Sainsbury’s biggest investor sells a chunk of stock, Tesla’s Cybercab fails to excite, BP hit by lower refining margins, Saga shares soar on Ageas talks and Revolution Bars changes name to hide the past

“European markets paused for thought at the end of the trading week, with the FTSE 100 flat at 8,236 as weakness in retailers, industrials and energy was offset by strength in pharmaceuticals, real estate and miners,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“A lot of investors are sitting on their hands, waiting for tomorrow’s update from China’s finance ministry about plans to accelerate economic growth in the country.

“Tesla’s Cybercab launch event failed to drive any interest from investors, with minimal change to its share price. The company has form in hyping up things and then pushing back launch dates, meaning investors might only get excited once there is solid proof the new vehicle is about to hit the road.”

Sainsbury's

“Sainsbury’s shares fell nearly 5% following reports that its biggest shareholder, the Qatar Investment Authority (QIA), had sold £306 million worth of shares at 280p each. Prior to the transaction, QIA owned 14.2% of the supermarket.

“The Middle Eastern investor has a reputation for backing financially strong companies across a wide range of industries. While it invests with a long-term view, like any asset manager it does make changes to its portfolio from time to time. QIA has been trimming stakes in other holdings of late, including Barclays, Shell, Vinci, Iberdrola and Accor. In contrast, it has been increasing positions in the likes of OQ Gas Networks, Kingdee International Software and Haleon.

“QIA first invested in Sainsbury’s in 2007 and at one point owned approximately a quarter of the group. Sainsbury’s share price last year bounced back after a difficult period, helped by the company making good strides with its food-first strategy. Like rivals Tesco and Marks & Spencer, Sainsbury’s seems to have found the right recipe for success and has been fighting off competition from weaker rivals Asda and Morrisons to take market share.

“QIA might feel that now is a good time to trim its stake in Sainsbury’s, selling into a market where other investors have become more interested in the supermarket. The fact it managed to offload a large chunk of shares at only a 2.8% discount to last night’s closing price implies there was decent demand.

“QIA selling down following a string of upbeat results and trading updates from Sainsbury’s would suggest the investor sees the supermarket now entering a new phase of its life. That’s often the point at which an investor also reassesses their commitment to a stock, so selling down shouldn’t represent any concerns about the health of Sainsbury’s. However, the fact the stock has fallen below QIA’s placing price does suggest that some investors have been spooked by the news, wondering why the biggest shareholder is reducing its position at this point in time.”

BP

“Just as Shell did a few days ago, BP has warned about pressure on refining margins amid an uncertain economic backdrop and with increased capacity coming on stream.

“This statement covers a period when oil prices fell, although the recent turmoil in the Middle East has seen crude recover and, assuming this holds, that may be reflected in BP’s performance for the final three months of the year.

“BP’s borrowing pile is expected to be higher, partly thanks to the weak performance from its refining arm, but also due to the timing of divestments being pushed into the fourth quarter. However, the increase in debt levels is unlikely to provoke anything other than modest disquiet.

“This brief teaser comes ahead of the third-quarter numbers in full on 29 October when BP will be expected to address reports it is abandoning plans to cut its oil and gas output by a quarter by 2030.

“BP has been watering down the net zero strategy it unveiled in 2020 as its shares have fallen behind its US counterparts and UK rival Shell. However, CEO Murray Auchincloss, who took the helm on a permanent basis at the start of the year, needs to convince the market he has a long-term plan which isn’t just about tearing up the old one.”

Saga

“Saga’s proposition always looked interesting as it targeted a growing over-50s demographic with, in relative terms, money to spend. However, it has broadly failed to exploit the opportunities in front of it over the decade it has been a public company.

“The market likes the proposed 20-year partnership with Belgian insurer Ageas which will see the latter pick up the insurance broking activities associated with its motor and home insurance lines as well as buying Saga’s underwriting business.

“Not only will this provide Saga with a useful injection of cash, but it also points to a possible future for the company of focusing purely on managing its customers and the marketing side at the front end, while back end functions are handled by specialist operators. This could allow Saga to grow without employing lots of capital.

“The company has already suggested it might look to secure a licensing agreement for its cruises business.

“Today’s first-half results show Saga is making progress, with a substantial increase in underlying profit and, perhaps more significantly, sizeable inroads made into reducing its debt pile.”

Revolution Bars / Revel Collective

“Companies often think a simple name change can erase any historical disappointments, believing a new identity is enough to make the market forget the past and focus on the future. But investors have a long memory and they know that nothing changes by hanging a new sign in front of the shop.

“Revolution Bars is the latest company to try this tactic, hoping the switch to ‘The Revel Collective’ will make everything better. That might describe a group of bars and pubs where people are enjoying themselves, but the people owning its shares haven’t had any reason to party for a long time. In reality, it’s a late-night bar operator that has destroyed shareholder value over the past five years and now shares a name with the Russian roulette of chocolate.”

These articles are for information purposes only and are not a personal recommendation or advice.