The best share tips of the week

published 23 December 2016

Three to buy

Lok'nStore

Investors Chronicle

The limited supply of self-storage units in the UK has enabled Lok'nStore to grow occupancy rates and raise prices. It is funding expansion and costs have been "tightly managed", which reduces risk. With US operators looking to enter the UK, it could also make a "good bite-sized acquisition" for any new market entrants. (409.5p)

Sports Direct

Shares

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Half-year results at the sportswear giant were "dire", with a 57% slump in pre-tax profit. But negative sentiment looks overdone. Whatever its difficulties, Sports Direct is the UK's price leader and has growth potential in Europe. Risk-tolerant investors might see the "beaten down" price as a good entry point. (282.5p)

Redde

The Times

Redde looks after customers after a breakdown or crash and ensures that they get a replacement vehicle. It is expanding quickly, with organic growth of 28% in the year to June. With no debt and a forward dividend yield for this year of 6.7%, it is one of the better high-yield picks on the market. (154.75p)

Three to sell

Rio Tinto

The Sunday Times

The miner has had a "weird year". Its shares have doubled since January on soaring commodity prices, but it is mired in a bribery scandal involving its two most recent CEOs. The lawsuits and investigations will be "a huge distraction" with the possibility of "more muck" surfacing. And, with predictions of a slowdown in Chinese steel demand, profits could soon be hit. 3,091p

BAE Systems:The Daily Telegraph

Shares in the defence giant have risen 34% since August last year, but they don't look such a bargain any more. Fund manager Alex Wright of Fidelity points out that the terms of BAE's pension scheme mean it may have to "significantly increase its cash contributions", leaving less for shareholders. Given the risks, "bank your gains and reinvest" the proceeds elsewhere. 597.5p

Somero Enterprises:The Mail on Sunday

Shares in Somero, which makes machines used to ensure that concrete floors are flat, have risen more than 70% since January. Three-quarters of revenues come from the US, and a strong dollar and hopes of a building boom under the Trump administration have driven shares higher. But investors "would be wise to sell" 30% to 50% of their stake and "bank some profit now, while the going is good". 230p

And the rest

The Daily Telegraph

Multi-utility supplier Telecom Plus looks well placed to capitalise on the UK's fragmented energy market (1,196p). Hurricane Energy's oil operations in the North Sea may appeal to "risk-tolerant investors" (42p). Fox News's bid for Sky faces obstacles, but the broadcaster is attractive even if it fails (988p).

Investors Chronicle

Asset manager Schroders has defied post-referendum gloom to keep winning new business (2,902p). Berkeley Energia's mining operation in Spain is the safest way to capitalise on rising uranium prices (47p). It's been a tough year for pharma, but Shire's strong drugs pipeline means a recovery is in the works (4,343.5p).

Online electrical retailer AO World should deliver "festive cheer" with its third-quarter results in January (184.5p). Credit bureau Experian is "one of the UK's finest businesses" (1,500p). Analysts are upgrading earnings forecasts for TV technology firm Amino Technologies (175p). Events company Tarsus has made an interesting $57m deal in the US (264p).

The Times

Packaging supplier RPC has a good track record of getting value out of acquisitions (1,051p). Micro Focus's $8.8bn purchase of Hewlett Packard Enterprise could bring big rewards (2,219p). Burford Capital is a key player in the growing market for litigation finance (562p).

IPO watch

Diversified Gas & Oil owns and operates 7,500 conventional wells in America's Appalachian basin, covering Ohio, Pennsylvania and West Virginia. It produces 4,400 barrels of oil equivalent (boe) a day from its proven reserves of 24.1 million boe, with a production cost of under $10 a barrel. The firm has expanded rapidly in the last two years, using debt to acquire low-risk gas and oil assets from energy majors that are moving on to unconventional oil and gas assets, and has a strong pipeline of similar assets available. It hopes to generate significant cash flows and establish a progressive dividend policy for investors. It is raising $60m on Aim to strengthen the balance sheet and fund acquisitions. Trading is expected to begin on 30 January.

A German view

Daimler is firing on all cylinders. The German manufacturer of the Mercedes-Benz brand reported a 9% rise in profits to €2.6bn on a 4% increase in sales in the three months to the end of September. Business in China, the world's biggest car market, looks especially promising, with sales up 28% year-on-year. That bodes well for Daimler's attempt to build a fleet of electric vehicles there, as Wirtschaftswoche points out, while Daimler's partnership with local carmaker BAIC should also stand it in good stead. The Chinese authorities are keen to promote electric cars to cut pollution. Mercedes aims to have more than ten models of all-electric vehicles in its portfolio by 2025. Meanwhile, the stock looks reasonably valued on a price/earnings ratio of 8.5 and it has a dividend yield of 4.5%.