Bet on bricks and mortar
Many have proclaimed the death of the high street. But Matthew Partridge weighs up the odds of one bricks-and-mortar play making a comeback.
As "Black Friday" amply demonstrates, the way in which we shop has been transformed beyond all recognition. Over the past decade we've grown accustomed to buying the majority of our goods over the internet.
Even things that were once assumed to be immune from e-commerce, such as our weekly food shop, are now increasingly ordered online and then delivered to our doorsteps. The proportion of our shopping done online has tripled over the past year alone, and now accounts for nearly one in every five pounds we spend.
This has not only thrown into question the future of the high street, which has been in decline for quite some time, but also of the large shopping centres and retail parks that were once seen as the future of shopping.
One company that has been particularly hard hit by these changes is Hammerson (LSE: HMSO), a commercial property landlord that owns and operates a range of shopping centres and retail parks across Britain, Ireland and Europe. Over the past two years its share price has plunged by a quarter from a peak of 700p in early 2015 to its current level of 516p.
However, there is evidence that this exodus could be overdone. Hammerson's argument is that, while we won't necessarily do as much shopping in shopping centres as we used to, we will still need them. Most people still like the option of seeing goods and in the case of clothes, trying them on even if they will ultimately go on to buy them online. Indeed, as JP Morgan points out, many companies have shut down shops, only to find that their online sales end up falling because their products are no longer visible. This suggests retail stores could help boost our awareness of brands, even if they are not making many sales.
The convenient location of Hammerson's shopping centres, which includes prime urban spots in London and Dublin, also makes them ideally situated for everything from leisure activities to office space.
At the moment, Hammerson is trying to boost footfall by investing in new technology (such as mobile-phone charging points) and creating an environment designed for shopping "experiences". These efforts are already bearing fruit, with double-digit growth in leasing volumes. Occupancy rates are now comfortably above the average for the sector.
And even if the sector's fortunes cannot be turned around, the fact that Hammerson trades at a 30% discount to the value of its assets gives the shares a relatively large margin of safety. It has also refinanced some of its debt, making it less sensitive to rising interest rates. I'd suggest a bet on Hammeron's shares at £4 per 1p with IG Index, with a stop-loss at 275p, giving a total downside of £964.
Trading techniques: 52-week high/low
As we've discussed here previously, many short-term traders like to buy shares that are trending upwards, or which exhibit positive price momentum. One simple way to spot momentum is to look at shares that are approaching their 52-week highs and buy them when they have broken through this limit. You can even do this automatically by setting a stop order at the level of the previous high, thus ensuring that your trade is only triggered if it makes a new high. Shares that are falling below their 52-week low are considered possible candidates for shorting.
It's important to note that some traders only consider a stock to be making a new high if it closes (ie, ends the trading session) above the previous high. Their argument is that if a high only appears during the trading day, then the market has not properly confirmed it.
Indeed, some think that if a share repeatedly comes close to making a new high, but keeps falling, then it has "topped out" and may be worth shorting. Similarly, if a share comes close to making new lows, but always bounces back, the worst might be over and it might be time to start buying it.
A study by Thomas George of the University of Houston found that stocks making new 52-week highs subsequently tend to outperform the market in the short term (this is the "momentum" effect, a well-known phenomenon in markets). As a result, some traders like to take this a step further and apply it to the index by looking at the NH/NL ratio. This is the number of stocks in an index that are making new highs (NH), compared with those making new lows (NL). A high NH/NL ratio is generally considered bullish (positive), a low one as bearish (negative).
How are ourtips doing?
Our five long positions have proved a mixed bag. IG Group is now at 66p, which means that you would have made £193 if you had bought into it in line with our recommendation in Issue 846. The ADR of the Brazilian energy company Petrobras, tipped in Issue 850, has jumped to $10.23, producing a profit of £300.
However, Barclays (Issue 856) is at 187p, making a loss of £193. AA (Issue 858) is doing even worse at 149.9p, a loss of £282; we are seriously considering closing the position. Nonetheless, Renault (Issue 854) now costs €85.26, making a profit of £121. Overall our long tips are making a net profit of £139.
Our short positions, sadly, aren't doing too well. Tesla (Issue 854) continues to fall, increasing our profits to £130.08. However, Facebook (Issue 864) is now at $183.67, so we have lost £461.04 on this trade. If Facebook were not so close to our stop-loss position of $200, we would probably suggest you close the trade down. We'll keep it open in the hope of a reversal, but it doesn't seem very likely. Thanks to Facebook, our short positions are losing £330.96, which means that seven open positions are losing a total of £191.96.
Speculators all over the world have been bedazzled by bitcoin's meteoric rise. Defying the predictions that we made in (Issues 866 and 868), the digital currency continues to rise higher and higher, and is now above $10,000. Had we not suggested that you wait until it fell below $4,500 (originally $4,100) before shorting it, we would be looking pretty foolish. However, we remain confident that eventually the bubble will burst and when it does the collapse will be as spectacular as the rise.
We're therefore going to stick with our suggestion that you should wait until it falls below a certain level before you sell it short. But we're going to increase that figure to $5,950 to take account of the recent price rise. Set a stop-loss at $6,800.