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
This manufacturer produces everything from gas masks for firefighters to cattle tags. The group is highly cash-generative, enabling it to invest in new products – notably for the military market – and reinforce its balance sheet. The shares are trading on 13.5 times 2020 forecast earnings when adjusted for cash – cheap for a business with a strong position in its markets, with healthy margins and an impressive 19.4% return on capital employed last year. 1,235p
The Daily Telegraph
Many conglomerates have fallen victim to the idea that a business makes better returns by narrowing down its focus. This New York-listed electrical-equipment supplier begs to differ. It supplies everyone from data-centre operators and commercial aerospace firms to carmakers and oil and gas explorers. The diversified structure provides protection against a downturn in one sector and profit margins are high. On 13.5 times 2019 earnings, the shares trade at a discount to peers and look undemanding, given per-share earnings growth of 9%-10% a year. $80.99
This €5.5bn market-cap Irish nutrition group is a lesser-known giant. Glanbia operates across the sports nutrition and weight-management markets, selling whey and even making Cheddar cheese for the US. Global health trends and the popularity of whey-based products among gym goers are tailwinds that should support future growth. The shares trade on the London Stock Exchange, but are not included in the FTSE 100. €18.70
Three to sell
The Sunday Telegraph
This medical-devices group is one of the world’s biggest players in both ostomy and wound care, but its recent performance has been like a “gory trip to A&E”. Longer life expectancy and rising incidence of chronic health conditions should be auspicious, yet leadership upheaval, unprofitable product lines and a lack of innovation have all weighed on performance. The shares trade at two-thirds of 2016’s original listing price, and with the business losing momentum it is time to “stomach the loss and move on”. 135p
TV is a tough world. Programmes can bring audiences flooding in, but if the advertisers don’t follow you are in trouble. Brexit jitters have made businesses reluctant to splash out on publicity as they otherwise might have done, sending ITV’s share price down to near-six-year lows. Britbox, a joint streaming venture with the BBC intended to rival Netflix, could improve matters eventually, but meanwhile ITV remains at the mercy of advertising forces largely beyond its control. 134.75p
This blue-chip aerospace and defence engineer issued five profit warnings between 2013 and 2015 and a turnaround has yet to take hold. Mechanical problems with its aircraft engines, bloated management and volatility in the oil and gas sector have all weighed on performance over the past decade. Beneath “all the red ink” core revenues are improving. Yet on 39 times earnings, the shares are too expensive. 895.25p
…and the rest
The Daily Telegraph
A dividend increase at sausage-skins maker Devro suggests that management is confident about profit growth – hold (180.5p).
Shares in British American Tobacco have lost around one-third of their value over the past year, but we see a buying opportunity. Income seekers will enjoy the 7.6% forward dividend yield and the company hopes to generate £5bn in sales from next-generation products by 2023-2024 (2,756p). Specialist plastics group Synthomer is a cyclical business, but recent falls make the shares look too cheap (372.5p). Aim-listed analytics business Oxford Metrics is a market leader in the promising area of “optical human-and-animal motion tracking” (82p).
The Mail on Sunday
The cost of solar energy has tumbled over the past decade. The newly listed US Solar Fund offers British investors exposure to the fast-growing American market (76p).
The market has completely overreacted to $49m in one-off costs at threadmaker Coats – use the dip to buy more shares (86.5p). Laundry business Johnson Service remains unloved, despite doubling turnover since 2014 (129p).
Patience is required from shareholders in Sensyne Health, which collates anonymised NHS patient data and sells it on to pharmaceutical businesses. The big profits may be ten years away (190p). Some think that unquoted securities deliver higher returns than publicly traded investments over the long term. Those wishing to test this thesis should buy private-equity funds investor Pantheon International, which has a solid track record (2,120p).
An American view
Robots are becoming “more efficient and versatile”, says Al Root in Barron’s. Robot deliveries have risen by almost 20% a year for the past five years. An especially promising niche is collaborative robots, or cobots: small machines that are easy to programme and can work effectively alongside people. That makes US semiconductor-equipment maker Teradyne, which recently entered the sector by buying Universal Robots, worth a look. The stock is on 17 times 2019 earnings, only a small premium to other chip firms that don’t have high-growth divisions. Teradyne’s automation division made sales of $261m in 2018, and cobots could be a $1bn market within three years. The stock could soar.
“Buzzy” start-ups from China are lining up to go public in America, says Kevin Dowd on pitchbook.com. Last month Luckin Coffee, which was valued at $2.2bn in December 2018, hired Credit Suisse and Morgan Stanley to run its initial public offering (IPO) later this year. It is seeking a $3bn valuation. Now Ehang, a Chinese drone manufacturer, has also decided it wants to float. It produces several drones, including one designed to fly individual passengers in an electric autonomous vehicle. It also boasts a fully automated “quadcopter” for delivering food, a joint venture with supermarket group Yonghui. The flotation is expected to raise $400m-$500m.