Mindful Money’s Monday share-tips

15th July 2013

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Mining giants Rio Tinto and BHP Billiton update the market this week while Vodafone presents its first quarter results on Friday. Philip Scott looks at what brokers are recommending investors do.

Most mining companies’ share prices have endured a very poor time so far this year on the back of weakness and volatility in the commodities market, primarily as a result of China’s slowing economy. Tuesday sees Rio Tinto deliver its second quarter results and it has not been immune from the fallout.

The group’s share price has tumbled by 19 per cent in the past six months. Investors will expect to hear of production increases and the average prices received for each commodity. Sheridan Admans, investment research manager at The Share Centre says: “Updates on large projects, such as Oyu Tolgoi in Mongolia, will be of interest. However, we would warn investors not to rule out further asset write downs.”

Keith Bowman, equities analyst at Hargreaves Lansdown Stockbrokers, says broker consensus has the stock down as a ‘buy’ and points out that as iron ore is Rio’s main commodity, investors will be keen hear its update, as previously it forecast a production uptick this year. But despite the company’s challenges, The Share Centre also it as a ‘buy’, while share data hub Digital Look has broker sentiment pointing to a ‘strong buy’.

Wednesday sees BHP Billiton publish its quarterly update and again like its fellow miner Rio Tinto has suffered in recent times, with its shares 13 per cent looser over the past six months and down by three per cent over 12 months.

Bowman says: “This update is broadly focused on production as opposed to results but the management may look to update investors in regards to the slowing economy in China, a key commodities buyer. In addition, it may look to talk about its crude oil interests, which is something that distinguishes it from its competitors, for example, Rio Tinto do not have any. Right now broker consensus has the stock listed as a ‘buy’.”

Admans anticipates that the challenges and pessimism facing the mining and commodities community will be reflected in the firm’s update. He adds: “Investors will be looking to see if mining production levels have increased and what the average price received for them was. Updates on the group’s projects will also be welcome.” Again BHP Billiton is listed as a ‘buy’ at The Share Centre and Digital Look’s broker consensus is that it is a ‘strong buy’

Vodafone delivers its first quarter results on Friday. In the wake of its move to acquire German cable company Kabel Deutschland, increased emphasis may well be placed on the performance of its European operations. For the last financial year, Northern and Central European service revenues stayed flat, whilst for its troubled Southern European markets, they declined by 11.6 per cent year-over-year. But over the past six months Vodafone’s share price has surged by 17 per cent, cheered in part by the acquisition news.

Bowman says: “The move to replicate the product offerings of the cable companies, starting with its home European markets, appears to underline management’s push towards becoming a data provider – fixed or mobile. Prior to the update, and with investors still contemplating an eventual sale of its US Verizon Wireless share stake and a possible return of cash, analyst opinion remains positive, currently denoting a strong buy.”

For its part The Share Centre also lists the mobile telecommunications business as a ‘buy’, while Digital Look has broker consensus pointing to a ‘strong buy’.

Utility firms tend to fit into often ‘dull but worthy’ category so in Severn Trent’s interim management statement, arriving Wednesday, investors are likely to be expecting trading in line with expectations. But over the past six months, driven by an attempted bid by a Canadian-led consortium, its stock has risen by 17 per cent and by 2 per cent over three months.

Both Admans and Bowman concur that further comments on the failed bid for the group and the new regulatory period, which is fast approaching, will be of more interest. The Share Centre currently lists Severn Trent as a ‘hold’, while Bowman has broker consensus as a ‘strong hold’.

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