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

Amerisur Resources

Shares

Shares in this Colombian oil producer are on the rise following news of a “potentially significant” new discovery and a $93m partnership deal with a US energy firm. Amerisur’s “strong and growing production base” of about 5,500 barrels of oil equivalent per day will facilitate further exploration. Cash flow is “robust” and the resulting money reserves will act as a buffer should the oil price fall. On a forward price-to-earnings (p/e) ratio of ten, the shares look inexpensive. 13.5p

Findel

The Mail on Sunday

The week before Christmas is crunch time for many retailers, but Findel should be feeling more relaxed than most. It is an “enticing blend” of discount “e-commerce with credit attached”; it sells online and through a catalogue. Sales growth has been strong, and management thinks it can more than double revenue over the next five years. A chequered history and poor market sentiment towards retailers have weighed on Findel’s share price recently. Along with the group’s recovering education supplies division, that spells opportunity. Buy. 177p

Tristel

The Daily Telegraph

This Aim-listed business has “carved out a clever niche” as a supplier of hospital disinfectant products. Patents protect the firm’s innovative dispenser technology from competitors. The group has a dominant share of the NHS market, is growing operations in Germany, and seeking regulatory approval in America. The shares, on a 2018 p/e ratio of 21, are reasonably priced given the auspicious outlook. 245p


Three to sell

AO World

The Times

This online electrical appliance retailer is not the way to tap into the e-commerce trend. Economic uncertainty and a slowing housing market have reduced the number of families choosing to splash out on big-ticket white goods such as fridge-freezers and ovens. Competition in AO World’s core British market is intensifying and analysts have also raised concerns about the way the business books income from the warranties it sells to customers. With no prospect of a dividend in the short term, the shares should be avoided. 127p

Balfour Beatty

Motley Fool UK

This construction business came unstuck in 2014. But it has now dealt with problem contracts, repaid debt and is winning new work on good terms. The turnaround has been impressive, but that is no reason to jump in. Construction-industry margins are tight “even at the best of times” and these are not the best of times. Banks are now restricting new lending to the sector amid growing bearish sentiment. A p/e ratio of 13 looks ample. Avoid. 245.8p

Superdry

Investors Chronicle

This clothing chain has served up its first-half results with “yet another profit warning”. Pre-tax profits now look set to be £59.7m this year, compared with £97m last year. The underlying operating margin has nearly halved. Management is blaming the lousy performance on “unusual weather patterns” and a “discount-driven” economy, suggesting that self-help measures will only be able to do so much. Given the macroeconomic backdrop, the 7.95% dividend yield is a major red flag.
Sell. 395p


…and the rest

The Daily Telegraph

Informa shares have dipped, but profits are growing at a decent clip and technological disruption brings as many opportunities as challenges for the exhibition operator (655.6p). Shares in wallpaper and fabrics firm Walker Greenbank have had two-thirds of their value “stripped away” over the last 18 months, but on just seven times earnings there is plenty of upside (75.5p). A new crop of British video-game makers is assembling on London’s Aim index, and motor-racing games franchise specialist Codemasters is one of the most promising (161p).

The Mail on Sunday

Hotel Chocolat more than doubled profits last year and is expanding internationally. A share-price slump in recent months is “unmerited”.
The stock is a buy (278p).

Investors Chronicle

Shares in Legal & General offer a well-supported 7.1% prospective dividend yield. The insurance industry faces challenges, but this is still a long-term income buy (231.4p). The mining majors want to increase their exposure to the copper market, so copper-gold explorer SolGold could be in line for a takeover bid (37.6p). Land and property developer Harworth’s big land bank may offer hidden value (116p).

Shares

Investors looking to rebalance their portfolio towards value stocks should investigate Keystone Investment Trust (1,477p). Weakness in the Russian and Japanese markets has hit shares in sausage-skins maker Devro but the smart money is placing bets on the sector (169p). Bad clinical trial news for AstraZeneca’s Imfinzi drug is disappointing but the firm remains a buy (6,080p).


A German view

Swiss interest rates are far more likely to go up than down, says WirtschaftsWoche. That’s good news for insurers, as their investments then yield more and they can offer policyholders better returns. One to consider is Swiss Life, the country’s biggest life insurer and one of the continent’s top institutional investors with CHF224bn (£180bn) of assets under management. The group is very conservatively run: its capital cushion is almost twice as large as the regulatory minimum. Premiums and fee income are both on the rise, while the group has just decided to increase its payout: 50%-60% of profits will now be distributed as dividends, up from 30%-50% at present. It already yields nearly 4%.


IPO watch

The trade dispute between the US and China has not stopped Chinese firms “flocking to the US” to list, says Yen Nee Lee on CNBC. The were 37 initial public offerings (IPOs) by Chinese companies in America this year, raising $9.2bn altogether, up from the $3.6bn produced by 20 flotations in 2017. On the tech-heavy Nasdaq exchange, which saw a total of over 180 IPOs in 2018, new Chinese flotations included video-streaming group iQiyi and e-commerce company Pinduoduo, which earned $2.3bn and $1.6bn respectively. The US appeals to Chinese tech firms because it has the most innovative tech sector and excellent research coverage helps bolster new issues’ profiles.