MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK financial pages.
Three to buy
The online retailer’s announcement that it needs to boost spending on logistics and distribution didn’t go down well with the stockmarket, but may offer a buying opportunity. Some will argue the Aim-listed giant is still pricey at more than 60 times this year’s earnings, but that’s because the shares represent a “compelling play” on clothing’s “channel shift to the internet”. There is still plenty of market share to win globally. Those with a long-term view should buy into this “highly profitable business”. 6,122p
The Sunday Telegraph
This website’s “fast, affordable fashion” for the 16- to 30-year-old demographic once convinced the City it “had another Asos on its hands”. But with expectations so high, a minor disappointment about margins triggered a harsh reaction, and the shares are down more than a third since September. That fall looks overdone, and the recent gloom over retail stocks might shake out weaker competition and open the way to a bigger slice of the market. The shares are still not cheap, but “Boohoo looks to be back on trend”. 154.25p
The Mail on Sunday
Bank lending to small and medium-sized businesses has almost halved since the financial crisis, forcing entrepreneurs to look elsewhere. One solution is royalty financing: firms borrow from specialist lenders and pay a share of their annual revenue in return. This practice started in the mining industry, but outfits such as Duke are now taking it into the technology and leisure sectors. A skilled management team is tapping into latent demand for such finance and the shares offer an attractive dividend yield of 5% or more. 39p
Three to sell
This gold and copper miner is facing questions about its future, but the answers are outside its control. It was hit by an export ban in Tanzania last year, forcing it to mothball a mine and suspend its dividend. A resolution to the dispute – which included demands for payment of a $190bn tax bill – is still up in the air. Acacia is pinning its hopes on aligning its interests with the Tanzanian state by letting it take a stake in the business. Sell. 134.75p
The FTSE 250 owner of Clydesdale Bank and Yorkshire Bank has become the latest institution to warn that it faces more payment-protection insurance (PPI) compensation costs, forcing it to set aside a £350m contingency fund. The bank’s biggest problem is that it is focused on Scotland and Yorkshire, regions with less affluent consumer bases than the challenger banks that have set up in England’s southeast. The group’s “anaemic returns” mean investors should look to bigger high-street banks for a decent dividend. 288.75p
Investors can no longer forgive TalkTalk’s “multitude of failings” in the wake of a profit warning earlier this year. Rising competition in the telecoms market is making customer retention more difficult, yet TalkTalk is still sticking with overambitious growth forecasts that are only likely to generate more disappointment down the line. The company’s high debts are also reducing room for manoeuvre and there’s a risk the dividend might be cut completely before too long. 121.5p
… and the rest
The Daily Telegraph
Tesco’s recent recovery has confounded critics and the benefits of its £4bn takeover of Booker are still to feed through (236p). Specialist drugs maker Shire is cheaper than its peers and now has takeover interest from Japan’s Takeda (3,622p).
The global economy is enjoying synchronised growth, and international recruiter Robert Walters is “storming ahead” (708p). Elecosoft has transformed itself into a focused construction-software group and offers a fast-growing dividend (54p). Barclays’ plans to more than double its dividend this year make it an excellent income play (215p). WPP is being hammered by digital marketing and Martin Sorrell’s departure only makes things worse – sell (1,113p).
Now is the time to buy into over-50s travel and insurance specialist Saga – full-year results show it remains an excellent income investment (127.25p). IT projects specialist SciSys is winning back the market’s favour and could be in line for a re-rating (139.5p). Uncertainty about Brexit talks has weighed on Eddie Stobart Logistics, but Shares magazine feel its prospects are underrated (136p). Shares in software business Sage have tumbled on news of weak sales, but Shares thinks the management still deserves the benefit of the doubt (597.75p).
Amazon prime memberships are rising faster than expected, catalysing further growth across the business ($1,557). A “spectacular rally” since last November makes now the time to take profits on streaming giant Netflix ($337.75).
A German view
Business is booming at Hella, a German car-parts supplier. In the past five years, net income has almost doubled to €400m, and growth shows little sign of slowing. Hella is profiting from the expansion of the global car market as well as trends within the industry, says WirtschaftsWoche. The core division, headlights, is doing well out of the ongoing switch from halogen lights to light-emitting diodes (LEDs), which applies to conventional, hybrid and electric cars. Automotive electronics is another growth area, and here Hella’s emphasis on energy efficiency and safety is paying off. The balance sheet is healthy, while the stock’s valuation on a price-earnings ratio of about 16 is reasonable.
Vaping and battery business Supreme Imports has announced plans to go public on Aim, London’s junior stock exchange, in May, in a float that could value it at £150m. The Manchester-based firm owns the Kik and 88Vape brands and sells batteries and lightbulbs to retailers such as Asda and Aldi. Supreme also makes three million bottles of e-liquid every month and sells kits and vaping accessories. The money from the float will be used to repay £5m of bank debt and fund expansion of its e-liquid manufacturing facility in Manchester. In the year to March 2017, it made a £6.9m pre-tax profit on revenue of £71m.