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The Times They Are a-Changin’

Jonathan Wright

Jonathan Wright - Fidelity Personal Investing

Is it just me or are you also struggling to keep up with the constant news flow coming out of Westminster at the moment?


While my knowledge of ancient Greek philosophers may not be as wide as our current prime minister’s, I do know that Heraclitus once said, “the only constant is change” and that seems as true today as it did two thousand years ago.

Of course, change is not just limited to the politics of Westminster. This week we’ve seen first-hand how some companies have successfully (or unsuccessfully) been adjusting to change.

We started with news of Thomas Cook’s collapse and 150,000 British tourists needing to be repatriated back to the UK. From small beginnings organising day trips from Market Harborough, Thomas Cook became a household name as Brits in search of the sun, replaced holiday camps for package holidays on the Costas.

However, with the arrival of the internet, the need to physically go into a travel agent, browse through a brochure, ask for advice on a suitable hotel and subsequently pay for it, can now be avoided as it can all be done from the comfort of your home. Things have certainly changed.

It wasn’t so long ago, as an investor looking for a safe, stable business you would have thought educational publishing was a pretty safe bet. Each year a fresh influx of students head off to university needing to buy a recommended reading list of heavyweight text books. However, yesterday educational publisher Pearson saw its shares tumble over 15% as it issued a profit warning, due to weak sales.

The company, which is undergoing a tough restructuring plan to become a digital-first publisher, is struggling as students shift from textbooks to screens.

Since chief executive John Fallon took charge of Pearson in 2013, the company has issued four profit warnings. Speaking yesterday he said “Students are turning away from print products more rapidly than expected and some students don’t buy physical books at all”.

Pearson, wasn’t the only company issuing a profit warning yesterday, Imperial Brands, formerly known as Imperial Tobacco also warned its revenues would be hit.

I guess if there’s a company used to seeing change it would be a tobacco producer. According to Action on Smoking and Health (ASH) 45% of the UK population smoked cigarettes in 1974, that figure is now less than half the amount. So, you would think the company’s investment into vaping and e-cigarette products would be a sure-fire way to overcome a steadily declining market?

Not necessarily. As the number of vaping-related deaths climbs, a backlash against vaping and e-cigarettes in the US has begun, with some states looking to ban the sale of e-cigarettes altogether, following the lead of San Francisco in the summer.

The trend is spreading across the world, as last week, India joined Brazil and Singapore in banning the sale of e-cigarettes, warning of an “epidemic” among young people.

Imperial Brands said along with tough trading conditions in Africa, Asia and Australasia, it now saw group revenues growing by 2%, down from a previously forecast 4%. It shares dropped over 12% as a result.

But amongst this gloom I was able to find one company posting successful results, and surprisingly it’s a retailer. While the internet has battered the high street, online-only fashion retailer Boohoo saw revenues jump by 43% with profit before tax up an eye-catching 83% to £45.2million.

With no high street shops to maintain and a database of customers whose online buying habits you can mine and cross-sell to, Boohoo has tapped into the shifting shopping habits of the young.

So, whatever the changing circumstances there are always winners and losers. As investors, knowing the companies to pick and the ones to avoid is no easy task. Sometimes it’s best to leave this job to the experts.

As shareholders in Thomas Cook have learned the hard way this week, putting all your eggs in the one basket comes at a very high risk. Diversifying your money by putting it in a fund means the risk is spread across a spread of different companies, more often in different sectors and geographical regions. The Fidelity Select 50 list of recommended funds is a good place to start.

I think still, 55 years on, Bob Dylan is on to something, “The Times They Are a-Changin’” and as investors we ignore change at our own peril.

More on the Select 50

Five year performance

As at 25 Sep
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Pearson -5.1 -31.4 -14.7 54.2 -14.0
Imperial Brands 38.7 17.6 -13.8 -13.1 -27.1
Boohoo -35.6 200.8 164.7 -17.6 25.3

Past performance is not a reliable indicator of future returns

Source: FE, as at 25.9.19, in local currency terms with income reinvested 

Important information The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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