higher than it might have been will cost me considerably more than that.

Input prices are falling

Meanwhile, elsewhere in the markets there was a distinct sound of air coming out of the inflation balloon. Some key input prices have dropped significantly in recent weeks: