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.
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
This "upstart rival" to online property groups Rightmove and Zoopla listed on Aim last year, promising to slash the listing fees charged toestate agents. Chief executive Ian Springett claims that "in some cases, agents are paying Rightmove more than they are paying in rent for their office". His low-fee strategy has seen phone and email leads grow more than sevenfold over the past year. The business remains loss making, but "if it can prove it can turn a profit, there should be value ahead. Buy". 106.5p
The Mail on Sunday
Hunting makes specialist components for the oil and gas industry. Lower oil prices and softening global growth have hit the share price. Yet the US shale business is maturing and is more conservatively run than five years ago, while nations such as Argentina and even Saudi Arabia are potential growth markets. This is a cyclical business, but on a long-term view the shares have fallen "too far too fast". Buy. 579p
The Daily Telegraph
In the three decades following its flotation in 1987, this environmental consultancy made a market-beating total return of 14.1% a year. Can new management keep up the good work? CEO John Douglas, who took over in June 2017, has invested in IT and HR and launched a "radical restructuring" of the group's many subsidiaries. The investments could help RPS become much bigger but even failure would probably see a shareholder value-enhancing sale to private equity. Meanwhile, the 6.1% dividend yield looks secure. 162p
Three to sell
This Aim-listed firm has three main lines of work: supplying drugs for clinical trials, distributing unlicensed treatments and buying unwanted medicine licences from multinationals. The shares jumped 18.2% last week on news that it will pay up to $210m for the US distribution rights for skin- and kidney-cancer drug Proleukin. Management claims this is a growth business, yet the volatile share price suggests the growth case is not yet established. At 13.4 times forecast earnings the shares do not offer obvious value. 872p
This food retailer is on a roll, with management flagging good sales momentum and operational execution in 2019. The launch of a vegan sausage roll has brought further publicity. This is a "fine business" with solid growth potential, yet a rating of 22 times forecast earnings is "too rich" for a company with so much exposure to the flagging retail sector. Strong same-store comparatives from the second half of last year will also limit further upside. Avoid at the current price. 1,606p
Ryanair boasts a low cost base and a strong balance sheet, but that is unlikely to spare it from earnings disappointments amid an intensely competitive market. The recent failures of rival airlines Flybmi and Germania should cut long-term overcapacity, but for now fares are falling, even as Ryanair sees staff and fuel costs rise. Brexit may also see UK investors sell before they lose voting rights. Avoid until the current uncertainty clears. €11.30
...and the rest
The Daily Telegraph
Precision engineer Renold trades on just six times earnings and could prove a bargain if profits recover (29p). Promising growth in the US means Paddy Power Betfair looks a "tempting wager", but there are "bags of execution risk" hold (£6,190p). A recent update by TalkTalk Telecom suggests that a profit recovery is even further off time to "swallow a nasty loss and move on" (98p).
New management, an incipient turnaround, and talk of coming mergers and acquisitions could act as catalysts for medical devices "juggernaut" Smith & Nephew (1,464p). Housebuilder Springfield Properties stands to gain as high demand in Scotland sees house-price inflation there catch up with the rate in England (120p). Xaar has been diversifying away from its legacy ceramics printing operation to focus on higher-value areas, but execution has been patchy and the group has become worryingly dependent on extending credit to win new business avoid (154p).
The Mail on Sunday
Shares in oil-well acquirer and operator Diversified Gas & Oil have risen almost 60% over the last 18 months amid soaring production, but the group has further to run (113p).
Advertising spending is shifting online. Gain exposure to the trend via Snapchat ($9.03), Weibo ($66.17), Facebook ($164.07) and Meet Group ($5.37). Don't be tempted by William Hill's 5.1% yield new taxes and regulations are eroding profits and it may struggle to benefit from the opening up of the US sports-betting market (177.65p).
A German view
China's BYD is one of Warren Buffett's better bets outside the US. His stake in China's biggest producer of alternative-energy (electric and hybrid) vehicles has risen in value by 500% since September 2008. But there should be further to go, says Der Aktionr. Last year BYD cemented its position as the dominant producer of such vehicles, selling 248,000, while its January sales were up by 291% year-on-year. China is the world's biggest market for alternative energy cars, with 1.1 million sold last year, even as the overall car market shrank slightly. The group also has a promising battery unit, which supplies its own electric cars and buses. The stock looks "too cheap".
US exercise-bike brand Peloton, founded in 2012, has been interviewing banks for a potential initial public offering (IPO) in the second half of this year, say Maureen Farrell and Dana Mattioli in The Wall Street Journal. The stationary bikes, which cost from $2,245 each, come with a mounted screen on which users can stream live classes led by Peloton's fitness instructors for around $39 a month. A fundraising round last year valued Peloton in the region of $4bn. The start-up would seek a valuation above that, unnamed sources told the newspaper. Should the IPO go ahead, it will be an early test of investors' appetite for the burgeoning high-end fitness sector.