MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK’s financial pages.
Three to buy
The Mail on Sunday
Banks are weighed down by more than £800bn in non-performing loans. One solution is to sell them off in batches at a big discount – typically for 10p in the pound – to a specialist who can try to recoup more of the debt than the banks can. Arrow works across Europe to track down debtors and develop long-term repayment plans, work that requires a mixture of financial acumen, good relationships with banks and empathy with debtors. The shares are a “bargain” at the current price and the dividend is also attractive. 278.5p
The Daily Telegraph
This property group disappointed shareholders during its old incarnation
as Development Securities, after a post-financial-crisis fundraising failed to deliver the hoped-for gains. The fund now has a new strategy and management. Its big projects in Manchester, Oxfordshire and Westminster are benefiting from calls for more affordable housing and a new enthusiasm on the part of austerity-hit councils for releasing land for development. Buy before the market spots its improved prospects. 234p
This “hidden gem” provides services to the pharmaceutical industry – it runs clinical trials, conducts data analysis and monitors the performance of already-approved drugs. This is a fast-growing market –regulation is boosting demand for its services and customers typically stay loyal once signed up. Profits should soar over the next two years. Fund managers are starting to wake up to its potential. 227p
Three to sell
Most of this private hospital group’s 75 hospitals and 28 clinics are overseas in South Africa, Switzerland and the UAE, though it does have a near-30% stake in the UK’s Spire healthcare. The shares have fallen by almost 10% following results that showed a turnaround in its Middle Eastern operations but “sickly” trading in Switzerland, which accounts for almost half of group revenues. A new boss will take charge in June, but it remains to be seen what he will prescribe. Sell. 615.5p
The Sunday Times
Shareholders in this water utility must rue the day back in 2013 that the board rejected a £22 per share takeover offer from a Canadian consortium. Today the business faces a more hostile regulatory environment and a Labour party that wants to see its operations nationalised. The firm is close to relegation from the FTSE 100 following recent share-price falls and the management team has drawn “a target on its own back” by promising inflation-busting dividend hikes at a time when regulator Ofwat is getting tougher on the industry. Avoid. 2,088p
The telecom giant’s new Fixed Low Price Plan (FLPP) helped attract 192,000 new customers in the year to March 2018. But the new clientele are bringing in less revenue, contributing to a 4% fall in headline revenue. Add in more marketing expenditure and restructuring costs and full-year profits fell 35%. This has left the dividend looking exposed and debt too high, and on a forward price/earnings ratio of 24 the shares aren’t even that cheap. 126p
…and the rest
The Daily Telegraph
Recently listed niche lender TruFin promises to serve up some “fintech stardust” (214p).
National Grid’s 5.5% forward dividend yield makes it a solid income stock (887.5p). Keystone Law went public last November and is attracting high-calibre lawyers to sign up to its platform (300p). Medical marketing is a niche market with high barriers to entry, which should drive continued momentum at public relations firm Huntsworth (96p). A diverse range of tenants reduces risk at regional office investor and developer Circle Property and the shares are trading on a big discount (157.5p).
Keep buying insurer Aviva as it builds a strong position in the burgeoning bulk annuities market (550p). Niche publisher Future is monetising its products via e-commerce and digital advertising (520p). Construction products firm SigmaRoc has underperformed, but a consolidating market means that patient investors should be rewarded (38.75p).
It will only be a matter of time before profits from emergency home insurance and repairs firm Homeserve’s US business outstrip those from its UK operation (851p). Babcock has been “unfairly tarred” by the failings of other outsourcers, leaving the shares attractively priced (784p). Chilled foods supplier Bakkavor’s sell-by-date looks “some way off” – keep buying (198p). Shares in Halfords have risen since the announcement of a new boss last September but the retailer looks like it has hit “peak bike” – take profits (344.75p).
A Swedish view
Pandora, the world’s biggest jewellery group in its price category, has had a tough start to 2018, says Affärsvärlden. Sales growth in the first quarter came in at 6%, down from 20% the previous quarter. This was due to business stagnating in China, where the Danish firm has failed to promote itself on the country’s most popular mobile platforms, even as a huge black market trade in its goods shows healthy demand for the brand. Profit margins fell to 32.6% from 36.4% a year earlier, due to increased spending on marketing and store openings. However, the fundamentals are sound. So even if growth slows and profitability slips, the share price looks cheap – it currently offers a dividend yield of 5.45%.
Dutch payments business Adyen has confirmed plans to list in Amsterdam next month with an estimated valuation of between €6bn and €9bn. The 12-year-old unicorn (that is, an unlisted company valued at more than $1bn) provides the payment technology behind multinational companies like Spotify, Uber, Airbnb and Netflix. This year, e-commerce giant eBay ended a 15-year-long partnership with PayPal and replaced it with Adyen as its primary payments provider. In the year to 31 December, Adyen processed €108bn worth of transactions, up 63% from 2016. As a result, revenues grew by 38% to €218m during the same period.