Daily market update: BP, Johnson Matthey, Filtronic

“Trump tariffs on steel and aluminium sold into the US is negative for markets on two levels,” says Russ Mould, Investment Director at AJ Bell.

“First, it suggests the new US president has only just got started with America’s budding protectionist trade policy. Second, it extends the affected countries beyond Canada, China and Mexico to places like Germany, Brazil, Japan and South Korea.

“With the promise of further tariffs later this week, Trump’s actions threaten to cause considerable volatility on the markets over the coming days if there is a tit-for-tat response from affected countries.

“While stocks in the firing line such as ArcelorMittal and Hyundai Steel fell on the news, another part of the commodities sector enjoyed a bounce around speculation that activist investors were targeting the oil and gas space. Talk that Elliott had taken a stake in BP drove shares in the UK oil and gas giant up 7.5%, which in turn gave a 0.4% boost to the FTSE 100.”

BP

“Tick tock, the window for Murray Auchincloss to convince the market he has a plan to revive BP’s fortunes just got shorter with reports that activist investor Elliott has joined the shareholder base.

“BP has not just fallen behind the leading pack of US energy names but also the chasing pack which includes its closest peer Shell and other European names, both in terms of share price performance and valuation.

“In this context it should come as little surprise BP has been targeted by Elliott. While Auchincloss and his predecessor Bernard Looney had already dialled back the ambitious ‘greener’ strategy announced in 2020, there’s a good chance Elliott might push for the company to stop allocating capital to existing renewables and clean energy projects and potentially exit them entirely.

“Breaking up the business might seem logical to Elliott as it is oil and gas production which delivers the cash flow to help pay the bills and fund dividends. A shift in the primary stock market listing to the US could even be on the cards, although that might be politically complicated.

“There may also be pressure to shake up the board. Chair Helge Lund has been in place since 2019 and Auchincloss was an internal appointment who has struggled over the last year-and-a-bit to get investors on side.

“News of Elliott’s move ramps up the pressure ahead of tomorrow’s quarterly results and a strategy update scheduled for 26 February. The other possibility looming over BP in its current reduced circumstances is a potential takeover approach, although its levels of debt might prove prohibitive to any potential bidder.

“The most likely candidate to buy BP is Shell. However, Shell is concentrating on getting its own house in order and is unlikely to be willing to take on what would be an extremely complex integration process at this point in time.”

Johnson Matthey

“Activist investors are aggressively targeting UK stocks, with Johnson Matthey among those under pressure to do something different. Standard Investments recently demanded that the chemicals group refresh its board, saying the current directors lacked urgency and the strategic capabilities to turn around the business.

“Chair Patrick Thomas now says he doesn’t intend to seek re-election in July, meaning that Standard Investments has a window of opportunity to try and influence the recruitment process for a replacement. Johnson Matthey doesn’t say if Thomas is bowing out because of pressure from the activist, yet his signalled departure doesn’t seem like a coincidence.

“Johnson Matthey recently pushed back against Standard Investments’ open letter, outlining steps already being taken to improve the business. However, it did admit there remains more work to be done and ‘further progress is required at pace’ together with a need to improve the share price. That was effectively an admission it needs to pull its socks up, otherwise the activist will get heavy.”

Filtronic

“Filtronic is making quite a name for itself as a way to play the space race. Winning another contract with Elon Musk’s SpaceX has put a new rocket under the share price. The shares have now increased by 750% in value over the past three years, proving that the AIM market is not entirely dead.

“Whereas many companies on AIM are all about jam tomorrow, Filtronic is actually making money today.

“It’s rare to see a company say it will exceed market expectations for both the current and next financial year, but the latest deal with SpaceX has gifted Filtronic with that magic status.”

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