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Margins are tightening in heavy-adverse battle

Managing director Jonathan Naylor claims high-risk borrowers are paying too little in the fight for market share which means margins are tightening for some lenders.

Rooftop pulled out of the heavy-adverse sector last year although it is likely to make a return at some point but only after a detailed analysis.

Naylor says: “We moved out of high adverse as we felt some of the criteria were wrong. It was too competitive and the margins were coming down when the quality of the risk did not match it. With the typical products we were competing against, the type of client and the price did not match.”

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Apple: a stellar technology story

By Ali Unwin, head of technology sector research

Apple recently announced the highest-ever recorded quarterly net profit ($18bn), with the sale of 74.4 million iPhones helping the company deliver $74.6bn of revenue for the quarter ending December 2014. These sales were largely driven by strong demand for the new iPhone 6 and iPhone 6 Plus. Highlights included Chinese iPhone sales doubling year-on-year and unit growth of 44% in the US — supposedly a well-penetrated market. Apple ended the quarter with $178bn in cash on its balance sheet, having generated a staggering $30bn in free cash flow during the quarter.

At Neptune, we have been long-term believers in the Apple story, and continue to hold the stock in a number of our portfolios based on the company’s long-term growth prospects. This is predicated on our belief that Apple has proved thus far that it can — unusually for a consumer electronics company — maintain high margins for a sustained period of time, even as adoption of new technology slows down and competitors produce similar-specification products.

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