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
Barnes & Noble
This bookseller is often described as an “embattled retailer”, or even “Amazon roadkill”. Nevertheless, its share price has rallied due to takeover interest. Talk of a sale highlights the fact that the group has remained profitable despite the e-commerce onslaught and now looks cheap. There is scope for making more money from its in-store cafés. What’s more, the e-books sector seems to have plateaued. $6.61 (NYSE)
New chief executive Graham Stapleton wants to boost this bicycle and motoring retailer’s investment in store refurbishments and digital platforms, but the market is wary of the strategy. Halfords has disappointed before, but the new plans represent a serious attempt to remedy some of the group’s current customer-service shortcomings and to distinguish itself from online and non-specialist competition. Patient investors will also enjoy a 5.8% forward dividend yield while they wait for a turnaround. 320p
The Sunday Times
This FTSE 250 investment trust is heavily exposed to the tourism sector through its ownership of Carnaby Street and Chinatown. Uncertainty over London’s prospects post-Brexit has seen the shares fall 16% this year, yet news of a takeover bid at shopping-centre owner Intu suggests that “deals are starting to emerge in the bombed-out property sector”. A gulf has opened up between Shaftesbury’s share price and its net asset value (NAV), which may tempt acquirers seeking a bargain to eye up the West End landlord. 888p
Three to sell
Low & Bonar
The Daily Telegraph
This high-performance building materials business has issued a profits warning, blaming rising raw materials costs that it says it is unable to pass on to consumers. That underlines the group’s lack of pricing power; higher US freight costs, production problems and a high rate of management turnover aren’t helping either. Most ominously, the debt-to-EBITDA ratio (a measure of debt levels compared to profits) is perilously close to maximum levels agreed with lenders. 39p
A profit warning this month saw Royal Mail’s share price slump by 23% in two days. Low productivity gains and cost-savings have led to a downgraded earnings outlook and put the prospective dividend – yielding 6.8% at the current price – in doubt. Competition and declining volumes of letters mean productivity gains are vital, but with little evidence of these we have switched our assessment of the stock to “sell”. 361.28p
The Sunday Telegraph
The share price of this Asia-focused bank has slid by more than a third since chief executive Bill Winters took the reins in 2015. Winters has made the bank as “safe as houses”, reducing exposure to risky loans and nudging up the tier-1 capital ratio. The trouble is that “safety does not go hand in hand with growth”. Scandals have forced management to focus on compliance while rivals gobble up market share. The shares may look very cheap on a forward price-earnings ratio of just ten, but there are better ways to get exposure to emerging markets. 605.7p
…and the rest
The Daily Telegraph
A hot, calm summer has hit energy company SSE’s wind business, but it is still a good bet for income seekers (1,127.5p).
Risks from legal proceedings with GSK are priced in at pharmaceutical business Vectura, leaving scope for a pipeline of new respiratory drugs to boost the shares if clinical trials prove positive (80.7p). A plunging Russian rouble has obscured the success of Raven Property’s “thriving” Moscow warehouse business – a buy for those who think current political tensions with Russia will ease (39.7p).
The Mail on Sunday
Artificial intelligence pioneer Sensyne Health, which uses anonymised NHS data to diagnose disease patterns in the population, should offer healthy growth (187p).
The market has overreacted to a wobble in trading at plumbing and heating distributor Ferguson, creating an opportunity to buy into a superb FTSE 100 business that is gaining market share (6,083p). Aim-listed audio-conferencing business LoopUp is building scale and could offer significant upside potential over the next 12 months (390p). Veterinary services provider CVS offers a compelling long-term play on a consolidating sector (948.5p). Higher oil prices and successful drilling in Niger bode well for Aim-listed Savannah Petroleum (33.2p).
Shares in Aston Martin are too expensive given the risky growth strategy (1,810p). Strikes and a profit warning suggest that Ryanair’s difficulties will last for some time (€11.30).
A German view
Rising European defence spending is good news for France’s Thales, says Wirtschaftswoche. The group designs and builds electrical systems for the aerospace and defence sectors, with the latter accounting for more than 50% of sales. Thales’s order book rose by 8% in the first half of the year. The orders are worth €31bn – twice as much as the group’s annual sales. The defence business concentrates on high-tech systems such as drones and surveillance equipment, while a recent acquisition will make Thales a major player in cybersecurity. The other main division, aerospace, looks set for long-term growth too. Boeing anticipates a 100% increase in passenger planes over the next two decades.
The third quarter is usually relatively quiet when it comes to initial public offerings (IPOs). But the British market saw a 47% drop in the number of deals compared with the third quarter of 2017, according to financial services group EY, with six flotations on the main market and four on Aim. The amount of money raised fell by 71% year-on-year, with proceeds reaching $836m. The weak pound and uncertainty over the shape of our future trading agreement with the EU appear to be the main worries. Globally, deal volume fell by a fifth amid jitters over global trade and geopolitics, but an increase in the number of unicorns (start-ups worth over $1bn) floating boosted proceeds by 9% to $47bn.