In a tough year for equities the best the newspaper and magazine tipsters could hope for was to preserve their readers’ capital. With the FTSE All-Share down 13% in 2018 and America’s S&P 500 registering a 6.2% drop, only the Evening Standard managed to avoid a loss, with its portfolio returning just under 1% over the year. That paltry return was nevertheless enough to prolong the London paper’s reign at the top of the table following a strong showing last year. The Standard’s best tip was legal platform Keystone Law, which gained 92.6% in 2018. It blames “ill-judged punts on outsourcers” for the weaker overall performance.
The next best performers were magazines, with the picks from US publication Barron’s falling 2.2%, followed by Shares and the Investors Chronicle on -6.4% and -10.2% respectively. The best Barron’s tip turned out to be health insurer Anthem, which rose by 26.2%.
Shares’ best performer was vehicle testing expert AB Dynamics, which rose 51%. However, it is not entirely clear if the magazine is playing fair – it chose to cut its losses on funeral services provider Dignity in March after it made “radical changes to its business model”. That crystallised a 49% loss, but it would have been -58.8% if they had held onto the shares until the end of the year. The Daily Telegraph also found itself compelled to retire a tip mid-way through the year when automotive and aerospace parts supplier GKN was delisted in May following a hostile takeover by Melrose.
GKN’s 5% rise was the publication’s best bet, but the portfolio was dragged down by B&M Bargains, which declined by 34%. The paper rather defensively notes that B&M is “one of the ravaged retail sector’s best performers but it still took a battering”.
The most battered share of all was probably The Sunday Times tip Faron Pharmaceuticals, which fell 85% in a single day following disappointing clinical trial results last May. The pick failed to recover and finished the year 93% lower than where it started. Yet even that loss was not enough to drag The Times’s portfolio to the bottom of the table. That honour goes once again to The Guardian, whose annual tips have proven a reliable way to lose money in recent years. The 2018 portfolio was down by 27.7%, with Footasylum the worst performer, falling -89.8%. Still, the Gym Group rose 24.1% on the year.
|Share tips for the year ending…|
|The Daily Telegraph||-2.21%||21.53%||-13.4%|
|Daily Mail/The Mail on Sunday||-9.44%||20.29%||-18.3%|
|The Sunday Times||26.06%||12.17%||-20.1%|
Annual share portfolios are generally presented in a spirit of seasonal fun. The comparison of the portfolios are not exact, as newspapers assess their performance at slightly different dates before and after the new year. In any case, as Money Observer tipster and regular MoneyWeek columnist Richard Beddard sensibly notes in his own offering for 2019: “I do not think about investing in one-year increments. I look for companies that should prosper for a decade or more”. We hope that applies to some of the picks below.
… and what they’ve picked for the year ahead
The tax on sugary drinks and the collapse of Conviviality, a major distributor, have damaged sentiment towards the soft drinks business. That makes for a perfect entry point into high-quality Britvic, which boasts “big-brand, low-or-no-sugar beasts” such as J2O and Robinsons (824p). The high street may be ailing, but a majority of WH Smith’s revenue now comes from its high-margin travel stores in airports and stations and the business is also expanding in the US (1,764p). Airlines rarely bring much joy to investors but falling fuel costs and easyJet’s strong brand may bring out your inner contrarian. A 5.5% dividend yield also makes the shares an income play (1,068p). BT shares have been rocked by an Italian accounting scandal and regulatory challenges, but a new CEO and a low valuation compared to peers mean investors should bet on a recovery (253p).
The housing market may be cooling but brick maker Forterra stands to gain from emerging brick shortages (219.5p). Consumers increasingly prefer to spend money on experiences rather than possessions, implying strong growth prospects for UK bowling market leader Hollywood Bowl (200p). Shares in InterContinental Hotels are down a fifth since October, but a capital-light franchise and management model makes the group more resilient than many investors appreciate (4,179p). London Stock Exchange Group may be facing Brexit uncertainty, but “beefy margins”, high levels of cash generation and a “dominant position within the clearing and indexing markets” give it strong defences (4,040p).
Thread manufacturer Coats, which supplies the likes of Nike, Adidas and Next, is a play on the athleisure and fast fashion trends. The shares look “great value” at the current forward price/earnings ratio (p/e) of 12 and offers a superb track record of solid returns (77.3p). One-time media business Euromoney has re-invented itself as a data analytics specialist – expect upside when the market cottons on (1,172p). Fevertree has already toppled Schweppes to become the world’s leading producer of premium carbonated mixers by retail sales value. Now “all eyes” are on its expansion efforts in America (2,210p). Identity verification software expert GB Group is that rarest of things: a British global leader at the “heart of the digital transformation” (422.5p). Hollywood Bowl’s combination of cash generation, low debt and a reasonable valuation should find favour with the market in the current climate (219.5p).
Keystone Law signs up lawyers on an online platform and takes a cut of the fees. It is a “superb growth story” with plenty more scope to expand. The UK legal services market is the second-largest in the world, with fees totalling more than £30bn per year (370p). The high street is out of favour, but high-quality retailer Next has a respected management team and a thriving online operation; it’s a bargain at the current price (4,862p). Online holiday retailer On The Beach boasts a superb track record and is expanding into Scandinavia (362p). Heavy investment by precision equipment engineer Renishaw has ensured that it can remain a world leader with few true competitors (3,804p). The “future is all about trains, planes and power systems”, but recent engine inspection issues mean that global champion Rolls-Royce is trading at a “rare discount” (801.8p).
Foundry business Goodwin has been diversifying away from the oil sector by winning orders to supply the nuclear industry and US Navy submarines; “a new period of prosperity beckons” (2,680p). Howden Joinery’s savvy use of small builders to sell its wares has turned it into Britain’s biggest supplier of kitchens (463p). Nuts, bolts and rivets maker Trifast is in a cyclical industry, but it is more resilient than it once was after broadening its industrial and geographical markets through acquisitions (193p). Management at Next is committed to wringing more value out of its shop estate while simultaneously developing the online operation (4,862p). Solid State manufactures and distributes rugged electronic kit for use in harsh military and industrial environments, activities for which relatively few companies have the “authorisations or know-how” (324p). Power converters manufacturer XP Power has been growing through innovation, while a recent acquisition increases its exposure to the semiconductor equipment industry (2,150p).
Google parent Alphabet continues to record year-on-year revenue growth of 20% or more. The company is sitting on $102bn of net cash and side projects such as Waymo, the leader in autonomous vehicle technology, could yet become multi-billion-dollar businesses in their own right ($1,062). Shares in Apple have fallen back owing to weaker earnings, but that makes them more attractive. High-margin services such as the App Store and Apple Music generated $37bn in revenue last year and the mega-cap’s share buyback programme is the world’s biggest ($171). Last year’s sell-off has left large bank valuations looking enticing. Bank of America’s strength in consumer banking and wealth management makes it our pick of the bunch ($25). Wall Street is worried that active equity-fund managers are dying out, but industry leader BlackRock’s ownership of the iShares exchange-traded fund platform and a lucrative alternative asset business leaves it well placed to outperform ($387). Shares in leading US machinery maker Caterpillar have slumped on a more muted global growth outlook, yet on ten times projected 2019 earnings the stock looks cheap and a trade deal with China could see the uncertainty lift ($126).
Integrated energy play Chevron boasts an attractive global asset base, dividend security and a strong balance sheet ($116). Mercedes-owner Daimler fell 33% in 2018 and is now valued at less than Tesla despite selling ten times more vehicles. This is an “ultra-cheap” stock with excellent brand value, although negative market sentiment towards traditional car makers may prove an obstacle to any share price rally (€47). Delta Air Lines is trading at just eight times forward earnings following the sell-off but boasts the best balance sheet and highest profit-margins – founded on making passengers pay more for extra legroom and baggage fees – of the major US carriers ($53.59). Wall Street is valuing Toll Brothers shares “as if the housing market is heading off a cliff”, yet the luxury homebuilder remains highly profitable ($32).
The Mail on Sunday
A newly streamlined GlaxoSmithKline should prove nimble enough to outflank the competition (1,507p). Asos shares halved following December’s profit warning and now look oversold. Investors should buy in to “enjoy the bounce” (2,216p).
Aim-listed Ukrainian gas firm Regal Petroleum rocketed by more than 700% in 2018, but with rising production and no debt it could still have further to go (57p). ITV shares sit at a five-year low after slumping 25% in 2018, but if confidence picks up then so will the firm’s advertising revenue. Failing that, there is a possibility that a global media firm will swoop in with a “generous takeover bid” (125p).
Asia-centric HSBC is less orientated towards the uncertain domestic market than its banking peers, and with the stock down 15% “now might be the time to buy”. Any cooling in US-China trade tensions should provide a further fillip (650p). British Gas owner Centrica lost 372,000 customers in the third quarter of last year alone, whilst Ofgem’s price cap will cost it £70m. However, these problems are now factored into the share price and after a year that saw seven smaller suppliers go bust, “Britons are wary of smaller outfits offering tariffs too good to be true” (134p). The outsourcing sector is horribly out of fashion, but with a top-class management team, which includes chief executive Rupert Soames, “slogging away” at a turnaround “this could be Serco’s year” (97p).
Economic turmoil should make this a year for defensive stocks and booze giant Diageo fits the bill. The firm has good international diversification and its products will help all of us to “drown our sorrows” if times get tough (2,795p). GlaxoSmithKline’s plan to spin off its consumer healthcare unit within three years shows that management is serious about developing the pharma side. A new HIV 2-drug regimen and shingles vaccine look promising, while the 2019 dividend is secure (1,491p). Iberdrola, the giant Spanish owner of ScottishPower, is pushing into wind and solar operations worldwide and looks a good bet for the coming year (€7.02). With a growing number of UK companies stockpiling goods in anticipation of a no-deal Brexit, industrial warehouse business Segro stands to gain. The company is also benefiting from the e-commerce boom (588.6p). Embattled telecoms group BT’s new boss arrives in February. Philip Jansen faces tough strategic decisions about the future of Openreach and the sport broadcasting operation, but at the current price there is plenty of scope to get the shares “moving” (238.1p).
One company better protected than most against Brexit turmoil is litigation funder Burford. After all, when “the tide goes out some companies are left exposed” and the lawyers usually win (1,656p). The quest for cleaner air and lower emissions will remain high on the global agenda. Catalytic converter maker Johnson Matthey is also moving into the growing area of electric batteries and in a sign of confidence hiked its interim dividend in November (2,799p). Morrisons has a number of tricks up its sleeve should consumers tighten their belts. The company should be able to pick up stores offloaded in the case of a successful merger between Asda and Sainsbury’s, and there are even rumours of a bid from Amazon (213.3p). Sheffield-based Sumo Group offers a way to tap into the fast-growing £109bn global video games market (118.5p). Accountancy software business Sage Group is “the sort of established company” that gives you confidence “that it might not lose you all your money” (601.4p).
Deal or no deal
OneSavings Bank will find itself in the vanguard of any post-deal recovery in UK assets amid robust loan growth. A lowly valuation of barely 6.5 times earnings also provides a degree of downside protection (350p). The rollout of mandatory healthcare insurance in the UAE and expansion into Qatar and Saudi Arabia will all help growth at Middle Eastern private healthcare network operator NMC Health (2,736p). Packaging supplier DS Smith has a strong financial track record and taps into the global ecommerce trend. It should also profit from consumer demand for more sustainable packaging (299.3p). Life insurer Prudential offers exposure to Asia and a strong dividend on a reasonable rating (1,402p). The Independent has also provided some 2019 tips based on whether or not we reach a deal with the EU by March 29. See sidebar.
The Daily Telegraph
Theme park operator Merlin Entertainments had a year to forget in 2018, but a recovering UK tourist market and a new Lego film – the group owns the Legoland parks – bodes well in 2019 (315.9p). Last November’s share price dip at Majestic Wine presents a buying opportunity. Revenues are growing, management is cracking multi-channel retail and boss Rowan Gormley is one of the most innovative retailers around (247p). Multinational distributor Bunzl is a well-diversified defensive pick for a year where boring is likely to be best (2,351p). Retailers were savaged in 2018, but brightly coloured welly and knits seller Joules outperformed its peers. International sales are up 70% and it has “real opportunities” to grow in America (228.5p). Aston Martin shares have gone into reverse since floating three months ago but 2018 could bring a boost. A total of 70% of Astons are exported, and any prolonged sterling weakness could prove a fillip (1,215p).
Insolvency levels are creeping upwards; administration specialist Begbies Traynor will benefit from the gloom (66p). Kenmare Resources exploits mineral sands to produce the basic ingredients for everything from white paint pigment and toothpaste to ceramics. A turnaround is under way and there is a shortage of alternative suppliers (190.75p). Cardboard box makers have been one of Britain’s biggest success stories of recent years, and DS Smith now looks set to benefit from the backlash against plastics (306.4p). A 46% share price slide in 2018 suggests that British American Tobacco is not the defensive play it once was. Yet a US regulatory clampdown on vaping rival Juul has brightened prospects, and there is a “chunky dividend yield” (2,500p). Consumer goods giant Unilever may prove more “bear market-proof” than other defensives (4,108.5p).
The Sunday Times
Asset manager Standard Life Aberdeen has been haemorrhaging money. Outflows reached £16.6bn in the six months to August. Yet the arrival of “wily operator” Sir Douglas Flint as chairman may herald an auspicious new beginning for “Staberdeen” (258.8p). The market is wary of the turnaround story at Essentra, which manufactures everything from cigarette filters to oil industry components, yet management has been buying up the shares “with gusto”. Follow their lead (334.2p). Tesco generates almost a quarter of its profit overseas, making it a “nice hedge” against any further drop in the value of the pound (190.1p). FTSE 250 cinema chain Cineworld is well placed to profit from a string of blockbuster releases in the year ahead. As an “affordable treat”, cinemas also do comparatively well during economic downturns (254.2p). 2019 could prove the year that the car industry finally realises that the future has arrived and it is called Tesla. Elon Musk’s factory is pumping out thousands of vehicles every week and the business finally looks poised to “break into the black” ($316.63).
Games Workshop, the board games retailer responsible for the “wildly successful” Warhammer fantasy franchise, will defy the wider high street gloom thanks to its dedicated fan base (2,920p). There is a growing backlash against high drug prices, opening the way for generic medicines producer Hikma Pharmaceuticals to grow its business in the US, Middle East and North Africa (1,684p). Mediterranean-focused explorer Energean Oil & Gas offers exposure to the fast-growing Israeli gas market as the country shifts away from coal (636p). Those seeking gold exposure in turbulent markets should opt for miner Fresnillo (870p). Entertainment One’s phenomenally successful Peppa Pig franchise will “bring home the bacon” again in 2019 (356.6p).
HSBC is one of those businesses that is so huge that its exposure to the UK is “incidental” and the dividend is surely safe – “unless it really is the end of the world” (646.9p). Thomas Cook had a shocker in 2018, but hot British summers like last year’s will remain the exception. “Be brave when others are fearful” (30.8p). The rise of tracker products continues to hit the asset management industry, but well-regarded Polar Capital should hold its own in the new landscape (472p). An ageing population and a shift to treatment in local centres means that NHS landlord Primary Health Properties could prove a “bright spot” against an uncertain property backdrop (111p). Engineering conglomerate Melrose has been hit by worries about trade and the future of the car industry, yet “healthy disposals” could prompt a reappraisal. The directors have been buying the shares (163.9p).
Investment platform AJ Bell is well placed to benefit from longer life expectancy and savings trends. What’s more, “the business thrives on volatility” (240.65p). Listed undertaker Dignity has been feeling the heat from low-cost competition, yet a no-deal Brexit bringing “medicine shortages, a dearth of food, soaring energy prices and stockpiling” does not “bode well for the health of Britons” (696.5p). Private equity firm 3i invests in “solid, mid-cap businesses”, making it a “strong and stable” choice (773.4p). Tech giant Micro Focus International looks “vastly oversold” following problems integrating its acquisition of the HP Enterprise software division, but a special dividend and share buybacks are in the pipeline (1,383p). There could be significant upside at bus and rail operator First Group amid investor activism and a rejected takeover bid. Just remember to “pull the emergency cord” if Jeremy Corbyn gets into Downing Street (83.4p).