Risks and opportunities in China

In a world of surging government bond yields, there is one country where yields are actually dropping. That’s China. 

Since 2023, the country’s bond yields have been falling non-stop. Last I checked, the Chinese 10-year bond yield fetches a meagre 1.66% - a full four percentage points lower than US’s.

Chart 1 shows the structural decline of the interest rates in the world’s second largest economy. 

What’s causing this sustained drop in rates?

Contracting aggregate demand is why Chinese yields are dropping across the board. While China’s headline news often relate to its trillion-dollar trade surplus or fast-expanding AI companies, dig a little deeper you’ll find its domestic undercurrents to be much rockier. 

Businesses and household aren’t queueing to borrow capital. Banks are in no hurry to lend either. Debt is cheap, but unaffordable, at the same time.

This perplexing trend is largely caused by the persistent fall in house prices. In a country where the bulk of the household wealth is tied up in property, falling real estate prices is eroding the nation’s wealth multiplier effect. 

When house prices decline, it generates two direct impact:

1. First, the collateral associated with mortgages are shrinking in value.
2. Second, many homeowners are feeling the acute economic pinch as household equity shrinks. 

Look at Vanke (ticker: 000002), formerly one of the largest property developers in China. Its share prices have collapsed by 90% in five years! Scores of other developers saw a similar trend in their share prices. (Chart 2)

Because of the shrinking wealth effect, Chinese consumer spending aren’t exactly growing. 

LVMH, one of the largest luxury fashion houses, observed this weakness in its latest quarterly result (12 Oct 2026): “The Fashion & Leather Goods business group continued to benefit from the buoyant US market but was affected in the third quarter by the slowdown in demand in China.”

Without the massive Chinese market, no wonder LVMH’s share price is struggling, as are Kering’s (KER) and Hermes’s (RMS). All three luxury stock hit 52-week lows recently and may continue to decline in the absence of downside support. (Chart 3)

Chinese Banks at Fresh Highs

But the Chinese government is not standing idle. It is proactively shoring up the balance sheets of the banking sector as deflation takes hold in the country. 

In early September, the government pumped $54 billion to re-capitalise the main financial banks and insurers, on top of the $72 billion capital injections last year. 

Moreover, the government has recently announced a mortgage subsidy program to help rejuvenate the property market. 

As a result of these measures, many Chinese banks hit new highs. The largest by market cap - China Construction Bank (939 HK, $444bn) - rose to its highest level, as did Bank of China (3988 HK). (See Chart 4)

Many investors are piling into these financials because of the government support and generous yields. CCB, for example, registers a dividend yield of more than 3.4% even after a strong run in share prices. This is better than the yields offered by government bonds.

Still, when a country’s economic trend is deflationary the downside risks multiply. Real growth will be hard to come by.

And the investment environment is not wholly bullish too. Many recent IPOs have fallen hard, such as Yushu Technology (688836). 

CXMT (688825), one of the largest chip companies worth US$500bn, has flatlined after its public listing. 

In addition to subdue corporate earnings, the global economy is entering into a choppy period due to high energy prices and rising interest rates. A synchronised slowdown will hit China’s immense exports.

There may be pockets of growth in the Chinese equity sector, but they are policy driven.

In sum, investors with exposure to the Chinese economy (LSE-listed stocks like FCSS, HSBC, STAN, or US-listed BABA, PDD) should be aware of the country's deflationary risk. Stoploss must be respected as no one can predict when this economic trend will turn around.

Part of your Psyche = Part of your Portfolio?

Tesco is so established in this country that it’s a part of the British psyche, and on that basis alone, you could argue that the leading supermarket chain, should have a place in your portfolio.

Of course, familiarity isn’t a justification for an investment on its own, but there is plenty to like about the stock right now that does justify it.

Tesco has sales of £66.60 bln per annum, an operating profit of £3.152 bln, and free cash flow of £1.957 bln (2025 numbers). Those financials are driven by a 28.50% share in the UK grocery market. The company employs 330,000 staff and operates just over 5000 stores, the vast majority of which are in the UK.

Despite tough economic conditions and a government that could hardly be called business-friendly, the grocer is enjoying something of a renaissance and is reminding us why it's the top dog among retailers and what it does so well.

Tesco recently reported its 2026/27 interim results, which showed that sales excluding fuel were up by +1.60% and operating profits by +6.0%. Free cash flow rose by +21.0% and EPS by +12.20%, all of which allowed the company to declare an interim dividend of 5.05p, itself up +5.20% over the comparable period last year. 

The free cash flow and profit that Tesco generates also allow the company to buy back its own stock, and it's currently more than halfway through a £750.00 million share buyback, which is due to be completed by April 2027.

Tesco also reported that its consumer satisfaction was at an all-time high, an intangible metric that says a lot in the increasingly competitive UK grocery market.

The firm took the opportunity to reiterate its 5-point strategy for success, which is comprised of :

Winning in food.

Meeting more customers' everyday needs.

Being the most strategic partner for its suppliers.

To be connected, personalised, and loved by customers.

All of which should be underpinned by long-term business sustainability. 

Writing after the earnings release, Deutsche Bank said of the stock:

 “We continue to view Tesco as a best-in-class operator in UK grocery. We are particularly encouraged by the resilience of earnings, despite subdued UK LFLs. Profit growth is increasingly supported by a combination of favourable sales mix (e.g. Finest +8.9%), cost savings and ancillary income streams such as high-margin retail media. Importantly, this is not coming at the expense of competitiveness, with customer satisfaction at a record high.”

Tesco is also seen as a buy by the broader market, with 7 buy, 3 neutral and 1 sell recommendation among the 10 analysts covering the name. 

To summarise, Tesco is the ultimate UK defensive play, brilliantly managed and extremely efficient in its day-to-day operations across logistics and retail.

Performance 

Tesco stock is up +13.99% year to date, comfortably outperforming the FTSE 100 over that period. 

Over 5 years, the stock has risen by +88.0%, and over the last decade by +139.0%. 

One performance metric that caught my eye is the fact that Tesco stock has posted 53 new highs over the last two years, roughly one every fortnight. This suggests that price momentum and appreciation have been pretty consistent, which the chart bears out. 

520.6p is the stock's 20-year high price, and as such, it's a target to aim for. I am not expecting Tesco to blast through that level immediately, but if it can build a base at and around that price, it could be a platform for future price appreciation. Deutsche Bank’s price target is 550p, for instance. 

Overall Rating 4.0/5.0

Pros: A highly efficient, well-regarded business with a near 30.0% market share. 

It operates in Eastern Europe and the Republic of Ireland; it also has an insurance business with 2.0 million customers.

Cons: Tesco is a classic low-margin, high-volume business, which is sensitive to price pressures and inflation, that can erode its relatively fine margins. Other grocers are constantly gunning for Tesco’s customers and market share. Opportunities for significant growth at Tesco in the UK are limited. 

The October 28th budget could raise business taxes further and apply additional pressures to large employers and consumer-facing businesses.

Technical overview 

The Tesco share price has been in an uptrend for almost 4 years, having posted a low in October 2022. The 50-day MA line has supported that uptrend for the majority of those 4 years and has only been breached infrequently and briefly in that time. RSI 14 is currently around 68.64, not too far from the overbought boundary at 70 but not yet through it.

To be frank, in recent times a rising RSI 14 has been associated with Tesco price gains, so that may not be something to worry about. In recent weeks, both the 10- and 20-day MA lines have crossed up through their 50-day counterparts. The 10 Day line has also crossed above the 20-day, and both lines are trending upward right now.

Rating:4.0/5.0

Fundamental Overview 

Tesco trades on a forward PE of 16.30 times earnings, which is above Sainsbury's 14.29 times and Marks & Spencer's 14.71 times. If you buy Tesco at these levels, you are paying a premium to own what we can think of as the category killer in the sector. 

However, I have written before about the opportunities that AI could provide to large-scale retail operations in the US. There is no reason to think Tesco couldn't benefit from AI in areas such as logistics and planning, and in hyper-personalising ads and offers for its customer base. These improvements should ultimately flow through to the bottom line.

Rating: 4.0/5.0

5 of the Best Dividend Stocks for Passive Income 

Dividend stocks are very popular investments in the UK. It’s not hard to see why – these stocks offer a regular income stream alongside the potential for long-term capital growth.

Interested in adding some dividend stocks to your Stocks and Shares ISA or SIPP? Here are five top dividend payers that could be worth considering. 

M&G

Starting with a high-yielder in the FTSE 100, we have M&G (MNG:LON). It’s a leading savings and investment company that has around 4.5m retail clients and over 900 institutional clients globally. 

It currently offers a dividend yield of around 6.9%. That’s one of the highest yields in the Footsie. 

One thing I like about this stock is that it’s a reliable dividend payer with a track record of consistent payout increases. Since the company was split off from Prudential back in 2019, it has increased its payout every year (rising payouts offer protection against inflation). 

I also like the fact that, unlike many other high yielders in the Footsie, the company has long-term growth potential. Over the long run, M&G should benefit from rising stock markets, increased assets under management, and growing demand for retirement solutions, which should help it continue to increase its dividend payouts.  

On the downside, stocks in the Financial sector can be more volatile than the broader market. This is certainly the case here – M&G has a beta of 1.5 meaning that it is about 1.5 times as volatile as the market as a whole.

An additional risk to be aware of with M&G is rising bond yields. If bond yields keep rising (and bond prices keep falling), it could have implications for assets under management. 

HSBC

Also in the Financial sector, I like HSBC (HSBA:LON). A blue-chip FTSE 100 stock, it’s one of the biggest banks in the world with a market cap of around £240bn today. 

The dividend yield on offer here is around 4.6% at present. So, this isn’t a super high yielder. 

However, dividend coverage (the ratio of earnings per share to dividends per share) is high, meaning the payout looks secure. And analysts expect decent growth in the payout in the years ahead. 

Next year, HSBC’s dividend payout is expected to rise to 95 cents per share from 85 cents in 2026. At today’s share price and GBP/USD FX rate, 95 cents translates to a yield of about 5.2%. 

A major attraction of this bank from an investment perspective is that it operates across a range of areas including retail banking, commercial banking, investment banking, trading, and wealth management. So, it has many ways to generate revenue. 

The valuation is also quite attractive. Looking at earnings forecasts for 2027, the P/E ratio is currently under 10 so there’s scope for earnings multiple expansion. 

Of course, there are no guarantees that HSBC shares will be a good investment from here. There are plenty of risks that could negatively impact the bank stock including adverse interest rate movements, an economic slowdown in Asia, and regulatory intervention. 

Overall though, I like the set-up at current levels. With the share price having dropped in recent months, I think a nice entry point has emerged. 

National Grid 

Utilities companies can be excellent dividend stocks due to the stable nature of their operations and one name I like in this sector is National Grid (NG:LON). It’s an electricity and gas company with operations in the UK and the Northeast US. 

It currently offers a yield of around 4.3%. Dividend coverage is solid at 1.8 times, and looking ahead, the company is aiming to grow its payout in line with UK CPIH inflation.

One key pillar of the investment case here is that National Grid is targeting earnings growth 8-10% per year through FY31. Higher earnings should boost the share price over time. 

Another is that the company has a natural monopoly in the UK’s energy sector as it owns and operates the core high-voltage electricity transmission network across Great Britain. This should provide highly predictable, inflation-linked revenues and insulated earnings. 

A risk to consider with National Grid shares is potential government intervention. Here, there’s some uncertainty because UK prime minister Andy Burnham has advocated for stronger public control of UK water and energy utilities. 

Rising bond yields are also potentially a risk. Utilities stocks are often seen as an alternative to bonds due to their stability and income, so when bond yields rise to attractive levels, capital often flows from the former to the latter. 

GSK

Healthcare can also be a nice source of dividend income. In this sector, I like the look of pharma giant GSK(GSK:LON) today. 

Its dividend yield is about 4%. Dividend coverage is strong at around 2.5 times, signalling that the payout is secure. 

One major attraction of this dividend stock is that it's defensive. No matter what’s happening in the economy, demand for medicines and vaccines tends to remain robust. 

The valuation is also attractive. Currently, the P/E ratio here is only around 10, so the stock is quite cheap at present.  

It’s worth pointing out that net debt of around £15bn is a risk with this stock. Especially with yields rising. 

All things considered, however, I see the proposition here as compelling. Note that City analysts see 20% upside to the share price so there’s potential for strong total returns. 

Keystone Law 

Finally, those interested in small-cap dividend stocks may want to check out Keystone Law (KEYS:LON). It’s a tech-enabled platform-based UK law firm. 

The yield here is currently about 5%. However, we could see higher yields in the years ahead as this company is continually increasing its payout (and paying special dividends). 

What stands out to me here is the quality of this business. This is a founder-led company with a track record of revenue and earnings growth, a high return on capital employed (ROCE), and a strong balance sheet. 

I also like the fact that the company is performing really well at the moment. In September, it posted a 22.5% increase in revenue for the six months ended 31 July 2026 and advised that it expects to deliver FY2027 revenue comfortably ahead and profits materially ahead of market expectations. 

Now, AI disruption is potentially a risk with this dividend stock. Today, people are turning to generative AI apps like Claude to draft basic legal documents. 

However, with the stock trading on a P/E ratio of 16, I like the risk-reward skew. I see the potential for attractive total returns here. 

It's been an interesting time for London's listed retail brokers; much of the focus has been on the margin trading sector, and not in a good way for some.

Is the US a graveyard for IG Group?

Cast your mind back to late July and the news that IG Group was making its second billion-dollar acquisition in just over 5 years; this time round, the target was Underdog, a sports prediction and Fantasy sports brand from Brooklyn, New York. 

The market did not take kindly to the news of the deal, and IG stock, which trades under the ticker IGG LN, lost 23.00% of its value in the days following the announcement, which was bad enough.

However, there was worse to come from a shareholder perspective. 

Because IG issued what amounted to a profit warning on October 2nd, saying that OTC revenue retention had fallen from 80.0% to 70.0%, that dip was caused by a combination of lower volatility and a new internal hedging policy. This kept more customer trading volumes in-house. 

The net result was that IG reduced its forecast for Q3 2026 total revenue by -14.0%.

One interpretation was that IG had shot itself in the foot; the market voted with its feet, and IG shares fell by another -20.0%, trading down to 923p, having touched a high of 1956p on June 15th.

IG stock has lost -48.36% of its value in the last 3 months, according to data from Barchart.com.

Analysts have largely been radio silent on IG since the warning. 

Peel Hunt reiterated its hold recommendation and £11.00 price target vs the current price of £ 12.37, and the stock retains a strong buy consensus among the analysts that follow IG Group. 

However, you have to feel that could easily change given recent events.

The company will meet with analysts and major shareholders on the 8th of October to walk them through the Underdog deal; it will also outline its strategy (going forward) at a separate meeting on October 22nd. 

Two briefings that could literally determine the future of the company. 

Against this background, it seems appropriate to look at IG's rivals and try to determine what their prospects are.

Plus500 PLUS LN 

The company took the unprecedented step of issuing its own trading statement in the wake of IG's news and a sympathetic dip in its own share price.

 Plus 500 confirmed that it was trading in line with expectations and stressed that it has a strong cash position and that it would issue a full Q3 trading statement as planned on October 20th. 

It last reported on August 10th with its H1 2026 results, which showed a 5-year high customer income and revenues at 3-year highs.

Plus 500 also announced at that time a further $182.50 million in shareholder returns, taking the total shareholder returns since IPO to an impressive $3.10 billion. 

The summer months witnessed lower volatility, and equity markets lacked clear direction, but there was increased volatility in gold and energy, which could well have compensated for that.

Plus500’s stock price has fallen by just under -12.50%over the last month and by -35.30% in the last quarter, moves that suggest momentum in the stock is fading rapidly.

UK stockbroker Panmure Liberum wrote on the stock after the unscheduled trading update, reiterating its buy recommendation and £54.00 price target, which compares to the current share price of £32.42.

The stock remains a strong buy among the 5 brokers who cover the name. 

The market will be looking for confirmation that Plus500 is indeed trading in line and also to see how the firm's US operations are faring. Plus500 has a retail futures business in the States, a sports and events prediction division, alongside a B2B institutional futures infrastructure and operations business.

CMC Markets CMCX LN 

CMC didn't escape unscathed by the fallout from IG's profit warning; its shares lost -5.50% over a couple of days in early October, part of a bigger markdown which saw them lose -15.40% over the last month, though year-to-date they are up by +122.0%. 

Founder, CEO and major shareholder Lord Peter Crudas has bought £1.0 million of the firm's shares in recent days; he already owns some 60.00% of the business, which has a market cap of £ 1.80 billion.

The stock attempted to rally on Monday, 5th of October, trading up by 6.65%, but there was no real follow-through thereafter. 

CMCX is buy-rated among the analysts that follow the stock. 

RBC reiterated its buy recommendation and 760p price target in mid-August; the stock is trading at 658p as I type. The company is due to report on November 26th. 

It recently announced the launch of CMC Funded, a specialist prop trading business, which it hopes will nurture what it calls trading talent. The business will draw on CMC's technology and trading insight. 

As well as wanting to know how the markets business has traded, investors will be keen to hear about developments at CMC Connect and CMC CAPX, which are both B2B businesses within the group. 

In the past, CMC has struggled to contain its cost base, but it should now start to see economies of scale as Aussie bank Westpac migrates 450,000 retail customers and AUD 39.0 billion of assets onto the CMC platform.

CMC continues to diversify both vertically and horizontally with the trading and markets universe, which should differentiate it from its rivals over time.

AJ Bell AJB LN 

AJ Bell is now the largest listed UK D2C investment platform. It will publish a year-end trading update on October 22nd and report its full-year results on December 3rd. 

Its previous trading update was out in early July; among the highlights then were solid customer growth of 39000 in the prior quarter that took total customer numbers to 762,000, an uplift of +5.0% in the quarter and an impressive +23.0% growth on a year-over-year basis. 

Assets under administration also grew strongly YoY by +26.0%, and net inflows were higher by +46.0% in that period.

Deutsche Bank wrote on the stock in September, saying that: “The group continued to report strong D2C customer growth driven by “marketing momentum,” which included a brand refresh, and that the lifetime value of the firm's customers continued to be in excess of the cost of acquisition. 

I would suggest this is the most important KPI in a high-volume financial services business.

Given that positive ROI, or return on investment, Deutsche believed that AJ Bell was likely to increase spending on marketing for 2027, though not at the expense of the firm's internal target of a 40.0% PBT or Profit Before Tax margin.

If AJ Bell can continue to attract new customers and retain healthy pre-tax margins, they could easily justify the bank's 700p price target, vs the current 575p price 

Of course, AJB don't have the field to themselves; Hargreaves Lansdown may be under private equity ownership these days, but it's still active. Aberdeen-owned Interactive Investors is also a threat, and it remains to be seen how Evelyn Group, now part of NatWest, will be able to leverage its access to two private banks and millions of current account customers. 

A|J Bell trades at a forward PE of 17.27 times according to Barchart and has impressive return on equity and return on investment ratios of 59.90% and 43.10%, respectively. 

The share price is up by +124.0% over three years and by +30.00% year-to-date. Earnings growth has been steady rather than spectacular, with revenues and earnings growing by just over +20.0% each over the last five years.

However, if they have found a marketing sweet spot, then those numbers should soon start to tick up. 

Is there a trade in bonds?

While numerous headlines are screaming about the ever-higher government yields, seemingly the trend is losing a bit of steam. 

Very often when a trade is front-page news, it is near some inflection points. The short-bond trade is no different. 

Why? Look the US WTI crude prices. It was the 50% gain there ($70 to $105) which eventually sparked panic selling in the bond market. Recently prices have broken down beneath the neat uptrend support (Chart 1). This suggests gradual waning speculative demand for crude.

Smart investors who anticipated a leap in inflation in the summer would have got in on the short-bond trade and profited massively. But would the same traders initiate the same position in Treasuries now?

I doubt it. Upward momentum is subsiding in energy. Motka city in Yemen is recaptured; key diesel stocks are being released. This may lessen the global inflationary outlook. 

Moreover, yields are hitting the highest level since 90s. Many investors haven’t been offered yields this juicy for many decades and are picking up debt at a good pace. 

The short-maturity debt are particularly in demand due to limited duration risk. 

If we look at US corporate bonds, many have taken a big hit over the summer. The iShares iBOXX $ Investment Grade ETF (LQD) slumped nearly 8 points to trade near its major support level (Chart 2). 

According to the fund’s latest figures, yield of this ETF now topped 6%. This is not too bad a compensation given potential technical support and good-grade corporate issues. 

Of course, one may remember Bill Gross's recent downbeat take on bonds (FT, £): “don’t own bonds, with the exception of one-year Treasury bills, which are now at 4.55 per cent.”

But, another strategist - Robert Buckland - is viewing these chunky yields with keen interest (FT, £):

Investors (In US) can currently sell the S&P 500 on a 1.1 per cent dividend yield to buy future real cash flows via 10-year Treasury Inflation-Protected Securities yielding a real 2.9 per cent.

In other words, investors should probably switch from those high-priced US stocks and replace them with long-term US Treasuries that guarantee good (real) cash flow in the coming years.

There is a potential contrarian trade in the debt market. But, again, this is not for everyone and certainly should not lead to a full ‘all-in’ type position size. The Fed is eyeing more hikes in the horizon.

Unfortunately hyped-up equity investors aren’t really listening. They still locked in that ultra-bullish mode. They look at Microsoft (MSFT) and ask ‘what’s the problem?’ (Chart 3)

In fact, MSFT, META, NVDA - are all nearing their peaks (again). In fact, NVDA just hit new all-time highs this week, pushing its market cap a step closer to $6 trillion. Even SpaceX (SPCX) has rallied 70% from its summer lows.

Meanwhile, semiconductor and memory stocks - as proxied by SOXX and DRAM ETFs - have rebounded back to their summer ceilings.  

These in-demand AI companies are carrying Nasdaq to record highs. And leaves many bearish market forecasters scratching their heads. If Big Techs can withstand 6% rates, can they actually keep going up until yields hit 8%?

That would be quite a spectacle to watch: Gravity-defying tech equities rumble on while investors flee shaky government debt. 

For now, market liquidity remains plentiful, although that may be about to change if rates stay ‘higher for longer’. 

Last week, I mentioned about the potential of a downswing in commodities. This view has not changed. Of course, within the entire sector there are some individual commodities that are going up and some going down. 

For example, palladium is falling into its major support at $1,100 while sugar has broken out to new multi-month highs. (Chart 4) 

If interest rates stay elevated around the world, demand for commodities may contract due to higher financing costs for capital spending and investments. In today’s FT, a big headline reads: “Surge in borrowing costs hit corporate America”. (6 Oct)

But that is a factor to worry in the future. For now, investors are busy at making money from those in-form AI stocks and dumping bonds. For contrarian-minded investors, perhaps buying some bonds on weakness and selling stocks on strength may be a reasonable choice.

Filtronic shooting for the stars

I am staying in the AIM market this week and looking at another very interesting business that is bang on trend; that company is Filtronic FTC LN.

Filtronic is an expert in specialist communications equipment, used in wireless backhaul and satellite communications, aerospace, defence, quantum computing and other demanding applications.

To underline its credentials, the company recently announced it had won a $61.80 million follow-on order from SpaceX, supplementing the original $62.50 million order it won in 2025. 

The new order is for the firm's Cerus E-band gallium-nitride (GaN) solid-state power amplifiers (SSPAs), which boost the power of millimetre-wave signals in satellite/high-capacity comms systems. 

Gallium arsenide offers higher power output, better electrical efficiency, and improved thermal performance than other materials, but these characteristics come at a higher cost; hence the size of the SpaceX orders.

This is exactly the kind of high-quality, value-added manufacturing that’s so beloved by UK politicians but which, in recent times, has become something of a rarity. 

Filtronic employs 236 people; headcount is up by +27.0% over 2025. It has offices in Sedgefield, County Durham, Cambridge, and Maryland, USA. 

Revenue has grown from £25.40 million in 2024 to £55.50 million in 2026 and is estimated to reach £60.00 million in 2027 and £75.0 million in 2028. 

UK Broker Cavendish has a buy rating and a price target of 290p, though that's well below the 335p average price among analysts who cover the stock. German bank Berenberg is targeting 360p. 

Filtronic isn’t just winning orders from SpaceX; last month, it announced an $8.0 million contract win from an unnamed US company, also a follow-on order from a business in the space industry.

Filtronic's equipment also has applications in quantum computing and quantum networking technologies, which at the moment are mainly based in laboratories, but which will surely spin out into the real world within the next decade, providing Filtronic with further growth opportunities. 

Growth, however, has meant added expense for Filtronic, which has meant lower profits as the firm invested in new facilities and engineering capabilities. That meant that cash flow dipped into negative territory, but that's likely to be a short-term blip. 

In 2025, the firm generated £13.80 million in operating cash flow, and it currently has some £12.90 million in cash and cash equivalents on its balance sheet.

Filtronic is best viewed as a small engineer in a niche space, supplying mega-cap technology companies.

Having SpaceX as a repeat customer is a massive vote of confidence in the business; however, it is one that places pressure on management to execute well by turning those and other contracts into sustained high-margin growth. 

One could also make the case that, at a sub £600.0 million market cap and in a high-tech niche, Filtronic could easily be an acquisition target itself.

Performance 

Recent share price performance hasn't been that great, with the stock moving sideways in a band between 195p and 270p since mid-July. 

The good news is that Filtronic is testing above the upper levels of that band, and is printing at 275p as I type. If that can be sustained, then 290p and 300p look plausible upside levels to aim for.

Trading volumes are bigger than you might imagine, and we saw more than 5.0 million shares change hands in the first two days of October. Over the last month, the stock has rallied by +26.80%.

You get a flavour of the growth that the stock has been capable of in the past when you look at the 3- and 5-year performance numbers, which are +1627.0% and +2390.0%, respectively. 

Overall rating: 3.5/5.0

Pros: Enjoys a niche position in the supply chain of a rapidly growing market. 

Is winning high-value repeat contracts from the space industry. The firm's valuation and specialist engineering talents make it a potential bid target.

Cons: It's often difficult for small companies to meet the exacting standards of multinational/mega cap customers, and far too easy for them to become focused and reliant on those customers.

Scaling Filtronic might be beyond the capabilities of its current balance sheet and management team and could require further investment and reduced profitability/cash flow.

Technical overview 

Filtronic stock has recently been through a period of consolidation; however, it is now testing higher, and that's reflected in the MA crossover in the chart with the faster-moving 10-day moving average crossing up through the slower-moving 50-day line, albeit with a fairly shallow trajectory. We might see that steepen if the price establishes itself above 270 /75, from where we could look for a retest of 280p and the three-month high at 290p. 

Looking at the stats for Filtronic, the fact that it has posted 28 new year-to-date highs suggests that the move higher is possible. Though it may take an additional catalyst/news to get things moving 

Rating: 3.50/5.0

Fundamental Overview 

The fundamentals for Filtronic don't look that good at first glance, because it's going through a transition that involves investment and expansion, with lower profits brought about by higher R&D spend, a larger engineering team and increased business development costs. 

Space dominates the firm's revenue, accounting for £42.10 million of the £55.50 million generated this year. Concentration, yes, but spending on satellite comms is expected to reach $40.50 billion by 2030, so it's right for Filtronic to prioritise this channel, not least because the new investments will allow the firm to grow revenues to as much as £200.0 million.

Management estimates that each new production line, which costs £750,000 to install, will allow an additional £15.00 million of turnover, potentially offering a very lucrative return on investment. 

Three words sum up what's needed at Filtronic: execution, execution, execution. 

Rating: 3.50/5.0

My Pick of the Best Obesity Drug Stocks 

The global market for weight-loss/obesity drugs is projected to see huge growth over the next decade. According to Morgan Stanley, it could be worth $150 billion by 2035 versus around $45 billion today. 

Interested in buying some weight-loss drug stocks for your portfolio to capitalise on the growth of the market? Here are five names to check out. 

Eli Lilly

It’s hard to talk about obesity drug stocks and not mention Eli Lilly (LLY:NYSE). It’s the undisputed market leader today. 

Its main products are Zepbound (which is prescribed specifically for chronic weight management) and Mounjaro (prescribed for Type 2 diabetes), both of which are based on the drug tirzepatide. Zepbound is the more potent of the two – it can lead to around 20% body weight loss. 

Thanks to the popularity of its weight-loss drugs, Eli Lilly has grown at a rapid clip in recent years. Between 2020 and 2025, its revenue climbed from $24.5 billion to $65.2 billion – a compound annual growth rate (CAGR) of around 22%. 

Analysts expect the growth to continue in the years ahead as more people turn to weight-loss drugs. For 2026 and 2027, revenue forecasts are $88.7 billion and $102.3 billion. 

In recent years, this stock has been quite expensive, often trading with a price-to-earnings (P/E) ratio of near 50. Today though, its P/E ratio is just 24 (using next year’s earnings forecast). 

I like the stock at that earnings multiple. With revenue rising rapidly, and a number of new weight-loss products in development, I see considerable long-term potential here. 

Novo Nordisk 

Another major player in the weight-loss drug space is Danish company Novo Nordisk (NVO:NYSE). It’s the maker of Wegovy (prescribed for weight loss) and Ozempic (prescribed for Type 2 diabetes), which are based on the drug semaglutide, and can help users lose up to 15% of their body weight.  

A pioneer in weight-loss drugs, this company was previously the market leader. However, in recent years, it has been eclipsed by Eli Lilly, whose drugs have become more popular (due to their superior weight loss efficacy). 

This is reflected in its revenue trajectory. After surging from DKK 127 billion in 2020 to DKK 309 billion in 2025, revenue is expected to dip to DKK 302 billion this year. 

In other words, growth has completely stalled. That’s not ideal from an investment perspective. 

That said, this stock is very cheap today – currently it trades on a P/E ratio of just 11. It also offers a near-5% dividend. 

So, it could be worth considering as a value/income play. With the company developing a new weight-loss product called CagriSema, there’s still plenty of potential here.  

Amgen

Amgen (AMGN:NASDAQ) is a diversified biotech company that offers a range of different medicines. In the weight-loss space, it’s developing a product called MariTide, which is currently in Phase 3 trials. 

The key advantage of this treatment is a less frequent dosing schedule – users can take it monthly or quarterly. That compares to weekly injections for products like Zepbound and Wegovy. 

Note that Phase 2 data showed participants achieving up to 20% average body weight loss at 52 weeks in adults without Type 2 diabetes. So, it appears to be a competitive option in the weight-loss landscape. 

In terms of timelines, if Phase 3 trial data (expected late 2026/early 2027) continues to show positive safety and efficacy, Amgen is expected to file for FDA approval, targeting commercial availability in 2027/2028. So, we could see this product on the market soon. 

This stock looks good from a technical perspective. Right now, it’s in a strong uptrend above, and trading above both its 50-day moving average and its 200-day moving average. 

The valuation is reasonable – the P/E ratio is about 18. A dividend yield of 2.4% adds weight to the investment case. 

Viking Therapeutics 

In the small-cap space, a name that could be worth checking out is Viking Therapeutics (VKTX:NASDAQ). It’s a clinical-stage biopharmaceutical company that is developing both an injectable weight-loss solution (currently in Phase 3 trials) and an oral tablet (in Phase 2). 

These products are based on its drug VK2735. This is a dual agonist targeting both GLP-1 (glucagon-like peptide-1) and GIP (glucose-dependent insulinotropic polypeptide) receptors – the same dual-mechanism approach behind Eli Lilly’s highly successful drug tirzepatide (Zepbound/Mounjaro).

Now, this stock is far riskier than Eli Lilly, Novo Nordisk, and Amgen, because today Viking does not have any revenues or earnings. But it could be worth considering as a speculative play. 

In clinical evaluations, VK2735 demonstrated up to 22% weight reduction without reaching a clear efficacy plateau – matching/exceeding metrics set by Eli Lilly’s tirzepatide – so Viking could capture market share if it can get its products to market. Meanwhile, with a market cap of just $4.1 billion, it could be a buyout candidate.

Hims & Hers Health 

Finally, another way to play the obesity drugs theme is Hims & Hers Health (HIMS:NYSE). It's a major direct-to-consumer digital health platform that has expanded heavily into weight management.

Through its platform, users can obtain personalised weight-loss subscriptions that include access to both branded GLP-1 injections and compounded semaglutide programs alongside non-GLP-1 oral medications. So, it’s essentially a ‘picks-and-shovels’ play on weight-loss drugs – no matter who has the best products it can prosper from the growth of the industry. 

Thanks to its subscription model, this company is growing quickly. This year, its sales are projected to hit $3.2 billion, up from $872 million in 2023.

Looking ahead, management is targeting $6.5 billion in annual revenue by 2030. So, the company is clearly expecting to see strong growth in the coming years. 

On the downside, the company is not expected to be profitable this year as a push into branded GLP-1 drugs has hit margins. This lack of profitability adds risk to the investment case. 

However, with the stock trading on a price-to-sales ratio of just 2.6, I think it’s worth a look. Taking a long-term view, there appears to be quite a bit of potential.

Is the commodity cyclical upswing into its last legs?

This view, for obvious reasons, is highly contrarian.

A potential debt turmoil is making heavyweights like Ray Dalio (of Bridgwater fame) and Grantham (from GMO) to recommend gold in their portfolios.

Deteriorating fiscal positions of many governments, US included, is raising fear of a credit crisis. Last month, America’s debt pile punched through the $40 trillion ceiling. More worryingly, across OECD nations annual interest payments alone now suck more than $2 trillion from government budgets (3% of GDP). These are undoubtedly massive numbers.

Spiking bond yields is validating this downbeat view. US, UK, EU and Japan 10-year bond yields are sitting tightly at new multi-year highs. 

Gold is therefore one of the monetary assets to hold when the financial world is careening into a solid debt wall. 

That said, gold prices are surprisingly weak right now. 

The metal has dipped back down into the $4K support band. Silver is too weighing into the $60 floor. Both remained far beneath their 1-year highs. (Chart 1)

What’s causing gold to perform poorly? One reason is the rise in yields. At 5-6%, savers are tempted to put some of their capital to work in government debt. Not a totally risk-free trade, but at least it generates some decent cash flow. 

Moreover, after phenomenal multi-year bull run, gold and silver look tired and are losing momentum. Silver’s fantastic 4x run (from $30 a troy ounce to $120) was clearly unsustainable. Now, investors are waiting to see if these metals can stabilise at current prices. 

And if we cast our eyes across the commodity space, weaknesses are emerging in a few commodity-linked equity sectors. 

Uranium, for example, is heading into a correction territory after enjoying a boom earlier. Global X Uranium ETF (URA) is testing weekly support after failing to progress for a whole year.

Lithium equities (proxied by Global X Lithium ETF, ticker: LIT) are heading towards support as well as bulls dumped shares. 

For rare earth stocks, the subject of intense negotiation between US and China, their prices are not doing well. The VanEck Rare Earth/Strategic Metal ETF (REMX) has slumped by more than a third since the summer. 

The gold/silver miners are currently weighed down by the current corrective forces in the precious metals. VanEck Gold Miners (GDX) had a really good bounce over the summer but is failing at the prior peak. 

A similar chart pattern is noted for the Global X Silver Miners (SIL). 

Thus with many commodity sub-sectors stalling, the risk of a further commodity downturn is not to be ruled out, especially if the rocketing borrowing cost deeply damage investor sentiment.

Bull case for commodity remains strong

Commodity bulls, however, will vehemently disagree with this negative assessment. 

For one, big miners are holding on to their long-term price uptrends. Miners such as BHP (BHP), Rio Tinto (RIO), Glencore (GLEN), AngloGold Ashanti, Southern Copper (SCCO), Freeport McMoran (FCX) et cetera are continuing their cyclical rallies. 

Freeport and Southern Copper, for instance, just established new price highs last month. 

The Bloomberg Commodity Index is too flirting with new cyclical highs (Chart 4).

Not only that, these heavyweights mining companies are continuing to throw out excellent financial numbers, resulting in market-pleasing share buybacks and dividends. 

The dip in share prices mentioned above is only happening in smaller miners and not these established, geographically-diversified mining mammoths. Shares of smaller miners are always volatile and should not be representative of the mining industry. 

Furthermore, look at crude oil. Prices are bouncing around triple-digit levels due to heightened geopolitical tensions. How can the commodity upswing be almost over when oil prices may surge higher? 

The last condition concerns the deployment of capital into AI infrastructure build-out. A tsunami of capital is creating new datacentres at an unprecedented pace. The demand for essential commodities like copper is rising and exhausting supply.  

The premise of a fading commodity upswing is thus a weak one. 

Concluding remarks

When the consensus is stacked firmly to one side (the bull case) and a large number of securities are seeing a decimation in their share prices, something is not right.

Either the corrective forces in smaller miners will ripple to larger miners, or these languishing miners will recover and return to new highs.

Randomness in financial markets means either path is possible. 

The dominant market factor now is the persistent jump in bond yields. This alone is dragging gold prices lower, making AI investment more expensive and unsettling markets. The capacity of a market correction should not be underestimated if yields rise uncontrollably.

Don't forget that if oil jumps to $150 a barrel, it will drag economic growth, dent commodity demand and increase downside risk on commodity stocks.