Tavistock Investments PLC (LON: TAVI) is up 20% this morning on the announcement of good results. The big question for traders is whether this advance is going to continue or whether there will be a fall back as habits change again post-lockdown.
Tavistock sold off its investment management division during the first half and this enabled it to pay down debt. The business also saw a near tripling, to 8.6 pence, in net asset value (NAV) and has raised the interim dividend to 0.05 pence from the previous 0.01p.
The receipts from the investment management sale enabled Tavistock to pay off the corporate debt of £3.53 million and the gain on the sale led to profits of £35.5 million being booked.
So, excellent results and this explains that 20% this morning rise in the share price. The big question becomes, well, will this continue?
On the one hand, we can look at the growth of the business and think that this will continue. At which point the stock has momentum and that might be the way to trade.
Alternatively, we can think of the macroeconomic situation here. During lockdown, the behaviour of everyone radically changed. The savings rate – the percentage of total income that went into savings of all kinds – was 5%. At the height of the pandemic, this jumped to 25% and is now still elevated at 10%. So, will this continue?
Have personal finances changed wholly that is, is the UK’s long-time low savings rate a thing of the past?
This is closely allied with the rise in household wealth over the same period. That now amounts to some £15 trillion according to the Office for National Statistics. Direct holdings of stocks and financial instruments are only a small part of that but private pensions are the single largest component.
Tavistock works to manage the wealth of its customers. So, an increase in the amount being saved, an increase in the total stock of what is invested, works to boost the sector and thus the business itself.
This gives the spread of views on the future value of the Tavistock share price. Which will be the major influence upon it? The specific management of the firm and its activities? Or the more general thoughts about the sector as a whole?
If we concentrate on that second then has British investment behaviour been changed for good by the lockdown? Some evidence from other sectors says yes, or at least it could have done. The leap in online shopping compressed possibly a decade’s worth of growth in the sector into just that two years. Some of it is retreating, falling off, but no one thinks it will return to where it was. This might be true of the savings rate and thus the addressable market for Tavistock.
Or, of course, it might not. The savings rate might return to those past levels. It is just those uncertainties that lead to a possible trading position.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.