Three to buy
The Sunday Telegraph
A no-deal Brexit could increase vehicle prices by an average of £1,700, while the weak pound makes imported cars pricier. Nevertheless, Auto Trader took advantage of its commanding position in the vehicle market to boost top-line sales 7% last year. The firm has a hand in ten million transactions each year and hopes to keep growing through new ventures in car finance and vehicle wholesale. The shares aren’t cheap but “chunky margins” and pricing power mean there should be “more in the tank”. 464.3p
This construction industry technology supplier operates mainly in the UK, Germany and Sweden, where its software helps builders with computer-aided design, engineering resource planning and cost tracking. The £6.3m acquisition of post-construction specialist Shire Systems in July should “really move the earnings needle”.
A high proportion of revenues are recurring. 82p
Trifast manufactures nuts, bolts and other fasteners for use in cars, washing machines and telecommunications equipment. These are cyclical sectors that could be hit by another downturn, but Trifast is in better shape to weather adversity than it was during the 2008 crisis. Acquisitions have diversified its product mix, while a presence beyond Britain helps too. Highly profitable widgets also support margins. A strong corporate culture of “continuous improvement” and investment in employees make the shares a buy for the long term. 209p
Three to sell
Dairy Crest is best known for its Cathedral City cheddar.
It also makes butters, spreads and uses whey by-products to produce an ingredient for infant-formula milk, which is particularly popular in Asia. Yet despite these multiple business lines, the shares have been in decline for the past two years due to debt worries. That debt is now falling but a rising milk price and slow progress in getting new products to market will continue to weigh on the shares. 466.75p
Phoenix Global Resources
Those impressed by the success of US shale operators are hoping that this Argentina-focused explorer can strike it rich with the Vaca Muerta shale basin at the northern edge of Patagonia. The firm is already pumping more than 10,000 barrels of oil equivalent a day. But much more cash-intensive work is needed to develop the field and a worsening Argentine economic backdrop means you should take profits now. 22.7p
This mining giant operates in 35 countries and saw revenue top $40bn last year. The dual-listed business (it is also quoted in Australia) has outlined the terms of a plan to return $3.2bn to investors through a share buyback. Somewhat surprisingly, the shares have fallen 6% since the plan was announced in August, a reminder that miners are always hostages to commodity price trends and wider political events. A new investment drive in Australia and Mongolia is already in the price. Investors should steer clear. 3,817p
…and the rest
Short-term negatives are distracting investors from the big picture as engineering consultancy Ricardo taps into the electric-vehicle and renewable energy trends (824p). Diversification efforts at specialist asset manager Polar Capital have been rewarded with six consecutive quarters of net inflows (612p). Secure Income REIT is “unlikely to set the pulse racing”, but its high-quality property portfolio offers a “very secure income stream” (393p). Governance, risk and compliance software specialist Ideagen is growing at a healthy clip and developing a presence in America (173p).
The Mail on Sunday
Cakes and bread maker Finsbury Food has been hit by the soaring cost of ingredients, but annual results show profits up and management has increased the dividend by 10% – existing shareholders should hold and “new investors could also find value” (122p). The worldwide video-games market is worth £90bn and expanding fast – buy Sheffield-based developer Sumo Group to tap into the trend (164p).
The Daily Telegraph
A recent share-price slide means it is “time to tuck into” sausage-skin maker Devro (199.6p). Whitbread’s ownership of the Premier Inn hotel chain means that it is still a terrific business in the wake of the £3.9bn sale of Costa to Coca-Cola (4,721p).
The Pacific trade war is likely to open new opportunities in the Far East for pork producer Cranswick (3,357p). Diageo, the world’s biggest producer of spirits, has been hit by slumping emerging market currencies, but it offers exciting long-term potential (2,654p). Low-cost housebuilder MJ Gleeson is an “enviable profits engine” with a knack for spotting opportunities. (722p).
An American view
Until recently makers of recreational vehicles (RVs) were largely associated with retiring baby-boomers buying motor homes. However, “budget-conscious-but-experience-hungry” millennials are also clambering on board, driving rapid sales growth, says Nicholas Jasinski in Barron’s. Shares in RV firms have slid after a bad winter left dealers with unsold stock. But the long-term outlook remains bright. Consider Camping World, which is less affected by the inventory overhang because 40% of its revenue stems from parts, financing and other services. These are high margin and don’t depend on RV sales. Profits are set to grow by 30% next year, but the shares cost just seven times 2019 earnings.
The Australian stock exchange is braced for the biggest flotation in the mining sector since 2012. Coronado Global Resources, the world’s number-five producer of coking coal (a key ingredient in steelmaking) hopes to raise up to $1bn. During the commodities collapse of 2011-16, prices fell by two-thirds to around $100 a tonne. But since then they have recovered amid firmer Chinese demand and dwindling supplies; producers have cut back on investment. Coronado’s initial public offering is taking place in Australia because sentiment on the larger US market is still poor – as CEO Gerry Spindler told the Financial Times, every listed coking coal company in the US went bust three years ago.