Insider: Buy M&S, sell London property

'Misses' M&S

Marks & Spencer had a "profits shocker" two weeks ago.

New boss Steve Rowe blamed an "unsatisfactory" retail division, its struggling international business and an uncertain future for its flagship food arm. His strategic review was delayed, too.

Analysts were quick to slash profit forecasts - many by 16, 17, 18%. Price targets came down too, but many thought the subsequent share price plunge of 22% near to a four-year low was overdone.

"Conventional wisdom is now that the best that investors can hope for is for the shares to mark time until the remainder of the strategic review is in place," wrote Tony Shiret at Haitong Securities.

"Investors will also be balancing whether the full 'kitchen sink' has been delivered or whether there will be more at the half year. This all said, clearly there is some scope to cut central costs and we would expect that forecast guidance probably anticipates the downside effects from cutting Full Prices but has a more conservative view on lowering markdown.

"So the numbers game is not necessarily weighted to the downside."

Shiret reckons M&S shares are still worth 450p. Even factoring in a 7% rally from the early June low, that implies significant upside potential from here.

Both finance boss Helen Weir and chairman Robert Swannell have dug deep. Weir, who's been looking after the numbers at Marks since April last year, spent £75,000 buying 20,500 M&S shares at 364.5p. Former investment banker Swannell picked up 26,298 shares at 376.5p, costing more than £99,000.

Swannell already owned 143,000 shares, which lost about £138,000 of their value in less than two weeks post-results. To make that back, Rowe must steady the ship and revive the M&S brand - whether that's through "Mrs M&S" remains to be seen.

A forward price/earnings (PE) ratio of 12.4 times is justified by very modest growth forecasts and potential for further bad news.

Founder cashes in

London's property market could be a major victim if the UK decides to leave the European Union. Brexit and concerns about capital market flows have dogged the sector for months, and while shares in central London property developer Derwent London have held up reasonably well, they have underperformed others like Land Securities and Shaftesbury this year.

Now, just two weeks before the potentially earth-moving referendum, Derwent director and co- founder Simon Silver has banked massive profits on his stake in the business.

Selling 30,000 Derwent shares on 8 June at 3,329p netted Silver, who set up the company with John Burns in 1984 and has sat on the Derwent board since 1986, almost £1 million.

However, he has been a regular seller over the years, and still owns 213,617 shares, or 0.192% of the business. That stake is currently worth over £7 million.

And Burns, who still runs the company, last month brushed off any concerns about a 'Leave' vote on 23 June.

"We are encouraged by the level of interest we are seeing for our space, and the strong progress made so far this year across the business," he said in a first-quarter update.

"Although uncertainty ahead of the forthcoming June referendum appears to have lowered investment activity, Derwent London continues to see little evidence of any slowdown in occupier demand for its middle market rental product."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.