2.2.5 Shares to follow

Armed with what you have learned about shares and the factors affecting their valuation, it is now time to start tracking the prices of the shares of selected companies.

The selected companies are:

• Anglo American – the international mining company
• BP – the oil company with a global profile
• Marks and Spencer – the UK focused retailer with overseas activities
• Tesco – the UK supermarket company with a major presence in other countries
• Rank – the media company
• Rolls Royce – the UK engineering company specialising in aerospace
• Nat West Group (NWG) – previously known as Royal Bank of Scotland – the bank that is currently largely owned by the UK Government after its rescue in 2008 during the financial crisis

In later weeks, we’ll also ask you to monitor the prices of two UK government bonds – you learn more about these later this week. As you know, the Bank of England’s Monetary Policy Committee (MPC) sets the official rate of interest for the UK (also known as Bank Rate). The decisions are normally announced at 12 noon on the Thursday after the first Monday of each of the eight months it meets in each year. So while studying Managing My Investments you should monitor and record the level of Bank Rate and look out for the decisions of the MPC. In October 2023 the rate was 5.25%. The prevailing level of Bank Rate can be found on the Bank of England’s website or in the financial press.

The BBC maintains a tool that you can use for tracking market data, which you can use to track the shares listed above. You can also track the prices and yields on UK government bonds (gilts) using the link provided later in this session in the section on ‘Gilts and the risk-free yield curve’. Alternatively, you could pick up a copy of the Financial Times.

Some of these companies may be reporting their latest financial figures while you are making your observations – so it will be interesting to see how the markets and their share prices react to their financial results. This can give us further evidence about the factors that drive share prices.

Two points to remember, though:

• At the same time that specific factors about their performance will be influencing the share prices of these companies, general factors affecting the equity markets as a whole will also be impacting. You looked at the generic drivers of equity markets, such as the pace of economic growth in the UK and other economies, in Week 1. So it is important to see how the share prices of our companies perform not just in absolute terms, but also relative to the market as a whole.
• As discussed earlier, the levels of share prices reflect the aggregate market view of the performance and prospects for companies. This is important when seeing how share prices react to the publication of financial results. Even if the results look, on the face of it, to be ‘good’, the share price of a company may fall if they are not as good as forecast. The reverse applies if a company posts weak results: if these are not as bad as had been forecast, then the company’s share price might rise! This illustrates an important point: share prices don’t just reflect what is known about a company and its performance, but additionally reflect what is expected in terms of future performance.