Table of contents for Issue 1279 in MoneyWeek

Is the long-promised small-cap revival finally in the offing? The Russell 2000 index, which tracks smaller listed US firms, has hit a record high for the first time since 2021, says Crystal Kim on Investopedia. In the US, small caps are generally considered to be firms with market capitalisations of between $250m and $2bn. The sector has long underperformed US bluechips and tech giants: over the past decade the Russell 2000 has gained 112%, compared with a 245% rise on the large-cap S&P 500. Now a rotation may be under way: the S&P has gained 3% over the past month, compared to a 5% rise in the Russell. US rate cuts (see page 4) are good news for smaller firms, which tend to rely more on borrowing than larger companies.…

Porsche, part-owned by Volkswagen, has issued its fourth profit warning in a year, says Robert Lea in The Times. It also tempered its ambitions when it comes to electric vehicles (EVs), saying it planned to continue producing models such as the Cayenne and the Panamera with internal combustion engines “well into the next decade”. Porsche has also “put the brakes on” projected future profits, thanks to the “collateral damage of the transatlantic trade wars and a decline in demand for luxury cars in China”. An invasion of Chinese carmakers hasn’t helped either. Porsche’s shares have now fallen by around two-thirds since their peak. The news will increase pressure on CEO Oliver Blume to give up his dual CEO roles at the German luxury-car maker alongside Volkswagen, say Sebastien Ash and…

Loveholidays has selected banks for its initial public offering (IPO) on the London Stock Exchange, which could value the online travel agency at more than £1bn, says Bloomberg. No final decisions have been made, but the listing would be a boon to London’s IPO market, which has seen a slowdown in deals. The company, which private-equity group Livingbridge acquired in 2018 for £180m, has experienced an uptick in demand for package holidays since the end of the pandemic. Loveholidays reported a 22% increase in revenue to £287.5m and a 15% rise in adjusted earnings to £71.2m for the year to 31 October 2024.…

● It has taken five profit warnings for Pets at Home finally to part company with CEO Lyssa McGowan, says Ben Martin in The Times. When McGowan joined in 2022, chair Ian Burke lauded her for bringing “strong corporate, strategic and operational expertise”, even though her experience – at Sky, McKinsey and Telewest Broadband – had little overlap with the retail and veterinary sectors. Investors were not convinced: the shares have fallen from 347p to around 200p now. The veterinary business has performed well, but retail has struggled amid a squeeze on household budgets and this is where McGowan’s “lack of industry experience has been felt keenly”. Burke will now run the firm while searching for a permanent successor. “Shareholders will be hoping he does not make a dog’s dinner of…

“There are similarities between the best consumer brands and the best owners of platform or data assets,” says Nick Train, the manager of Finsbury Growth & Income Trust and Lindsell Train Investment Trust, whose strategy has long revolved around investing in leading consumer firms. Just as people tend to buy food, drink and household products from brands they know and trust, “the brand and the quality of the data or the cleverness of the analytic tool bring loyalty to the respective products”, says Train in his latest update for Finsbury. This “brings repeat business and long-term pricing power”, which are the key factors that underpin long-term returns. What’s more, digital firms can enjoy advantages over traditional consumer brands. Many charge by subscription – “the most reliable sort of repeat business”.…

lawliberty.org “Across the Western world, right-leaning ‘postliberal’ groups are proliferating,“ says Samuel Gregg. They do not agree about everything, but all share a “deep scepticism about free markets”. They insist that the state needs to reorient the economy towards the realisation of specific goals. They want “more localism”, “greater community”, a revival of manufacturing and so on, and to that end propose more welfare spending, bigger unions, higher tariffs, more regulation and industrial policy or government ownership of key industries. But all these measures come with well-understood problems. Tariffs undermine competitiveness and raise prices for everyone. Industrial policy “breeds cronyism and assumes knowledge about the future” that we do not have. Postliberals seem uninterested in understanding such economic truths and trade-offs. But disdaining the realities to which economics “insistently directs…

● The board of Octopus Titan, the UK’s largest venture capital trust (VCT), has responded to “widespread and deep dissatisfaction” among investors by upping pressure on its manager. Octopus Investments’ notice period will be cut from three years to one and its fees will be cut by 17% plus a potential further 20% rebate if returns do not improve. The board said it had considered replacing the manager entirely, but concluded that Octopus was best placed to maximise value from the existing portfolio. However, the VCT will now focus on follow-on investments in its existing holdings, with no new investments permitted for the time being. ● Shares in Hydrogen Capital Growth have been suspended as the fund’s new managers struggle to complete an updated valuation of its portfolio. The clean-hydrogen…

Pension providers could deliver so-called “small pot” reforms by 2030, a new report suggests, helping millions of savers to consolidate their retirement savings. But while co-ordinated action would certainly help savers struggling to keep track of dribs and drabs of retirement cash, experts are urging people not to wait for these reforms. The measures are aimed at tackling a problem that has become more and more pressing since the UK adopted the auto-enrolment system in 2012. Since then, employers have been required to offer an occupational pension scheme, and automatically to enrol new employees in the scheme. As a result, employees build up pension rights with each employer they work for; those who move jobs frequently end up with multiple small pots of savings. These are often uneconomic to run,…

James Dyson (pictured) invented his first bagless vacuum cleaner in 1993, says Hannah Mendelsohn in The Telegraph. More than 30 years later, he’s “still shaking up the market” with his first “wet and dry” robot cleaner. The Dyson Spot+Scrub Ai uses an AI-powered camera to check that stains are gone and goes over them again if needed. He’s also launching the Dyson PencilVac, “the world’s slimmest vacuum”, and the V16 Piston Animal, which has a dust compactor to reduce the number of trips to the bin and a new head that directs hair up into the cleaner without tangling. If you’re as much of a fan of Dyson and his products as I am, these new cleaners will find their place in your home alongside the Dyson air purifier, the…

Central banks are back in easing mode, but the descent down the interest-rate mountain is proving arduous and slow. The US Federal Reserve lowered US rates by a quarter of a percentage point at this month’s meeting, its first cut since December 2024. Meanwhile, in Britain the Bank of England held rates at 4% as policymakers hope and pray that inflation eases from August’s 3.8% level. The opposite of QE More significant was an announcement that quantitative tightening (QT) would be reduced from the current annual pace of £100bn to £70bn. QT is the reversal of quantitative easing (QE). Under QE, between March 2009 and the pandemic the Bank of England bought vast tranches of bonds with printed money in order to support the economy. At the peak in 2021…

Nvidia, the world’s top chipmaker, is to buy a $5bn stake in rival Intel and collaborate with it, says Johana Bhuiyan in The Guardian. The shares jumped 25% on the news, the largest one-day percentage gain since 1987. The deal, subject to regulatory approval, comes a month after the US government made an “extraordinary intervention” by converting a grant to Intel into a 9.9% stake. The Japanese firm Softbank also said a few weeks ago that it would buy a 2% stake in Intel for $2bn. The tie-up gives Intel a cash infusion for its stretched balance sheet and helps it field better products, “both items high on its to-do list”, says Bloomberg’s Ian King. But to succeed as both a designer and manufacturer of chips it must secure a…

Five to buy Sage The Telegraph Although Sage trades at the same share price as it did two years ago, the accounting software company has still generated a 58% capital gain and outperformed the FTSE 100 index since June 2021. Sage enjoys strong loyalty from customers and should post double-digit earnings growth this year and next. It is worthy of a “premium” valuation compared with blue-chip peers, as its bottom line has grown 64% over the past three years. Patient investors should see share-price gains in the long run, fuelled by expected interest-rate cuts and lower inflation. 1,073p Dunelm The Times Dunelm’s shares dipped after the homeware retailer issued a cautious view of customers’ spending power. However, the sell-off may reflect short-term pessimism for Britain’s retail sector rather than Dunelm’s…

What’s the fuss about? It’s the landmark UK legislation, passed by the previous Conservative government in 2023 – with very broad cross-party support – that aims to protect users, especially children, online. The main provisions of the act came into force in July this year. It requires social-media platforms and large search engines to prevent children (aged under 18) from accessing pornography online, and obliges relevant websites to have “highly effective” age-verification checks for UK users. It also requires tech companies to stop under-18s accessing any material that promotes or encourages several other defined harms, including suicide, self-harm and eating disorders, dangerous stunts, the use of harmful substances and bullying. How does that work in practice? Websites offering a “user-to-user service” – including social networks, dating apps and pornography sites…

Rising fears about the outlook for the dollar may make it more compelling to hedge currency exposure, as we discussed last week. This is not just a theory: investors are increasing hedges on their US holdings, as Andrew notes (page 3). To recap, forward currency rates (ie, the rate at which you can commit to buy or sell a currency at a fixed point in the future) are mostly driven by expected interest rates. If they weren’t, we could borrow in one currency, invest it in another at a higher rate and lock in a future exchange rate to repay the loan without taking the risk that currencies will move against us. So if the sterling-euro rate today is €1.14, the one-year sterling swap rate is 3.8% and the one-year…

China’s water stranglehold Brahma ChellaneyNikkei Asia China’s new $168bn Himalayan super-dam on the Brahmaputra is an “ecological disaster in the making”, says Brahma Chellaney. The river sustains one of the world’s most biodiverse regions as it plunges to form the steepest canyon on Earth. At present, floods “flush toxins, recharge groundwater and deposit nutrient-rich sediment”, which sustains farming and fisheries downstream. The dam is also sited on one of the world’s most seismically active areas and straddles a “heavily militarised frontier”. A collapse would “devastate” India’s northeast and Bangladesh. Designed to produce three times the power of China’s Three Gorges Dam (an acknowledged “environmental and social disaster”), the dam will give China a “hydraulic chokehold” over hundreds of millions of people. It already controls river flows to more countries than…

economicforces.xyz The modern world tends to look unfavourably on aristocracy, says Josh Hendrickson. But the British aristocracy persisted for a long time and it governed with the consent of the people, without popular revolts even during the period when the king lacked a standing army. It must have fulfilled some important social role. Economic historian Douglas Allen has examined the question. The key to understanding it is that the monarchy lacked a large bureaucracy capable of collecting taxes and providing public goods. The solution was to have a trusted group of aristocrats perform these tasks. Trust could only work if the king could impose a punishment on public servants that was greater than any benefit they could obtain through dishonesty. The rules and requirements of aristocracy – that they had…

Since listing in 2013 Greencoat UK Wind (LSE: UKW) has grown to become one of the UK’s largest investment trusts. At one point, its net asset value (NAV) reached almost £4bn. Yet the trust has generated mediocre long-term returns for investors: the NAV total return has been 5.7% per annum (pa) since 2013, while the share price total return has been 6.6% pa. Over five years, results have been much worse, with a NAV total return of 1.8% pa. In comparison, City of London (LSE: CTY), a straightforward equity-income trust, has produced 15% pa over the past five years, 7.8% pa over ten years and 9.1% pa over 15 years. Greencoat even lags cash funds in recent years: Royal London Short Term Money Market Fund has returned 2.7% pa over…

The apologists for the relentless expansion in the size and cost of Britain’s public-sector debt like to point out that other major developed economies face a similar predicament. Although government bond yields have risen further and faster in the UK than elsewhere, they have also increased sharply in the US, Germany, France and Japan, countries with – except for Germany – higher debt relative to GDP. If Britain is on the wrong path, then it is a path endorsed by everyone else. Where have we heard this argument before? In the early 2020, the governments of nearly every developed country imposed lockdowns in an attempt to prevent the spread of Covid. Scientists advising the UK government advocated a policy of lockdown for no more than nine weeks. However, the government…

Nervous savers who take drastic action to “beat the Budget” could end up worse off – often completely unnecessarily. Rachel Reeves, the chancellor, has announced that she will present this year’s Budget on 26 November, prompting a series of headlines suggesting she could make major changes to the tax system on pensions. However, trying to second-guess the chancellor could cost you dearly. In the run-up to last year’s Budget, rumours about several pension reforms proved unfounded, and left many of those who’d acted on this gossip with a nasty shock. For instance, suggestions that the chancellor might abolish savers’ right to take 25% of their pension funds as tax-free cash appear to have prompted a huge increase in withdrawals: savers took out more than £70bn from their retirement pots in…

The Schroder Income Growth Fund has a clear dual objective: to deliver a reliable dividend income and long-term capital growth. Since its launch in 1995, it has raised its dividend every year, earning a prestigious “Dividend Hero” badge from the Association of Investment Companies. Over the medium term, the trust aims to grow income ahead of inflation, helping investors preserve and build wealth in real terms. The trust invests predominantly in British stocks, with a bottom-up approach that seeks out mispriced opportunities. Its experienced manager draws on a long record through multiple economic cycles to identify companies where growth potential or where progress by management is overlooked. By blending holdings that provide strong dividends today with those positioned for sustainable growth tomorrow, the portfolio is diversified by style, sector and…

£57.95, langhamwine.co.uk The annual WineGB tasting was hosted earlier this month in London. It was the most well-attended and impressive tasting to date, with easily the most significant number of top-flight wines ever poured. I tasted 306 wines over ten hours and there is no doubt that English and Welsh wines have never been in better shape. I found legions of brilliant bottles for my various articles across all styles, but only one wine scored a near-perfect 19.5/20 in my notes. Approximately 300 bottles remain of the 1,000 made of my featured 2019 Langham Pinot Noir. If you adore transcendentally awesome sparkling wine (from anywhere on Earth), this is an unmissable wine. In terms of value for money, it is in a class of its own. Rarely do wines shock…

“Cryptocurrency practitioners are resorting to similar tactics to... so-called asset strippers, who [have historically used] synthetic wealth to acquire real assets. One... way to get rich quick is to create and hype an asset – be it cryptocurrencies or glamour stocks – and then use the purchasing power... to acquire 'hard' assets, whether they are companies, real estate or... gold. [Stablecoin firm] Tether... is [reportedly exploring investment in gold miners]. The sheer irony of this development will... not have escaped those who have noted the frequent claims by cryptocurrency enthusiasts that... bitcoin and the like are the gold of the future. Now, cryptocurrency – in the shape of Tether, at least – is investing in gold instead of trying to usurp its role... as a reserve asset... Gold has history…

Hedge funds shorting DIY group Kingfisher have been left shell-shocked after its shares rose more than 15% on Tuesday, marking their biggest one-day gain since 2008, says Laura Onita in the Financial Times. The surge came as it lifted its annual profit forecast towards £540m for the current year. Investors were especially cheered by group like-for-like sales rising 1.9% in the six months to 31 July. In Britain they gained 3.9%. This has increased hopes that there has been a “revival in demand for big-ticket purchases in the UK”. The latest earnings report certainly comes with a lot of good news, with margin improvements lifting adjusted pre-tax profit and free cash flow by 10% and 13.5% respectively, says Adam Vettese of eToro. The board’s decision to upgrade full-year profit guidance…

Option Care Health, America’s largest provider of infusion therapies, is capitalising on growing demand in the US for medical services delivered at home for an ageing population, says Barron’s. The infusion-therapy market is expected to expand at an average yearly rate of 8.6% over the next five years. The recent pullback in its shares has created an “exciting entry point” for long-term investors. The stock may be poised to gain from market-share gains and government support to expand access to home-care services. The firm’s revenue has more than doubled since 2019 and is expected to exceed $5.5bn this year. Option is a “bargain”, trading at a discount to the broader market.…

“Donald Trump has performed what might be his biggest – and most startling – shift in foreign policy to date,” says Bel Trew in The Independent. On Tuesday, at the UN General Assembly, he told a reporter that Nato countries should be allowed to shoot down Russian aircraft in their airspace. Later, on Truth Social, he declared that Ukraine could not only defeat Russia but “with the support of the European Union… WIN all of Ukraine back in its original form”. He also described the Russian army as a “paper tiger”. This is a “far cry” from the embarrassing “dust-up” between him and Ukrainian president Volodymyr Zelensky in the Oval Office in February. Trump’s statement is “pie in the sky”, says Frank Gardner on the BBC. The Russian army has…

Jim Ratcliffe has shown with his Ineos empire that he is one of Britain’s smartest entrepreneurs. Yet there is not much sign that he has been able to work his magic as the co-owner of Manchester United. When it reported its results last week, revenues were up by less than 1%, at £666.5m, while it made a loss for the financial year of £33m. It had been a challenging year for the club, with no Champions League football, and the team finished just 15th in the league, its lowest placing in more than 30 years. It’s not the only team struggling. Manchester City, their great rivals across the other side of the town, had a far more successful season on the pitch. But revenues last year only rose from £712m…

A reserve currency refers to a currency that central banks hold in large quantities as part of their foreign currency reserves. The US dollar remains the most dominant reserve currency, accounting for about 58% of foreign currency reserves, with the euro far behind on 20%. In addition, around a third of countries peg their currencies to the US dollar (in other words, their currencies go up and down along with the dollar), and half of global trade invoices are denominated in dollars. This means the US dollar’s influence stretches far beyond America’s direct economic clout – by comparison, the US accounts for about 13% of world imports and 9% of world exports and 25% of global GDP. The dollar’s dominance in global trade and financial transactions means the US enjoys…

“This will get robbed in my school. No chance. I am definitely not taking it to school. No, no, no.” Owen Cooper (pictured), 15, star of Adolescence, when asked if he would show off his Emmy at school, quoted in The Mail on Sunday “I used to buy seven-inch singles with my babysitting money. And I listened to the radio. That’s how I got most of my music. And California radio at the time when I was growing up was amazing. So when I got money I would immediately go and buy whatever the latest single was.” Pop star Belinda Carlisle, who had a successful career with the Go-Go’s and as a solo artist, quoted in The Big Issue “The real egalitarians are not the people who want to redistribute wealth…

aeon.co China’s economy “rises from an ancient cultural soil, rich with religious and philosophical traditions” such as Buddhism, Confucianism and Taoism, says Zhangxin Liu. But could a firm’s willingness to share profits as dividends be shaped by its moral environment? Liu, a professor of finance, and his colleagues, examined more than 33,000 accounts from publicly listed non-financial firms across China from 2009 to 2023 and took proximity to local Buddhist and Taoist temples, monasteries and shrines as a proxy for local religious influence. The results were “striking”: firms in more religious regions were significantly more likely to pay dividends, and to pay more when they did. It was “as if the invisible hand of culture was nudging firms towards more shareholder-friendly habits”. Economics often treats behaviour as driven solely by…

A proposed management buy-out of Japanese hair-care group Mandom “grossly undervalues” the company, says Hibiki Path Advisors, a Singapore-based activist specialising in Japanese small caps. Mandom’s founding family are teaming up with private-equity group CVC on a planned tender offer at ¥1,960 (£9.83) per share, following a difficult period for the firm caused by weak performance at its Indonesian arm. However, in its latest results, Mandom had set a price target of ¥3,000 per share by 2028, yet management is offering 35% less, says Hibiki. “This is unacceptable in our view and the lack of any satisfactory explanation is alarming.” Mandom’s share price has since risen to ¥2,250, implying that the market believes the tender will be increased.…

● Have you planned for pension reforms taking effect in the years ahead? Perhaps not: new research suggests that more half of Britons have no idea about big changes to come, including a rise in the state pension age by 2027. A survey from Schroders Personal Wealth warns many savers are unaware of reforms that could have a significant impact on their retirement planning, such as an increase in the age at which you can start withdrawing pension savings. This will rise to 57 in April 2028, as the age at which you can claim the state pension increases to 67. ● HM Revenue & Customs is facing further criticism amid new data revealing that more than 2,400 pensioners have this year received a tax refund of more than £10,000…

The Great Art Fraud Directed by Jamie Crawford and Barry Ronan Available on BBC iPlayer Fraudsters are not exactly unknown in the art world, but few have been as brazen as Inigo Philbrick. He worked his way up from intern to successful gallery owner and quickly gained a reputation as one of the top art dealers of his generation. That all came crashing down when he was exposed as a fraudster, selling the same artwork to multiple people and forging documents to assuage his angry investors as the market for his artists started to cool. After defaulting on his loans, and sparking an international manhunt, he was found hiding on the South Pacific island of Vanuatu with his partner, the socialite and reality TV star Victoria Baker-Harber, and arrested. This…