However, it could turn out to be a Pyhrric victory. Eurotunnel is massively indebted, and the new managers’ demands for banks to restructure the finances are unlikely to receive a sympathetic hearing. The banks have already taken several big write-offs and are likely to demand that shareholders accept massive dilution, along the lines of recent restructurings at Marconi and Telewest.
The French shareholders seem to have forgotten that when companies are in as dire a mess as Eurotunnel is, shareholders come bottom of the list – and creditors are effectively in charge. None of this changes our view of Eurotunnel: the company is a financial disaster, and unless you’re a frequent user of the shareholder discounts on Le Shuttle, the shares should be sold.
Besides taxation, death is this world’s only certainty – making the burial business a steady earner (should that be ‘urner?’!). Now you can invest in it, courtesy of the listing of Dignity, the country’s biggest funeral service provider.
Almost one in five Britons is ushered into the beyond by the company, which owns over 500 funeral homes and 21 crematoria. The rest of the market is very fragmented, meaning Dignity should be able to grow by acquisition. The shares seem quite modestly rated for what is a very stable business.
Housebuilding shares have once again proved themselves safe as houses. The sector once again outperformed the broader market during the first three months of the year, meaning it has now repeated that feat in 18 out of the past 20 years. Bellway’s interim results this week showed why: profits beat expectations, the dividend was raised by 50% and the outlook remains robust.
The price of gold hit a 16-year high this week, prompting yet more chatter about a return to the ‘good old days’ when the metal soared as high as $800 an ounce. Not likely, in our view: the ratio of gold prices to US government bond prices is close to an eight-year high, and this is usually a reliable predicator of future falls in the price. We’ve noticed as well that financial institutions are starting to offer more and more ways for private investors to ‘play’ commodity prices – one has just launched warrants on gold, silver and platinum. Small investors are always last in and first out, so this suggests the market is close to its peak. As John D. Rockefeller is reputed to have said, when the bellboy starts giving you share tips, it’s time to sell.