Does list of most Googled shares point to an ideal portfolio?

I have been perusing the list of most Googled shares. Every company that makes up the list is well known. But together, would they constitute the perfect portfolio?

Article updated: 9 July 2018 10:00am Author: Michael Baxter

Wisdom of crowds: ever since Francis Galton visited a livestock fair and, after observing the entries in a ‘guess the weight of an ox’ competition and noticing that the mean guess was almost exactly correct, the idea that crowds can be wise has become well known. It does not always work, sometimes a crowd can fall victim to groupthink, but on the whole, and in most circumstances, I think the crowd is right – except for when it disagrees with me, of course.

When it comes to buying shares, there are two reasons to listen to the crowd, firstly because it is wise, secondly because stock performance is in any case a function of what the crowd does. This all begs the question, is studying Google searches a way to find out what the crowd will do, or what it has already done, in which case the data is not much use?

Besides, looking at the most Googled shares does not necessarily tell you what the crowd is thinking of buying, it can tell you what it is thinking of selling.

Top searches

Without further ado, here is the list of the most Googled stocks a week or so ago:

BT, BP, LSE, Persimmon, Morrisons, Sainsbury, Rolls-Royce, Centrica, National Grid and the two pharmaceuticals: GSK and Astrazeneca.

Together they make a pretty diverse range of companies, maybe a little over reliant on the UK economy, but not excessively so.

Income

Combined, they are big dividend payers.

Persimmon has been buying back shares like they are going out of fashion and is expected to buy back shares worth around a third of its market cap in the next few years. Centrica is paying out over seven per cent, BT is only just behind. GSK, National Grid, and BP are all paying around five per cent, while AstraZeneca and then Sainsbury are a little behind.

Reliance on UK households

Persimmon, Sainsbury and Morrisons are all UK economy focused, so is Centrica and National Grid, although they are a little different - we will always buy energy, no matter how weak the economy.

Persimmon’s worry relates to the weak housing market, with the latest Residential Market Survey (RICS) mildly negative, while the supermarkets are both struggling with price competition posed by Lidl and Aldi. If the Sainsbury/Asda merger goes ahead, it could be a game changer, leading to big cost savings, and pumped up buying muscle.

BP shares rose 29 per cent over the last year, replacement cost profit was up 71 per cent, the highest level in three years, in the latest 12-month period. It’s got new oil and gas projects, and although Brent Crude is lower than it used to be, the company appears to be able to eke out more profit from cheaper oil. But, what happens next with the oil price matters, and the renewable revolution will come to bear, eventually.

Some old favourites

BT is up 10 per cent last month, down around a quarter in last year, pre-tax profits were up 11 per cent in the last quarter. The PE ratio is just 8. Debt is £9.6 billion, 13 times EBITDA on 31st March and it has an £11.3 pension deficit. Net debt plus pension deficit was £20.9 billion at the last count, compared to a market cap is £22.93 billion. The company is shedding jobs as it tries to cut costs. Of course, if interest rates go up, it will help the pension deficit. For me the bigger fear relates to the regulator and for how much longer it will tolerate the UK’s internet infrastructure weakness. Shares have risen since the departure of CEO, Gavin Patterson. He led BT into becoming a sports broadcaster and buying EE, but remember, a good internet infrastructure is good for UK PLC, but is the infrastructure offered by BT good enough? The company was hit by an Italian accounting scandal and shares are less than half price at the end of 2015.

The London Stock Exchange is up 21 per cent over the last 12 months. The PE is 36, dividends 1.15 per cent.

At Rolls Royce, shares are down around 30 per cent over the last five years, but this has been a rollercoaster of a 12-month period, with shares now just about at a year high. The company is making substantial cost cuts, but if its projected improvement in cash flow proves right, it may be good value. Dividends are around 1.19 per cent.

Pharmaceuticals

I am a fan of the pharmaceuticals sector - demographic pressures are leading to rising demand, technologies such as genome sequencing, nano technology and CRISPR, provide the promise of revolutionary treatments. GlaxoSmithKline shares are down five per cent over the last year and down 11 per cent over the last five years. Meanwhile, AstraZeneca’s shares are down two per cent over the last year, but up 60 per cent over the last five years. It is now more focused, and specialises in cancer, respiratory and cardiovascular. Shares are just a little short of the offer from Pfizer in 2014. At the time, Astra’s boss, Pascal Soriot, made bold forecasts for the company over the following eight years or so. We are now half-way in, nothing exceptional yet, but then nothing has happened to make the Soriot plans look unrealistic either.

Weakness

For me, the ideal portfolio should also have significant exposure to techs, including the giant US companies. I would also hold some funds, providing exposure to certain overseas markets.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.