Share Tips Update: Estée Lauder, McBride, Prosus, Alpha Group

The Armchair Trader’s picks seemed to be generally performing well in September. We continue to look a little overweight in resources in the venture list, but our feeling is that there are many under priced quality small cap mining stocks out there. We are seeing funds and mining giants loading up on these in anticipation of a rally driven by higher metals and other resource prices.

On the macroeconomic level investors continued to be razor-focused on geopolitical risks. The Family Office Insights report from the Raffles multi-family office in Singapore and Deloitte Private supported this. Buying by private investors as well as central banks continued to drive the gold price up in September. Our own gold position is now up 33% (unleveraged). With this much fear in the market, activity in small caps / value stocks seems to be very focused on a few popular names or investment stories.

Short of the Month: Estée Lauder NYSE:EL

We’ve been historically quite successfully in shorting luxury consumer stocks, especially when companies are making a mess of their China strategy. This is the case for Estée Lauder at the moment. Apart from a significant leadership shake up, Estée Lauder is losing traction within the essential Asian luxury goods market. Brand management specialist Gradient told us that Estée Lauder has been making some serious mis-steps in its marketing strategy. Competitors like L’Oreal are also simply outspending Estée Lauder in terms of marketing budget at the moment.

• Speed chess and skinning cats: or how can investors avoid losing money?

McBride LON:MCB

I finally gave into my screens which kept telling me McBride was a high value and under-priced UK stock. I feel like I have been ignoring it for too long: shares were up 50% YTD but it looked like there was scope for more. McBride remains the number one private label producer of everyday household cleaning products and partners with 90% of the European retailers in this space. It is making considerable progress in Germany and Spain, and is considered to have one of the most competitive product portfolios in the cleaning industry. The company also looks increasingly profitable: while there is still debt on the balance sheet, revenues were reported up 9.8% at £468m.

• McBride shares up over 20% as dividends are restored

Prosus [AMS:PRX]

At the end of September I bought shares in the ‘other Softbank’ as the Financial Times likes to call it, Amsterdam-listed Prosus. This is a stock which traded at close to EUR 50 during the pandemic. It represents a strong long bet on the Chinese tech sector, especially given its massive exposure to Tencent. There are some other big Chinese tech names under the Prosus umbrella, including the likes of Meituan, the online shopping platform. Beyond the Chinese portfolio, Prosus also has investments in tech companies like Germany’s Delivery Hero.

Alpha Group International [LON:ALPH]

James Coffey tipped Alpha Group International in September: this is a founder-led, non-bank provider of financial services, targeting corporates and institutions globally. Its core products are FX risk management and global bank accounts, the latter targeted at the alternative asset management industry. FX Risk Management (FXRM) helps corporates and institutions manage FX volatility when either buying and selling goods and services overseas or from the underlying value of an asset or liability. James thinks Alpha has been outpacing competitors within this niche, as the company aims to specialise in FX risk management through high technology solutions.

Sold in September: Palo Alto Networks NASDAQGS:PANW (Raine Lahtinen)

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So how are our picks getting on?

James Coffey’s FTSE 350 share tips

Raine Lahtinen’s US stock tips

Tactical trading portfolio

These are shorter term equity and commodity trades which we can see playing out within one to three months. We will sometimes keep these on longer if the trade is still quite range bound but we are anticipating further upside. These trades have the tightest risk parameters.

Longer term buy and hold portfolio

These are positions where we see a longer term growth scenario, usually in the small to mid cap space, but sometimes larger companies. We will typically be keeping these stocks on the list for at least six months and often longer. Consequently our risk tolerance is higher for these positions than for the trading list.

Venture portfolio

These are companies which we see as having long term and considerable growth prospects. Due to their size and the nature of the business they are in, we feel that our normal risk management constraints should not be applied to these stocks.

*Prices as of close of play on 30 September 2024, all prices in GBX (Pence Sterling) unless indicated