This week in MoneyWeek magazine: profit from university research; buy into cutting edge healthcare, and how trackers beat hedge funds almost every time.
Plus: should you use profit forecasts, the trouble with internet advertising, the perils of buying insurance, and making the most of tax breaks.
All that plus a whole lot more in this week’s MoneyWeek magazine. Sign up and you’ll get the magazine delivered to your door, plus full access to the MoneyWeek website and our smartphone and tablet app.
Make billions from boffins
Although Britain has some of the best universities in the world (Oxford is number one, Cambridge number four) we still lag behind in profiting from some of the discoveries that they make. American universities take their research and build world beating companies out of its, says Matthew Partridge, but British institutions tend to sell their best ideas early on, missing out on profits. But things are now changing. The turnover of companies spun out from UK universities has quadrupled since 2002/03, from £466m to £1.84bn. Matthew looks at what’s driving this “improvement in commercial nous”, explains how you can invest in this British success stories before they leave the lab, and picks five “stars of the future to invest in now. Find out what they are with a subscription to MoneyWeek magazine.
Buy into cutting edge healthcare
Echoing Matthew’s cover story somewhat, Max King looks into the UK’s disappointing record in life sciences. We may undertake “world leading” research, but the value from it has been captured in the US. The UK punches far below its weight, selling out far too early, while the US builds multi-million dollar companies. A small number of UK-based fund managers have set out to change, that, including Neil Woodford with his Patient Capital Trust. But “the trust’s results so far have been disappointing”, says Max. He picks an alternative investment trust that “combines successful investing with good causes”. Find out what it is in MoneyWeek magazine.
Are tracker funds really better than hedge funds?
Almost ten years ago now, Warren Buffett – pretty much the world’s most successful investor – bet a hedge fund manager half a million dollars that, over the next decade, a “cheap, no-frills S&P 500 tracker fund” would beat five funds of hedge funds representing 100 underlying funds. There’s less than a year to go before the bet is up. But, says Stephen Connolly, “the market has trounced the fund managers”. It’s a valuable reminder that in the long run “most professional fund managers charge healthy fees for rotten results”. If you’ve been paying the slightest attention to what we’ve been saying in MoneyWeek, this should come as no surprise to you at all. Stephen delves in to why this might be.
Should you trust forecasts?
“The price/earnings ratio (p/e) is one of the simplest and most popular valuation measures in investment”, says John Stepek. Al you do is take the company’s share price and divide it by its earnings per share. A high number means the share is highly valued; a low number suggest its cheap. The trouble is , there is more than one “earnings” figure to use. The “trailing” earnings – the most recent full year’s number – or the “forward” earnings, which is basically a bunch of analysts’ best guess as to what it will earn in the future. John Stepek looks at the pros and cons of each, and explains which you should use.
Buying insurance, making the most of tax breaks, and brace yourself for a rise in VAT
Elsewhere, Ruth Jackson delves into the perils of buying insurance. Many of us just plump for the cheapest policy, but this is often a mistake. Paying just a little bit more, for example could give you much better coverage. David Prosser’s looks at pensions tax allowances. “Sources close to the chancellor have been briefing the press that tax breaks on pensions could be reduced from the 2017/18 tax year onwards”, he says. Find out how to make the most of them while you still can with a subscription to MoneyWeek magazine. And on the small business page, David looks at how the new flat-rate VAT could cost businesses dear and land them with an administrative headache.
There’s more, of course. Much more. I can’t go into it all now, of course. Simon Wilson explains the crisis in internet advertising; Matthew Lynn writes on how Uber would be better off as a listed company, and professional investor Paul Major picks three stocks that should profit from US healthcare reforms. Chris Carter’s travel page is on “unspoilt Europe”; our properties for sale all have impressive libraries, and Matthew Jukes tastes an “exuberant rosé” in his wine column