The G7 and EU will ban Russian gas imports on routes where Moscow has cut supplies, according to officials involved in the negotiations, the first time pipeline gas trade has been blocked by western powers since the invasion of Ukraine.

The decision, which is to be finalised by G7 leaders at a summit in Hiroshima next week, will prevent the resumption of Russian pipeline gas exports on routes to countries such as Poland and Germany, where Moscow cut off supplies last year and triggered an energy crisis across Europe.

Western powers want to ensure that Russia does not receive a boost to its energy revenues as they attempt to raise economic pressure 15 months after Moscow’s full-scale invasion of Ukraine.

One of the officials, all of whom spoke on condition of anonymity, said the move was “to make sure that partners don’t change their mind in a hypothetical future”.

A draft G7 statement seen by the Financial Times said that the group of leading economies would further reduce their use of Russian energy sources “including preventing the reopening of avenues previously shut down by Russia’s weaponisation of energy” at least until “there is a resolution of the conflict”.

While the measures are unlikely to affect any immediate gas flows, it underscores a deep determination in Brussels to make permanent the rapid and painful pivot away from decades of reliance on Russian energy.

The ban is highly symbolic because at the start of the war the EU had avoided targeting pipeline flows given their huge dependence on Moscow’s gas. Russia went ahead and cut supplies anyway, sparking a surge in gas prices to more than 10 times their normal level.

But in recent months prices have fallen substantially as Europe successfully cut demand over winter, accelerated the roll out of renewable energy and sourced alternative supplies such as seaborne cargoes of LNG.

Moscow’s share of the European gas imports has fallen from more than 40 per cent to less than 10 per cent, and a mild winter has boosted gas storage in the EU.

Officials are confident that gas storage, which is already some 60 per cent full compared with roughly 30 per cent at the same time in 2022, will reach capacity long before the next winter arrives.

“With European gas storage unusually high for the time of year and wholesale prices inching back to what might just be considered their normal price-range, you can understand why Europe’s leaders are confident this plan will not scupper security of supply any time soon,” said Tom Marzec-Manser at energy consultancy ICIS.

“It’s important nevertheless not to become overly complacent regarding the European gas market outlook.”

Oil pipelines where Russia has cut supplies, including the northern leg of the Druzhba line that supplies refineries in Germany and Poland, could also be blocked under EU measures to prevent a resumption in flows.

The embargo is being discussed by diplomats as part of the EU’s 11th sanctions package. The commission said it would not comment on sanctions discussions or leaks.

One EU diplomat said that the proposal needed more clarification from Brussels to show how the “status quo” would change, particularly as some oil from Kazakhstan flows through Druzhba. “It has to be clear exactly how it would work,” they said.

Berlin and Warsaw, despite having an exemption from sanctions on Russian oil, said that they would voluntarily end deliveries of crude through Druzhba last year although Poland continued to receive supplies until Russia cut off flows in February. German refineries stopped ordering Russian crude from the beginning of this year.

Some of Russia’s main gas conduits to Europe — the Nord Stream 1 and 2 pipelines — were sabotaged last year and only one of their four strings remain. But other pipelines such as the Yamal line to Poland remain intact.

Despite many seeing them as the ideal hunting ground for stockpickers, falling markets have done little to dent UK appetite for passive funds in the past year. Trackers took in nearly £10bn in net retail sales in 2022, meaning they now represent some 21 per cent of the industry assets monitored by the Investment Association.

This popularity, built during the previous decade, is understandable when you consider the good returns passives have delivered for much of that time. They also tend to offer a decent level of diversification in many cases. Having said that, some of the most widely owned trackers offer skewed exposure to their underlying markets, given their particular focus on the winning names and the fact that certain segments are left sorely under-represented. So filling some of these gaps with other funds, both active and passive, can help add an edge to your portfolio.

Popular as MSCI World trackers are, it is fair to accuse them of in effect being a play on the US, which made up 68 per cent of the index at the end of March. The S&P 500 and the global benchmark, in turn, serve as a play on Big Tech. Apple made up 4.9 per cent of the MSCI World index at the end of March, with Microsoft on 3.8 per cent, Alphabet on 2.4 per cent, Amazon on 1.8 per cent and Meta Platforms on 0.9 per cent. That presence rises even further in an S&P 500 tracker, with Apple alone making up 7.1 per cent of the Vanguard S&P 500 Ucits ETF (VUSA) at the end of March.

That reminds us of the need for diversification in two different respects. First, it can make sense to simply bulk up on other exposure to regions outside of the US, be that Asia, the emerging markets, Japan, Europe or the UK. Trackers are one simple way to do this, and names we outlined in last year’s Top 50 ETFs list include the iShares Core MSCI Emerging Markets IMI UCITS ETF (EMIM), the Vanguard FTSE Developed Europe ex UK UCITS ETF (VERX) and the iShares Core MSCI Japan IMI UCITS ETF (SJPA).

This article was previously published by Investors Chronicle, a title owned by the FT Group.

In terms of US allocations, investors might want diversification beyond the tech majors and more exposure to the “real” economy. Premier Miton US Opportunities takes a bottom-up stockpicking approach and hunts further down the market cap spectrum. The fund has returned roughly the same as the S&P 500 over a five-year stretch, albeit with some notable differences in performance at times, including in 2022 when the fund was down 4.4 per cent versus a 9.3 per cent fall in the S&P 500.

Another way to diversify exposures on both the global front and in the US can be via income funds, which will look past most of the US tech majors with the exception of Microsoft. In the US, JPM US Equity Income lists names such as ExxonMobil among its top holdings and has a modest allocation to the information technology sector, with financials and healthcare as its biggest sector weightings.

As previously discussed, active global funds with less of a US focus do exist. Some examples include value portfolios such as Jupiter Global Value Equity and Schroder Global Recovery, while income funds such as Murray International also look past the US. Big generalist global investment trusts such as Alliance Trust have also tended to focus less closely on the US and the tech majors.

Some passives similarly have less of a US tilt, including the relatively UK-focused Vanguard LifeStrategy multi-asset range. But with any of these approaches, investors need to ask what bias they prefer and whether they want such a heavy focus on domestic shares.

UK trackers have not always served investors well, but recently some of that underperformance has been removed. The FTSE 100 has performed well this year, with exposure to the likes of energy and some popular dividend payers working out well.

A problem here is that investors using FTSE 100 trackers miss out on exposure to small and mid-cap stocks, which have come under pressure in the past year but have fared relatively well over a longer period. As we recently discussed, names such as BlackRock Throgmorton could serve as a good play on small and mid-caps. Small-cap funds certainly look cheap at the minute following a fierce sell-off, even if they could face further problems as a recession looms.

Active UK equity funds broadly tend to have a decent focus on small and mid-cap shares, especially in the growth space. Even some of the largest and most successful names try to look beyond large caps: Liontrust Special Situations, for one, had a 43.4 per cent allocation to the FTSE 100 at the end of March, but has diversified across the market cap spectrum with 30.4 per cent in FTSE 250 stocks and 21.2 per cent in Aim. Man GLG Undervalued Assets, a popular name with more of a value bias, had a 40.8 per cent allocation to the FTSE 250 at the end of March.

The Asian market, like the US, is dominated by a few superstar names, with stocks such as TSMC and Chinese internet majors such as Tencent featuring prominently in both the MSCI AC Asia ex Japan index and MSCI Emerging Markets. That bias can be offset in different ways: funds such as Pacific Assets go a different way, namely by having a much more limited exposure to China. That, however, does leave them with big exposures elsewhere: Pacific Assets had 41.3 per cent of its portfolio in India at the end of March.

Europe has fewer such problems with Nestlé, the biggest name in the MSCI Europe ex UK index, making up 4.3 per cent of the index at the end of March. Some sector skews are still evident, but they are far from extreme: industrials, healthcare and financials each made up about 16 per cent of the index. And the average fund in the IA Europe ex UK sector tends to stay in line with some of these biases, with 17.3 per cent in industrials at the end of March according to FE data.

*Investors Chronicle offers an expert and independent view of the UK investment market. To find out more, visit investorschronicle.co.uk

Global index provider MSCI has dropped two Adani Group stocks from its India equities benchmark, in a move analysts said could spur investor outflows of almost $400mn and complicate plans for share sales by the sprawling Indian conglomerate.

The latest setback for the industrial group owned by Indian billionaire Gautam Adani follows months of grappling with accusations of fraud and stock price manipulation made by short seller Hindenburg Research, which at one point lopped off more than $150bn from the market value of Adani’s listed companies.

The allegations, which Adani denies, also spurred greater scrutiny from index providers over how much of the companies were freely traded. MSCI said in a statement on Friday that it would drop Adani Total Gas and Adani Transmission from its India Domestic index at the end of the month.

The deletion of the two listed companies from the MSCI index adds to the challenges facing Adani Group, which has struggled to shore up investor confidence following the short seller’s report and has been forced to slow the previously breakneck pace of its acquisitions and spending.

“The company has done very little, if anything at all, to provide a different narrative and show things are not how Hindenburg said,” said Brian Freitas, an independent analyst. Adani did publish a 413-page rebuttal to Hindenburg’s allegations in late January.

Freitas said the exclusions, which MSCI blamed on the companies’ failure to meet its minimum free-float requirements, would trigger outflows of almost $400mn, as investors who track the benchmark reduce their shareholdings.

The deletion of the two Adani Group stocks follows a cut to their index weightings, along with those of several other Adani listings, by MSCI in February.

Adani Total Gas and Adani Transmission together account for about 0.6 per cent of MSCI’s India Domestic index, which tracks 115 of the largest and most liquid stocks traded in the country with a combined market capitalisation of $1.08tn. Six other Adani Group stocks will remain in the index, with a total combined weighting of about 1.8 per cent of the stock benchmark after the cuts.

The MSCI announcement also comes after three Adani companies, including Adani Transmission, told stock exchanges that they were considering new share sales, without giving details. Their boards will meet to decide on Saturday.

Last week, Adani Enterprises, which includes the group’s coal trading and airports businesses, reported post-tax profits had more than doubled in the first quarter. It is one of the Adani companies considering fundraising.

“Given that Adani Transmission could also be looking to do a fundraise soon, this makes that more difficult because people are now going to be selling $200mn [of that stock] towards the end of this month,” Freitas said.

Good morning. Yesterday, a reference to the film Caddyshack provoked a lot of approving mail. Does that mean most of our readers grew up in the 1980s, or just have excellent taste? Send other market-applicable movie quotes to: robert.armstrong@ft.com and ethan.wu@ft.com.

Trade-off time is here

We’ve been moaning for some months about confusing, contradictory or equivocal economic data flowing out of the US economy. But recent reports, in a refreshing change, have mostly been singing from the same hymnal.

Wednesday’s CPI numbers were, on balance, encouraging. A second consecutive month of falling shelter inflation was particularly welcome. Yesterday’s producer price index was good, too. Year on year, core PPI has plunged from 10 per cent to 3 per cent in 13 months. “Peak inflation data continues in the pipeline,” as Don Rissmiller of Strategas puts it. At the same time, a rise in unemployment insurance claims this year adds evidence that the tight labour market is weakening. Put together, we’ve got an economy that’s slowing, and disinflating.

The chart below illustrates this. It shows smoothed data for jobless claims (dark blue), core PPI (pink) and trimmed mean CPI (light blue), a measure that excludes the hottest 8 per cent and coldest 8 per cent of CPI sub-components. Jobless claims are jumping, PPI is coming down fast and trimmed CPI is following, but slowly:

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

For a year and change, the Fed has wrestled with making live monetary policy decisions using backward-looking data. But it had something going for it: the economy was obviously too hot. Both sides of its dual mandate (price stability and employment) pointed in the direction of tightening. Now, inevitably, the dual mandate is coming back into conflict. We wrote this in July 2022:

In a sense, the Fed’s job is easy now. Inflation is very high and unemployment is very low. What it must do — raise rates, fast — is clear. But imagine a scenario in which inflation is still way too high, say 5 per cent, and falling. At the same time, imagine that unemployment is higher, say approaching 5 per cent again, and rising. What does the Fed do then?

Things are better now than we imagined then. Headline inflation is indeed 5 per cent and falling, but the unemployment rate is still just 3.4 per cent. It’s entirely possible that the tightening done so far — 500bp of rate increases, $400bn in asset run-off and a few bank failures, to boot — is enough to control inflation without much higher unemployment. The soft-landing dream, to our great surprise, remains alive.

But even in an optimistic scenario, inflation will take many months to reach anything resembling 2 per cent. Meanwhile, the economy, while relatively strong, is unbalanced. It is almost entirely reliant on the US consumer. If the labour market keeps weakening, growth could fall fast. And at the apex of a tightening cycle, we should expect more things to break, worsening the economic picture.

Hard choices are coming for the Fed. A rate pause in June seems sensible, but the real question is how long to wait before a cut. Mr Futures Market is betting it won’t be long at all: one 25bp cut in September, and three by year-end. Here Unhedged is still split. Rob is inclined to say the Fed will “higher-for-longer” us right into a recession. Ethan thinks economic deceleration later this year will force cuts. In a few months’ time, our divide could well be mirrored at the Fed. (Ethan Wu)

Uber vs Airbnb

Uber and Airbnb are companies with almost identical business models, built around different assets. Both run global marketplaces on which owner/operators can rent an asset to a customer. In one case, the asset is a car; in the other, a house. Both companies make money by charging the seller a fee for use of the network.

The similarity of the two businesses is brought out neatly by the fact that their values are quite similar and move together. Here is the enterprise value of the two:

There is, however, something deeply dissimilar about Uber and Airbnb. One of them makes money and the other does not.

Regular readers will remember that we recently argued that the right way to think about Uber’s profitability is in terms of what we call true free cash flow: operating cash flow, minus capital expenditures and stock-based compensation (failure to include stock comp in any measure of profitability is, everywhere and always, a lowdown dirty trick). Here is quarterly true free cash flow at the two companies:

Airbnb generated $2.8bn of true free cash in the past four quarters, a margin on revenues of over 30 per cent. This is a very profitable business! Over the same period, Uber burnt more than $900mn in cash. Given the similarity of the business models, what explains this? I don’t know for sure, but I have a tentative theory which has to do with the fundamental differences between a car and a house.

With companies using a marketplace (“network”, “platform”) model, it is traditional to link profitability with scale. There is a phase while the network is being built up where the business is lossmaking, but when it gets to a certain size, costs stabilise and cash starts to flow. But given that Uber’s revenue, at $33bn, is four times Airbnb’s, it is hard to argue scale explains the difference here.

A closely related, somewhat more convincing theory is that Uber, whatever its size, has decided to invest more aggressively than Airbnb has, sacrificing profits now for profits later. In other words, Uber could be profitable at its current scale but chooses not to be. It is true that Uber is increasing revenues faster than Airbnb (58 per cent in the past 12 months, versus 32 per cent). It is also true that Uber is adding new services (deliveries, freight). There could be truth to this theory, but I doubt that it is the whole story.

What makes me doubt it is the big difference between the two companies’ gross profit margins:

For both, revenue is fees charged to the asset owner/operators. Here’s what Uber says goes into cost of revenue (that is, the costs subtracted from revenue to arrive at gross profit):

Cost of revenue, exclusive of depreciation and amortisation, primarily consists of certain insurance costs related to our mobility and delivery offerings, credit card processing fees, bank fees, data centre and networking expenses, mobile device and service costs, costs incurred with carriers for Uber Freight transportation services, amounts related to fare chargebacks and other credit card losses.

And here is Airbnb:

Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centres used to host our platform, and amortisation of internally developed software and acquired technology.

One difference here is that Airbnb includes amortisation of technology in cost of revenue line whereas Uber sticks it in a different line further down the income statement. But this should make its gross margins higher relative to Airbnb’s, not lower.

Another, possibly more important difference is that Uber flags insurance costs right off the bat. This raises a crucial point: you can’t crash a house, or at least not without serious effort. I’m guessing that insurance costs for every unit of revenue at Uber’s business are much higher than Airbnb’s, and that these higher costs are almost completely variable, that is, they increase with revenue (whether those insurance costs are borne directly by Uber or by the asset owner/operators, who then have to be compensated for them, is irrelevant).

I have a lot more work to do on these two fascinating companies; insurance could be a red herring. What is clear is that Uber’s cost of goods includes large, variable costs that Airbnb’s do not. I’m keen to hear from readers who know more. (Armstrong)

One good read

Steven Kelly pushes back on the technology/social media theory of bank runs.

AngloGold Ashanti has announced plans to switch its primary stock market listing to New York, a sign that Wall Street rather than London has become the preferred destination for the world’s biggest gold miners.

Under a plan set out on Friday, the world’s fourth-largest gold miner will move its primary listing from Johannesburg to New York as part of an effort to lift its valuation. The group said it would retain a secondary listing in its historic base in Johannesburg and another in Ghana.

With roots in the mining empire built by Ernest Oppenheimer more than a century ago, AngloGold’s move follows the sale of its remaining South African operations in 2020. It also comes as the London market, the traditional home to many of the world’s largest miners, tries to counter the growing pull of New York.

Chief executive Alberto Calderon said making New York its primary listing would give AngloGold access to the “world’s largest capital markets and pool of gold investors”.

“It’s such a compelling case for change — we have no operations in South Africa, a bigger pool of gold capital in New York and not tied to South African rating discount,” Calderon told the Financial Times.

While a handful of gold miners are listed in London, the world’s biggest, Newmont, is listed in New York. AngloGold says Wall Street-listed competitors trade at a significant premium.

AngloGold already has a secondary listing in New York, which the company says generates about two-thirds of the daily trading in its shares. That helped convince the company of New York’s merits, alongside what Calderon said was a fear of damaging the liquidity in its stock if it were to also have a London listing.

Gold miners are betting that New York would help them gain access to passive funds that invest in gold, which is trading near a record high.

As part of the plan, AngloGold said it would redomicile in the UK from South Africa, in part because its main holding company subsidiary has been based in the UK since 2017.

Calderon said redomiciling would also help win investor backing for switching the listing to New York because it would spare its South African shareholders from paying a tax on dividends.

After scaling back in South Africa, AngloGold’s operations are now focused elsewhere in Africa, Australia and the Americas.

The group’s decision to opt for New York is a blow to London, which has few large precious metals miners: Fresnillo, Endeavour Mining and Centamin are among the biggest. It lost Randgold when Canada’s Barrick Gold acquired the group in 2018.

AngloGold’s exit deepens the woes of South Africa’s mining industry, which is already battling persistent problems with its power supply.

South African regulators have approved its plan, the company said. The South African government has historically been reluctant to let major companies move overseas.

The miner said the move would cost it $560mn, mainly in taxes to the South African government. It expects to complete the moves, which will require the approval of 75 per cent of shareholders, in the third quarter.

AngloGold on Friday reported adjusted core earnings of $320mn in the three months to March, down 26 per cent on a year earlier, on production of 584,000 ounces.

A senior Federal Reserve official has warned recent US inflation and employment data had not convinced her that price pressures are under control as she left the door open to voting for more rate rises.

Michelle Bowman, a voting member on the Fed’s policy-setting committee, said the US central bank’s attempt to tighten financial conditions and damp the economy were having the “desired” effect, but she stopped short of endorsing a pause in rate rises.

“In my view, the most recent [consumer price inflation] and employment reports have not provided consistent evidence that inflation is on a downward path,” she said at an event in Frankfurt on Friday. Bowman said she wanted to see more data before deciding whether to vote in favour of holding rates at their current level when the committee next meets in June.

“Should inflation remain high and the labour market remain tight, additional monetary policy tightening will likely be appropriate to attain a sufficiently restrictive stance,” she added.

Earlier this month, Jay Powell, the Fed chair, sent a strong signal that the central bank was preparing to hold off on another rate rise next month, after raising the benchmark rate above 5 per cent at its most recent meeting.

“We feel like we’re getting close or maybe even there,” he said, pointing to the effect of rate rises and an expected credit crunch stemming from recent bank failures.

Bowman’s comments suggest Powell will need to forge a consensus on what looks like an increasingly divided committee. Other voting members such as Austan Goolsbee of the Chicago Fed seem to be more worried about the credit crunch.

Meanwhile, Bowman also warned her colleagues against a knee-jerk reaction following the recent implosion of Silicon Valley Bank and other lenders. She said implementation of new rules and regulations should not take place until there was a deeper investigation of what went wrong.

Bowman called for a fresh review conducted by an independent third party to “supplement” what she described as the “limited internal review” that was published by the Fed’s vice-chair for supervision, Michael Barr, late last month.

Such a report “would help to eliminate the doubts that may naturally accompany any self-assessment prepared and reviewed by a single member of the board of governors,” added Bowman.

In that report, Barr said SVB’s failures stemmed from the weakening of regulations during the administration of Donald Trump and mistakes by internal supervisors who were too slow to act on the errors of the bank’s management.

Barr also signalled his support for stronger supervision and regulation for banks with more than $100bn in assets, changes that would not require congressional approval.

Bowman acknowledged that some changes, especially with regard to how the Fed supervises lenders, are likely necessary but pushed back on the need for “radical reform of the bank regulatory framework”.

“We should avoid using these bank failures as a pretext to push for other, unrelated changes to banking regulation,” she said.

Alphaville has already highlighted how much AI mania has contributed to the US equity market’s 2023 gains. SocGen is now arguing that even those estimates underplay the impact.

The French bank’s analysts find that without the gains of stocks that are possible AI winners, the S&P 500 would now be down 2 per cent this year, rather than up 8 per cent.

It’s not immediately clear from the note how SocGen classifies “AI Boom stocks”, but we’re guessing it includes the likes of Nvidia, Microsoft, SalesForce, and Alphabet. Here’s SocGen’s Manish Kabra, with our emphasis:

The AI boom and hype is strong. So strong that without the AI-popular stocks, S&P 500 would be down 2% this year. Not +8%.

Our update on the AI sentiment news indicator keeps rising exponentially and more extended than when we first talked about few weeks ago.

While AI as a theme has been with us for a while and we suggested being long SG Robotics and AI Equity as a secular theme last year, it is tough to fight against a very strong hype on a very short-term.

We don’t want to seem like Luddites, but . . . 

Further reading:

— This awfully fragile narrow no-good rally

— The ChatGPT market shock

More deals in Europe’s €4tn natural gas derivatives market have moved off-exchange since Russia’s full-scale invasion of Ukraine as squeezed companies try to save trading costs, the European Union’s securities watchdog has warned.

A report on Friday by the European Securities and Markets Authority found the share of trades on the opaque over-the-counter market had jumped from 15 per cent last summer to 27 per cent this year, shifting from the regulated futures exchanges.

The agency said the change had been driven by energy groups and may have been linked to a push to save the margin used for trading. Producers and traders that rely on futures markets to hedge against volatile price moves and lock in supply months in advance were last year loaded with sharply rising demands for margin.

The prices of gas in Europe rose to record levels following Russia’s invasion and were exacerbated by scorching temperatures. The European benchmark TTF started the year at about €90 per megawatt hour, but in the summer traded at more than €300/mwh, and ended the year at about €75/mwh. Prices have fallen further since the start of the year, on Friday touching €32.25/mwh, as European storage is filled with an unusually high amount of gas for this time of year.

However, the margin payments, demanded by exchanges as insurance to secure deals, more than doubled in 2022, according to the European Central Bank. That forced many companies to draw on credit lines with their banks, seek emergency funds and conduct more trades privately, where margin requirements are lower.

The EU also brought in a cap on the price of gas traded on exchange but exempted the over-the-counter market. Analysts had warned last year, when the EU was drafting the price cap, that trading would migrate to over-the-counter markets.

While most trades are still being conducted on exchanges, the shift to OTC “raises concerns due to more limited transparency and more bespoke margin and collateral requirements in that market segment”, Esma said.

The volatile market pushed annual turnover of natural gas derivatives on EU futures exchanges to €4.1tn last year, with open positions of EU companies amounting to about €500bn, the authority said.

However, it also found the market was becoming increasingly concentrated as funds exited and left banks and energy companies as the main traders. “Some energy firms hold relatively large derivative positions,” Esma found.

The EU has warned that its price cap could be pulled if too much trade moves to over-the-counter deals that are “less transparent, less subject to regulatory scrutiny, and carrying greater risks of defaulting on obligations for the parties involved”.

Intercontinental Exchange, which operates the main trading hub for gas in the EU, opened a gas contract in London as insurance against disruptions in the EU market, but few traders, apart from a few early tests, have made much use of it.

AstraZeneca is the jewel in the FTSE 100’s crown. The pharmaceutical group now has a market capitalisation of £182bn. This places it firmly ahead of Shell, the index’s second-largest constituent, with a market cap of £161bn.

This might be difficult to believe given oil’s well-documented resurgence in the wake of the war in Ukraine. But it is a testament to the power of both AstraZeneca’s pipeline and its existing portfolio of medicines.

The company recently overtook Pfizer in market value terms — a significant milestone given that the US firm attempted a hostile takeover of its UK rival nine years ago. AstraZeneca’s shares have climbed more than 123 per cent in the past five years, despite the well-documented turbulence surrounding its Covid-19 vaccine.

Some corners of management are clearly feeling bullish about the company’s prospects for continued growth. It was announced this month that Michel Demaré, non-executive chair of the board, had purchased 2,000 of the company’s ordinary shares at a price of £117 each.

On the other hand, chief financial officer Aradhana Sarin sold £1.15mn-worth of American depository shares a couple of days later. Two ADSs are worth one ordinary share.

Sarin previously sold more than 16,000 shares in November last year, a trade valued at £2.15mn. The share price has risen by roughly 9 per cent since then.

FactSet broker consensus says sales could rise to $46bn (£36.8mn) for the full financial year, up from $44bn last year. By December 2025, analysts currently estimate revenue will grow to over $54bn. 

Superdry chief tops up through equity raise

Superdry’s shares have cratered by 40 per cent this year on the back of weak trading and the withdrawal of profit guidance. Management had told the market that it expected pre-tax profits for this financial year of £10mn-£20mn. This was downgraded to a rough break-even position in January. Then, last month, “given the challenging trading environment”, even that was removed.

The fashion retailer has pinned trading issues — retail sales growth “at a slower rate than anticipated” and a difficult wholesale recovery — on the cost of living crisis and its impact on consumer spending. According to the board, demand for the company’s spring-summer collection has also been hit by inclement weather. Investors, as the year-to-date mark down of the shares indicates, are far from satisfied.

In this context, the turnround plan that founder and chief executive Julian Dunkerton is spearheading looks much needed. Around £35mn of initial cost savings have been identified, through such means as optimising the estate and improving procurement (which the company expects will be fully realised in financial year 2024) and work is being done to deliver further cost-cutting. Management expects this to deliver a “material uplift” in underlying profitability over the medium-term.

A turnround needs cash. Superdry proceeded with an equity raise, via a retail offer and placing of ordinary shares, earlier this month and raised gross proceeds of £12mn. Dunkerton’s bullishness on the future of the business was apparent in his acquisition of 4.5mn shares on 4 May as part of the raise, which takes his interest in the company’s shares to over 25 per cent.

The shares are rated at 15 times forward earnings, according to consensus forecasts on FactSet, in line with the five-year average. Analysts forecast sales of £624mn this financial year, in the middle of management’s guidance range of £615mn to £635mn, and a net loss of over £7mn.