With the Autumn Budget due tomorrow (26 November), markets are trying to assess what might happen to the fortunes of UK companies.
That has already been happening for months. I expect some companies may see a notable impact on their share price when the Budget is announced.
Here are three of them.
J D Wetherspoon
Pub operator J D Wetherspoon (LSE: JDW) is well-known for its cheap beer and spirits prices.
Read many of its financial reports though, and it becomes clear that the company reckons those prices could be even lower were not for the phalanx of duties and taxes it has to pay.
One of its particular bugbears is the differential between the taxes levied on an alcoholic drink purchased in a pub and the same tipple bought in a supermarket.
Given the government’s stretched finances, it may seem unlikely that the Autumn Budget will see any significant reduction in alcohol duties or VAT.
Still, any big move on booze duties and taxes could move the Spoons share price, in my opinion.
AJ Bell
Over the past year, financial services provider AJ Bell has seen its share price move up by 8%. But with a lot of speculation about potential changes to ISA allowances, the AJ Bell share price has fallen 7% over the past month.
If the Autumn Budget makes significant changes to the rules around Cash ISAs or Stocks and Shares ISAs, that could push the shares of ISA providers like AJ Bell up or down.
As a Stocks and Shares ISA investor, I will also look out for any such changes!
Taylor Wimpey
Another area that may be of interest when assessing the Autumn Budget is housing. Housing affordability and availability is on the government’s radar and it is something that past Budgets have sometimes addressed.
If the market reckons that any Budget moves could help push up housing demand, that could be good news for builders including Taylor Wimpey.
The company’s current 9.2% dividend yield is certainly juicy, but what the dividend looks like in future will depend partly on the company’s sales numbers and average selling price.
Looking to the long term
But while I think both AJ Bell and Taylor Wimpey could potentially see their share prices affected by the Autumn Budget tomorrow, that does not affect my plans. I have no intention of buying either share.
I do already own shares in J D Wetherspoon. Again, the potential for Budget moves to impact Spoons’ share price has no bearing on my plan to keep holding the shares I own, without buying any more for now.
That is because I am a long-term investor.
Tax changes can be significant for a company over the long term. But trying to predict short-term share price moves due to government policy announcements strikes me as trading, not investing.
Rather than do that, I prefer to take a long-term view that includes possible risks (or business boosters) such as tax changes.
Wetherspoon has a proven business model, loyal customer base and economies of scale. But taxes and other costs have eaten into demand for pubs. That is a risk for Spoons, although with its low-cost model it may also present the opportunity to pick up some market share as rivals shut pubs.
