Share tips of the week

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

British American Tobacco

The Sunday Telegraph

Big tobacco has run into big trouble in 2018. BAT’s shares are down 45% this year as higher taxes, marketing restrictions and a proposed US ban on menthol cigarettes take their toll. Yet the company still sold a “staggering”
686 billion cigarettes last year and the shares look cheap on eight times next year’s forecast earnings. Cigarette volumes are falling but the number of smokers worldwide is expected to not change much over the next decade. “Tobacco is a long way from being stubbed out completely.” 2,750p

Primary Health Properties

Sunday Times

The poky GP surgeries of yesteryear are increasingly giving way to larger, more modern healthcare centres. PHP owns 308 such centres in the UK and Ireland and was promoted to the FTSE 250 last April. Real-estate buyers are drawn to a sector that offers long leases and secure rents guaranteed by the NHS.
As a safe place to store cash with a decent return – the shares yield 4.9% this year – PHP might be “just what the doctor ordered”. 110.2p

Sports Direct

Motley Fool UK

Shares in this value-focused retailer have fallen 29% in the past six months owing to negative sentiment towards the high street. Yet the company’s bottom line tells a different story, with earnings forecast to grow 16% this year and 10% the year after. In the medium-term, cash-strapped consumers may well turn to cheaper retailers, such as Sports Direct. Those willing to make a contrarian bet amid the current Brexit fuss could find value in the shares. 289.9p


Three to sell

AstraZeneca

Investors Chronicle

This pharmaceuticals giant returned to sales growth in the third quarter, but we think buying now requires a “significant leap of faith”.
As high-earning medicines lose exclusivity rights the firm must find new treatments to avoid toppling off a looming “patent cliff”. The new drugs pipeline remains subject to the unpredictable results of clinical trials and debt levels and costs are on the rise. With risks mounting, investors’ best bet is to take advantage of a recent share-price run and sell. 6,156p

Mitchells & Butlers

Investors Chronicle

Full-year results at this pub group showed like-for-like drink and food sales rising despite a “tepid” backdrop for the wider sector. The latest figures were boosted by price increases – which may have “limited mileage”, given the uncertain consumption outlook – rather than volume growth. The firm’s 18 brands, which include All Bar One and Harvester, are particularly exposed to the general decline in high-street footfall. Add in rising costs, high debts and weak cash flow and the shares are not a good deal, despite appearing cheap. 268p

Majestic Wine

Shares

We hoped that the summer heatwave would prove a boon for this quality wine specialist, but shares have tumbled 20% since August on some shockingly bad results. The Watford-headquartered group has reported a near-63% decline in half-year pre-tax profits amid challenging retail conditions and the high cost of growing the online Naked Wines operation. We think it is time to “cut your losses and move on”. 301.5p


…and the rest

The Daily Telegraph

The seemingly endless chaos in the support services sector has probably led the market to overlook Babcock International’s engineering expertise, but you should still sell because “value with no catalyst to unlock it is not really value at all” (574p). The market has reached “maximum pessimism” about the prospects for Indivior, which makes drugs that wean addicts off heroin. Things can hardly get worse, so investors should hold (95.76p).

Investors Chronicle

Recent acquisitions will give piping and ventilation business Polypipe a boost, although its reliance on the construction sector remains a worry (362.6p). Close Brothers’ margins have held up even as other lenders feel the pain and it offers reliable income (1,490p).

Shares

Large-cap miner Anglo American has proved resilient in a challenging climate and will rebound should there be more positive global economic news (1,562p). More record-breaking results from electronics equipment supplier Halma confirm its status as a “long-term, high-quality buy” (1,342p). Auto Trader has had a difficult autumn, but its position as the clear market leader in online car retailing gives it high margins and pricing power (434.5p).

The Times

Shares in travel business Thomas Cook are priced for disaster following two profit warnings, but it isn’t going to go bankrupt – buy (33.75p). Shares in pharmaceuticals service provider UDG Healthcare have been unjustly “clobbered” this year, but the shares remain a good long-term bet (596p).


An American view

Shares in aircraft manufacturing giant Boeing have returned an impressive 894%, including reinvested dividends, in the past decade – 272% more than Alphabet. And there should be plenty more to come, says Jack Hough in Barron’s. Easing trade tensions bode well in the short term, as Boeing is America’s number-one exporter to China, while the longer-term outlook is auspicious.

It has an order backlog of almost 6,000 planes, and is set to deliver around 800 this year. Airline traffic is growing by 5.5% a year, while airline capacity growth is slower. China is trying to set up a rival plane maker, but has been struggling to get it off the ground. The shares are cheap in terms of earnings and free cash flow.


IPO watch

Manolete, a company that supplies funding for lawsuits, is about to float on Aim, London’s junior stockmarket. The UK-based group funds claims against former managers and debtors of bankrupt firms. Its high-profile cases include a claim in 2016 against television presenter Anthea Turner relating to the collapse of her former husband’s company. Manolete, which recently reported annual returns on investment of 200%, has raised £29.4m for the initial public offering, implying a market capitalisation of £76.3m.“Litigation funding is growing fast, but Manolete’s UK insolvency niche has room to grow,” reckons
Lex in the Financial Times.