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Hancock’s Half Hour

18 November 2020

This Government certainly has the ability to dampen spirits. I know we are in precarious times but, God forbid, give us a break occasionally, please. Having locked us down again earlier this month Boris was firmly insistent that we will be released by no later than the 2nd December. How excited we all were when Pfizer-BioNTech announced their Covid vaccine had enjoyed a terrific success rate of 92% in its trials. A speck of light at the end of this particularly long tunnel? You wouldn’t think so when Boris hit the lectern again. You would have been forgiven for thinking Pfizer’s success rate was 22%, so glum was our leader in the face of potential joy.

He won’t be gracing the lectern again for a while though. Having come into contact with a Covid-carrying minister, Boris is now faced with a lockdown all on his own so it was left to Health Secretary, Matt Hancock, to follow up on the even more exciting news that Moderna had seen even greater success in trials of its own vaccine – almost 95%. Surely half an hour of unadulterated glee would delight us when Matt took the stage. Sadly not. First stating that it was “a candle of hope and we must do all we can to nurture the flame” he promptly snuffed it out. He couldn’t rule anything out, including an extension to the lockdown. Does that include Boris’s I wonder? Matt hoped so, I’m sure, for he was enjoying himself now. Christmas? Who knows? Mandatory vaccination? Couldn’t rule it out. I think my worry would be that there aren’t sufficient people capable of dispensing said vaccine. How long will it take to give 30 million adults the needle? If the testing and tracing is anything to go by we’ll still be waiting next Christmas.

Perhaps I shouldn’t be so sarcastic but I’d rather laugh than cry in the face of adversity. At least the stock markets have greeted the vaccine announcements with relief. We have seen strong performances across most markets over the last week, including even ours. The dribble of overseas predatory moves on our companies continues and, whilst our considerable discount to other markets remains, that dribble could turn into a flood, particularly if a Brexit deal is done.

ITV – Update

Mentioned in August at 62p, ITV was recognised as a company very geared to economic recovery, particularly on the advertising side of the business. In a trading update last Thursday the company said that advertising trends showed improvement in the third quarter and, as a consequence, the second half was looking better than expected. A further upturn in fourth quarter advertising revenues is anticipated although Covid measures would still impact the production studios.

I suggested in August that at around 7.5 times likely earnings the shares were just too cheap and that a sensibly modest 12 times would see them at 100p or so. They are 97p currently but I feel the recovery potential is only just becoming apparent. Hold.

Walt Disney – Update

Our widely held US favourite has survived Covid well. Initially hit badly by the lockdown impact on its global theme park business and production for cinemas, it was extremely fleet of foot in pushing its Disney Plus streaming service. In fact, last year’s launch really could not have been better timed. This helped direct to consumer revenue jump by 41% to $4.85 in last week’s quarterly report, soothing the pain from the hit to theme parks and studio revenues. The overall loss per share of 20 cents was far better than analyst expectations of -68 cents and was greeted by an immediate 2% jump in the share price. In fact, at $144, the shares are not far off their 2019 high of $151 and are well above the $112 , if my memory is correct, at which we recommended them at our previous home.

When Shanghai Disneyland reopened in May tickets for the opening day were sold out in minutes and shows the pent-up demand that will greet the company when its global theme parks are finally able to open. Some of Disney’s businesses will continue to suffer until Covid is behind us but the proof of good corporate management is how it reacts to problems. Problems don’t come much bigger than Covid and Disney is a big beast to haul around but the speed at which management reorganised the business to put it in the best position to both survive and prosper long term should be taken as a lesson by others.

A solid hold and one to buy on weakness.

Russell Dobbs FCSI

Chartered Wealth Manager