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Vanquis Banking Group published its half-year results this morning. At first glance, the figures look solid. Profit increased, the loan book continued to grow and costs declined. Nevertheless, the shares opened more than 25% lower.
Anyone following the news alone might expect stock markets to be trading considerably lower. The conflict between the United States and Iran continues, the Strait of Hormuz remains a major risk factor and President Trump continues to surprise markets with new statements on trade and geopolitics. Nevertheless, equity markets are increasingly looking beyond these developments.
Geopolitical tensions are currently the main source of uncertainty across financial markets. The war in the Middle East, the ongoing conflict between Russia and Ukraine, and questions about how central banks will respond are keeping investors on edge.
The markets are entering a new week in which geopolitics is once again taking centre stage. Although investors had hoped to focus on the first corporate results for the second quarter, the conflict between the United States and Iran continues to dominate financial markets. For the ninth consecutive night, the US carried out strikes on Iranian military targets, after which Iran responded with attacks on Bahrain, Kuwait and other locations. Tensions around the Strait of Hormuz also remain extremely high. Iran claims that tankers have once again been attacked, while the United States says it intends to continue protecting vessels passing through the strait.
The markets appear to be taking a breather. After months in which artificial intelligence dominated almost every trading session, we saw the first signs of growing caution. Investors are increasingly questioning whether the hundreds of billions currently being invested in AI will ultimately generate sufficient returns. This has put considerable pressure on a range of technology and semiconductor stocks, a trend that has persisted for several weeks. At Shares Under Ten, we see this as a healthy development. Major technological revolutions almost always begin with enormous enthusiasm and lofty expectations. Ultimately, however, the key question remains: who will actually make money? That distinction is likely to become increasingly important in the years ahead. Not every AI winner of today will still be a winner tomorrow. At the same time, the macroeconomic backdrop is becoming somewhat more supportive. The latest US jobs report came in slightly weaker than expected, easing concerns about further interest rate hikes. Oil prices have also largely returned to more normal levels following the unrest in the Middle East. This should help inflation moderate and, over time, increase the likelihood that central banks can begin lowering interest rates again. Attention will therefore shift back to central banks in the week ahead. On Wednesday, the minutes from the Federal Reserve’s latest meeting will be released, followed a day later by the publication of the European Central Bank’s meeting account. Final inflation figures from Germany and France are also due. Meanwhile, the US earnings season begins to gather pace with results from companies including PepsiCo, Delta Air Lines and Levi Strauss. TSMC’s monthly revenue figures will also be closely watched, as they often provide an important indication of global demand for semiconductors. For Shares Under Ten, very little changes. Periods when markets become more selective often create the best investment opportunities. We therefore remain focused on identifying companies where fundamental developments are stronger than current market sentiment. In the long run, that is where the most attractive returns are typically generated. Ashtead Technology Last week, we reintroduced Ashtead Technology to the portfolio after successfully investing in the company previously. The share price has declined over recent months, while our investment thesis has changed very little. The business continues to benefit from the structural growth in the offshore energy market, and several members of senior management purchased additional shares earlier this year. We believe this demonstrates confidence in the company’s future and suggests that the current valuation does not fully reflect the quality of the business. As a result, we continue to see attractive upside potential and remain confident in holding the shares. Deceuninck Our investment case for Deceuninck has now run its course. We have held the stock for an extended period, but the share price has remained broadly unchanged. Market conditions continue to be challenging, and we no longer believe the company is sufficiently differentiating itself from competitors. We have therefore decided to exit the position. While we sold the shares at approximately our original purchase price, the dividends received during our holding period mean we still achieved a total return of around 10%. Sometimes it is simply the right decision to free up capital for more attractive opportunities. Sunny Optical We have also decided to fully exit our position in Sunny Optical. Market sentiment surrounding the company has continued to deteriorate in recent weeks. In addition to the broader weakness across technology and AI-related stocks, Sunny Optical was removed from the Hang Seng China Enterprises Index, creating further selling pressure. Several analysts also lowered their price targets due to weaker expectations for revenue growth and margins, while the company’s planned bond issuance raised additional questions about its financing structure. Although some investment banks continue to maintain Buy ratings, we believe the current uncertainties outweigh the potential upside. We therefore prefer to allocate our capital to companies where the risk-reward profile is currently more attractive. Banijay This week, Banijay announced another acquisition. Through its subsidiary Banijay Gaming, the company has agreed to acquire French casino operator JOA. The transaction further strengthens Banijay’s position within the gaming sector and represents another step towards its broader omnichannel strategy, integrating online and land-based operations. We believe the acquisition fits well within the company’s long-term growth strategy and demonstrates that management continues to invest actively in markets where it sees attractive opportunities. As a result, we see no reason to change our investment view and continue to hold the shares with confidence.
This stock is returning to the Shares Under Ten portfolio. After a previous successful position that delivered more than a 40% gain in just a few months, the share price has pulled back significantly in recent months. For us, that creates an opportunity to buy again. We are adding 500 shares to the Shares Under Ten portfolio. The main reason is simple: our investment thesis has barely changed. The company continues to benefit from the long-term growth of the offshore energy market, both in oil & gas and offshore wind, while its valuation has once again fallen to a level we consider attractive. Another factor that stands out is renewed insider confidence. Earlier this year, several executives once again purchased shares after having done so previously. Following the recent decline, the stock is now trading at almost exactly the same level where those insiders made their purchases. We view that as an important signal. Management knows the business better than anyone else and typically invests only when they believe the market is undervaluing the company. Shares Under Ten is therefore maintaining its previous 700 pence price target. From the current share price, we once again see highly attractive upside potential. Sometimes the best investment opportunity isn’t discovering a new stock, but buying a high-quality business when the market gives you another chance at an attractive valuation. In our view, Ashtead Technology is an excellent example of that today.
