Share tips of the week
MoneyWeek’s comprehensive guide to this week’s share tips.
Three to buy
The company provides emergency insurance cover and repair services to households in the UK, Europe and North America. Its fast-growing Home Experts platform, which connects householders with tradespeople offering repairs and improvements, offers exposure to a market worth £400bn. UK prospects are underwhelming, but overseas growth more than makes up for the domestic disappointment. The recent share-price fall is a buying opportunity. 717p
Demand for new houses is as strong as ever, but the investment case for housebuilders is "muddied" by concerns that their "margins may have peaked". That's why brickmakers look a better bet, with Michelmersh the pick of the three listed in the UK.
Not only does the firm trade on a lower earnings multiple than its peers, but it also appears poised to deliver significant growth in earnings and cash flow this year. Michelmersh should also be able to expand its profit margins as demand for bricks outpaces supply and industry stockpiles fall. 84p
Primary Health Properties
The Mail on Sunday
One way to reduce the pressure on hospitals is to increase the role played by GPs, but only a third of England's 7,500 GP practices are equipped to offer services such as blood tests or minor surgery. This firm, which rents out over 300 purpose-built healthcare sites, is part of the solution to that problem. It is currently raising £100m to expand its estate through a new share placing at 108p each, making this an "ideal time to buy in". 110.25p
Three to sell
The Daily Telegraph
This outsourcer's share price has been "crushed" by a combination of "thin margins, problematic contracts" and "above all, lofty debts". News that lenders are giving the business some breathing space and that private-equity outfit Emerald is buying up its debt reduces the risk that the firm will go the same way as Carillion. Nevertheless, don't be misled by the mini share-price rally. Any refinancing is likely to dilute the equity of existing shareholders, while the business still faces "huge challenges". 92.5p
With high-street conditions worsening, investors would do well to sell out of this small cap. Recent updates from home-improvement peers Kingfisher and Carpetright suggest that trading conditions are still challenging, with the latter's share price hitting new record lows last month. Some might be tempted to hang onto Topps Tiles for the 4.4% dividend yield, but with a "patchy" revenue outlook and mounting debt another dividend cut could be in the pipeline. 80p
UK Oil & Gas Investments
UKOG listed on Aim in 2013 and has a track record of hyping oil finds that then turn out not to be commercially viable. In 2015 it said that data from the Horse Hill well in Surrey aka the "Gatwick Gusher" suggested there could be 100 billion barrels of oil in the Weald Basin in England. However, today production is still "negligible", and UKOG has been forced to seek repeated cash injections from investors. 1.25p
... and the rest
The Daily Telegraph
A weak pound is encouraging foreign buyers to snap up UK engineers Morgan Advanced Materials, a world leader in ceramics, carbon and composites, could be next (319p). Majestic Wine is recovering after a few difficult years and its online operation is growing fast (389.5p). The City cannot agree whether pub owner Greene King can ride out the consumer slowdown, but with the shares down to eight times next year's forecast earnings they appear cheap enough to warrant another look buy (509.5p).
Shares in pharma group Clinigen are "too cheap", given the firm's strong balance sheet and excellent earnings-growth prospects (897p). Gold miner Caledonia Mining should benefit from a more stable political backdrop in Zimbabwe (538p).
Document management and office removals business Restore is in a "sweet spot" as industry prices rise for the first time in more than a decade (507p). Agrochemicals play Eden Research should appeal to "patient microcap punters" (8.25p). Gaming-machine platform supplier Quixant was hit by the stockmarket sell-off, but has started to recover after a "super set of full-year results" (410p). Mobile advertising platform Taptica has had a "rocky start" to 2018 owing to fears of tougher regulation, but its acquisitions war chest bodes well for future growth (370p).
AG Barr, the drinks group behind Irn-Bru, has reformulated its brands ahead of the new sugar tax, while giving the dividend an 8% boost (630p). Niche products distributor Diploma is a well run, cash-generative business that may soon start looking for a company to buy (1,157p).
A Swedish view
Swedish lift manufacturer Alimak is acquisition-hungry, says Affrsvrlden. It's been just over a year since it confirmed the biggest acquisitions of its 70-year-long history: Denmark's Avanti Wind Systems and Australia's Facade Access Group. Although they seemed expensive then (a total of 1.7bn kronor), the strategy has been a success. Its turnover doubled last year while organic growth rose 9%.
This year seems promising too. In the last quarter of 2017 Alimak won a contract in Australia worth 170m kronor its biggest project so far. A few weeks ago the customers behind a 369-metre high skyscraper complex in China also chose Facade lifts from Alimak. The shares trade on a forecast p/e of 22.
Britain's first medical-cannabis investment business, Sativa Investments, floated on London's Nex stock exchange last week. The firm raised £1.1m through the float, which gives it a value of £4m. Sativa was founded by serial entrepreneur Geremy Thomas, who told The Daily Telegraph it would enable UK investors to capitalise on the "massive growth potential" of medical cannabis despite the products being all but banned in Britain. Analysts expect cannabis sales will overtake beer in California next year following its legalisation for recreational as well as medicinal use at the start of this year.