Cover of MonryWeek magazine issue no 834, Friday 3 March 2017

The online media companies to buy instead of Snap

2 March 2017 / Issue 834

Online media is set to bite into TV advertising revenue. But how to spot the game-changers in a sector awash with jargon and hype? Simple – go back to basics, says Rupert Foster. Read this week’s cover story here.

PLUS:
• How Vestager sank the London Stock Exchange’s big deal
• The start-up that’s teaching kids how to code
• The pitfalls of selling a secondhand watch


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Excerpt

Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

The future’s good. Very good – or so says Warren Buffett. this week, we look at his latest letter to his investors. In it he says much what he always says – that America is great; that human ingenuity and capitalism make anything possible; and that anyone who buys and holds “conservatively financed” US stocks will “almost certainly do well”.

We aren’t so sure. Might it be that Buffett is looking backwards a little too much? His own career has spanned a period of fast-moving globalisation that has given tremendous freedom and extraordinary growth opportunities to America’s big firms (and everyone else’s for that matter). But if Buffett was starting his career today, would things be moving in the same happy direction?

Jonathan Compton doesn’t think so. He explains the danger Buffett isn’t seeing: a “bombastic, introspective and nationalistic” trend in Western politics that could easily lead us to a 1930s-style collapse in world trade. Your immediate thought may be that Compton is worried about Donald Trump. Not so. As he notes, politicians all over the world are calling for much the same things as Trump (tighter control over everything from mergers and acquisitions to the tax status of multinationals) and the trend that is producing is already clear in the numbers: since 2008 the G20 nations have between them introduced 1,583 new trade-restrictive measures and removed only 387. The future could be less good than Buffett thinks.

We always tell you to invest with as much of a margin of safety as possible. That’s particularly important at the moment. Turn to our cover story and you will see why that means not going anywhere near the upcoming initial public offering of Snap. We look at why it could mean investing in small companies in France (yes, really!). After all, as Andrew Van Sickle points out, valuations across Europe remain reasonable, but when it comes to small caps, they are “extremely cheap”.

You might also look to our chart of the week for an idea. We’ve been suggesting Russia for some time on the basis that it is too cheap. I suspect that those of you who got in early will want to take some profits. But you should also note that, despite the huge gains of the last year, it is still very cheap. I would hang on to a small stake.

David Stevenson looks at a less nerve-racking investment – Alliance Trust. The Dundee-based investment trust has had a trying few years – underperforming assets, overpaid management and stroppy activists. But David reckons (as I think I do – see my blog on the matter) that it has given itself “an impressive reboot” and that it is turning into a reasonable one-stop asset-allocation shop. Finally, remember that you are going to end up with duds in your portfolio (however safe they look on day one). What do you do with them? John Stepek answers that one.