There are no new stocks to add to the SIF portfolio this week. So I’m going to take a look at the numbers behind a stock that’s grabbed a lot of headlines recently. It’s one that also features in my own portfolio.
The market has become increasingly divided over the investment case for fashion retailer Next. Speaking personally, I bought shares during the first half of this year, at prices between £38 and £42.
As the year rolled on, this looked like a smart move. Next’s cash generation has remained robust, resulting in an expected yield on cost for me of about 8% this year. The firm’s profit guidance has also gradually firmed up, leaving the stock looking affordable on around 11 times earnings.
At the same time, costs appear to be under control and the group looked well positioned to take advantage of falling rents. My thinking was that performance wouldn’t have to improve by much in order to trigger a decent re-rating.
The jury’s out
I started to develop niggling doubts after the firm’s interim results were published. One reason for this was that it became more obvious that the group’s retail business may end up in a state…
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