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 Sunday Times
There is a “quiet revolution” under way at your local bowling alley. Bookings can be made online, menu options are becoming more varied and you can even wear your own shoes. Hollywood Bowl runs 58 alleys in the UK. Warm summer weather and the World Cup made for a tough backdrop this year, but a drifting share price presents a buying opportunity. Modern families increasingly prize experiences over possessions, meaning that leisure operators are outperforming retail. 183.5p
Telecom Plus, which trades under the name Utility Warehouse, is Britain’s biggest energy supplier outside the big six. It provides gas and electricity to more than 621,000 homes and businesses, as well as offering broadband, mobile and home insurance. The multiservice model keeps profit margins healthy. Next year’s Ofgem price cap will level the playing the field with the big six. 1,364p
The Mail on Sunday
This pawnbroker is one of the few high-street businesses to be thriving, opening its 136th store this month. The business sells new jewellery in addition to unclaimed pawn items and has also branched out into foreign currency, with more than 800,000 customers visiting the shops each year.
A fast-growing online business supplements the bricks-and-mortar operation, with the latest figures suggesting both divisions are “flourishing”.
The company also boasts a “rock-solid” balance sheet.
The shares in this “gem”
look like a bargain. 166p
Three to sell
This bakery chain has upgraded its annual profit forecast. That marks a major turnaround since a profit warning in May, but is also a reminder of how volatile this business can be at a tough time for the high street. Savvy management has been trying to tap into new trends, such as food-on-the-go and healthy eating. The shares are “not wildly expensive” on 17 times forecast earnings, yet that is more than most high-street retailers and looks ample in this difficult climate. Avoid. 1,394p
Japanese pharmaceutical business Takeda’s takeover of London-listed Shire, which focuses on rare diseases, looks set to complete as early as January after securing shareholders’ approval. Shire’s shares rose 3% on the news and lots of analysts are bullish. Yet doubts remain about the wisdom of the £46bn cash-and-share deal. The new combined company will have a whopping debt pile of £40bn, and investors also need to factor in the potential for being “caught by the backwash from earnings downgrades” after the deal is finalised. 4,556.5p
This American casual dining chain’s shares are up 140% in five years, far outperforming the broader market’s 50% gain. Yet with the US labour market very tight, this “steakhouse stock could get burned”. Rising labour costs are putting the Kentucky-headquartered firm’s margins under increasing pressure. Management has responded by raising prices, but that is a risky move for a company known for its value offering. Steer clear. $65
…and the rest
The Daily Telegraph
Insurer Hiscox is about to join the FTSE 100, but on 17 times next year’s earnings it is too expensive for new investors – hold (1,608p). Investors hoping to tap into favourable savings trends should buy IntegraFin, which offers an online investment shop for financial advisers (296.4p).
Stockbroker and investments provider AJ Bell is one of the few companies brave enough to list on the stockmarket in the current turmoil. The shares are likely to “shine” and generate healthy returns for investors. Buy (160p)
Logistics-focused Schroder European Real Estate Investment Trust offers a cheap way to diversify away from risky UK assets (112p). Safety expert Marlowe is experiencing “rapid earnings growth” (434p). Clinigen is developing an online platform to widen access to niche medicines –
Investors wanting exposure to long-term bullish trends in the luxury and diamond markets should look at iconic New-York listed jeweller Tiffany & Co. ($91.00). Property companies are reporting slowing or declining growth in net asset values (NAV), but Urban&Civic is bucking the trend (296p). A high-court defeat over its pension scheme is likely to aggravate a strained balance sheet at BT – sell (261p). A string of bad news from Consort Medical, capped by a recent profit warning, means that it is time to sell (765p). Aim-traded SafeCharge helps businesses with secure payments and fraud protection and offers exposure to the broader shift towards digital payments (272p).
An American view
With the US economy expected to slow, it’s important to own companies able to tap into new sources of growth, says Barbara Miller of fund manager Federated Kaufmann in Fortune. Enter Constellation Brands, a global drinks giant with brands spanning wine, beer and distilled spirits. It is the world’s largest premium wine seller with over 100 brands, including Robert Mondavi. Constellation is growing its share of the US beer market with Mexican brands such as Corona and Modelo, and is now exploiting the momentum of the nascent cannabis sector, which looks immune to the economic cycle, with a $4bn stake in Canadian pot group Canopy Growth. The shares also yield 1.5%.
You wait ages for a ride-hailing app to hit the market, then two come along at once. After hinting for months that they intended to go public, Uber and Lyft, both based in San Francisco, have reportedly filed for an initial public offering (IPO) with America’s Securities and Exchange Commission. Uber is expected to be worth $120bn, while Lyft’s value should exceed the $15.1bn implied by its last funding round in June. Both firms have hitherto struggled to make a profit, but there is still vast scope for growth, according to analysts at wealth managers Raymond James. Like Amazon, ride-hailing firms should be capable of expanding sales by 13%-20% a year for a long time, they reckon.