In the green corner is Imperial Tobacco, up marginally on a day when the market fell more than 1%. It put out an interim management statement on Wednesday that told investors in all-red capital letters the firm is on track to meet its full year targets as strategic progress continues.
It announced a 1% rise in net revenue, if the impact of Iraq is excluded. Underlying volumes fell 6%, with a third of that attributable to the deteriorating political and security situation in Iraq. But, it said it saw continued improvement from its growth brands and remains on track to deliver a 10% increase in its dividend for the full year.
These numbers were also largely expected and the increase in dividends remains encouraging.
But, as Chris Watt, manager of the Jupiter Growth and Income Fund points out, this is a well-known story and one that remains intact.
However, he added the market has been very momentum driven in recent months, a trait that looks to be rising.
“Growth stocks have been heavily favoured if they have put up numbers that do not disappoint, but value stocks have continued to be knocked hard,” he said.
Indeed, Watt says, difference in valuations of growth and value stocks is at a similar level to where it was toward the end of 2007.
Source: Barclays Research, Datastream, MSCI, 30.04.15
“If the market believes the story at the moment, they are very happy to continue funding it, but where there are questions over the industry or the business model, those stocks are getting hit hard.
At current valuations, the mining sector is beginning now to look interesting, he says, but he does not think there is any reason to rush into the sector just yet as sentiment remains so negative.
That said, he also does not see much value in the domestically focused stocks that are currently the market’s darlings.
“This is a tough market in which to be a value manager,” he said.
If there is anything to be drawn from this tale of two stocks it is that in the current environment markets are difficult to impress and very easy to disappoint.
