Specialist currency manager Record(LSE: REC) is down 4.21% in early trading after publishing its second quarter trading update to 30 September. This has brought an abrupt stop to its share price surge, which has seen the stock double from 26p to more than 50p over the last 12 months. So how bad was today's report?
Small-cap stock Record, which offers hedging strategies to reduce the impact of currency movements on client investment portfolios, saw group assets under management up 2.2% in dollar terms to $61.2bn. However, they actually fell 1.1% in sterling terms to £45.6bn. While UK-based clients benefited from dynamic hedging, which protected currency gains made following sterling's changes in the six months after the EU referendum. However, persistent sterling weakness has hit returns and cash flows, so the group's remaining UK-based dynamic hedging clients either converted their mandates to passive hedging or terminated their contracts.
Chief executive James Wood-Collins said assets under management were now at their highest ever level in dollar terms, while Record now has a foothold in the Swiss market after opening an office in Zürich. However, the group has also had to bear the cost of boosting employee numbers to improve client service, plus the cost of introducing MiFID II, as well as possible mandate losses.
Wood-Collins anticipates further currency volatility, due to political and economic uncertainty, but said this should provide opportunities to engage with existing and new clients. "We remain confident of making further progress in the second half of the financial year." However, the report is relatively downbeat compared to recent missives. In June, Record posted double-digit growth in full-year revenues and earnings, which allowed management to boost its dividend payout and deliver a special payment for the period.
Yet City analysts remain bullish, forecasting 15% earnings per share (EPS) growth in the year to 31 March 2018, followed by 6% in 2019. It also offers an attractive forecast yield of 6.9%, while trading at a less than demanding 14.7 times earnings. Today's dip could be a buying opportunity.
Home and hearth
Domestic shale explorer UK Oil & Gas Investments(LSE: UKOG) is up 330% over the last six months, but down 30% over the last month. Are you prepared for this level of volatility?
The AIM-listed company invests primarily in oil and gas assets located in the Weald Basin in southern England. How its share price performs largely depends on news flow from drilling sites such as Broadford Bridge, Markwells Wood, Baxter's Copse and Horse Hill Portland. The share price has been knocked by operational issues at Broadford Bridge, but the company continues to investigate, carrying out extended flow testing after receiving approval for a 12-month planning extension.
You need to scrutinise its drilling updates to work out the group's prospects for tapping into the rumoured 100bn barrels of oil lying under the region. These things are hard enough for the company to gauge, let alone outsiders, so you will need to take a view, or what some people might call a gamble.
Today's entry price is 5.45p, roughly half its 52-week high of 11p, but far higher than its low of 0.83p. Risky, but also exciting.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.