Friday tips round-up: Schroders, Electrocomponents and 3i Infrastructure

9th Nov 2012 06:40

Tempus in The Times writes that Schroders' performance since the financial crisis started gives an idea what can be achieved if you stick to your knitting and abjure significant acquisitions, unlike other fund managers such as Aberdeen Asset Management. Over the past 14 quarters Schroders has gained an inflow of £53bn in new business, with only one of those quarters showing a negative performance. In the three months to end-September, net inflows were £2.6bn. Of this, £1.9bn came from institutions and £800m from retail clients, while private banking had a £100m outflow. Schroders shares, despite the strong rise this summer, sell on a typical sector multiple of about 11 times this year's earnings, stripping out the spare cash. Further outperformance looks unlikely in the short term, but they remain one of the strongest holds in the sector.Tempus writes that the phrase 'high operational gearing' is used to describe companies where fairly small changes in sales or costs have an overwhelming effect on profits. It is hard to think of a better example than Electrocomponents, the world's biggest distributor of electrical and electronic bits and pieces. This is a well-known proxy for global economic performance because its goods are ordered in their millions, so the slightest slowdown has an immediate effect.In the first half to end-September, cost inflation was running at about 3%. Margins fell by 1.2% and the lower euro hit earnings from the Continent and thre were one and a half fewer trading days than in the previous first half. These are tiny changes, but together they meant that pre-tax profits were off by 30% to £41.5m on flat revenues. It is the ultimate cyclical stock, and on 12.5 times this year's earnings, unless you think the world economy is set for a significant bounce, probably worth leaving for now.Questor in The Telegraph writes that infrastructure funds own relatively low-risk assets that offer a solid yield for investors. A number of funds have listed in the UK, with 3i Infrastructure being unique in offering exposure to India. The main reason to hold these funds is for the income. The interim dividend was 2.97p, which is flat year on year. The payment will be made on January 9th. The dividend policy of the fund is to pay out 5% of shareholders' equity - essentially the value of the group's assets minus its liabilities - each year. The interim payment represents 2.5% of shareholders' equity, so is bang in line with its target. The rating remains the same, buy for income and long-term growth.Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.CM