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 Mail on Sunday
Founded in 1889, Law Debenture is a “business of two halves”. It combines an investment trust focusing on UK equities with a professional services business that helps companies with accounting and pension administration. Revenue from the professional services side frees up the money managers to take a long-term, “sometimes contrarian view”. The group has consistently outperformed and is an attractive long-term buy. 576p
Clean energy will be a key future investment trend as concern over climate change prompts countries and industries to “wean themselves off oil and gas”. This Copenhagen-listed company, which is 50.1% owned by the Danish state and used to be known as Dong Energy, has moved on from hydrocarbons to become a leading player in the construction and operation of offshore wind farms. Ørsted operates across northern Europe and is expanding into the US and Taiwan. DKK517
The Sunday Telegraph
Heightened concern over terror and cyberattacks means bigger defence budgets and more demand for “sophisticated detection systems”. This defence contractor was spun out of the Ministry of Defence in 2001 and listed in 2006. Now, 13 years later it remains heavily dependent on UK defence contracts, but is also diversifying internationally, with a third of sales now generated overseas. Opportunities in Australia and with the US army look promising, while limited EU exposure means that there is little risk from Brexit. 297.5p
Three to sell
The Sunday Times
Greencore’s £1bn food-to-go-business has quadrupled in eight years, but the sandwich maker now looks “past its sell-by date”. Rising wages and commodity prices are pushing up costs just as the advent of Aldi and Lidl has made supermarkets reluctant to pay more to suppliers. The firm’s decision to sell its US business last year makes it dependent on the uncertain UK market. This is not a business in distress, but with short-sellers piling in, Greencore’s best days may be behind it. Avoid. 196.5p
Standard Life Aberdeen
A “too-good-to-be-true” 8% forecast dividend yield at this asset manager tells you one thing: investors have come to doubt its ability to continue making such generous pay-outs. Last year’s sale of its insurance operation makes Standard Life Aberdeen more dependent than ever on the investment management side, so it hardly bodes well that assets under management fell by 10% last year– a third successive year of net outflows. It also leaves the top line more exposed to equity fluctuations at a time of greater market volatility. 264.75p
Shares in this £95bn mining giant have performed well over the past three years, thanks to good cost discipline, healthy margins, and a growing oil and gas unit. Yet BHP Billiton is also “uncomfortably prone” to serving up nasty surprises, such as the 2015 Samarco dam disaster in Brazil, and outages at copper plants. Add in tax disputes and boardroom governance wrangles and investors would do better to looks elsewhere. 1,796.25p
…and the rest
The Daily Telegraph
Companies should aim to make the best use of shareholders’ capital, but too often they prioritise corporate empire building in low-margin business areas. Not so for specialist insurer Lancashire, which turns down unprofitable business and uses spare cash to pay generous special dividends (652.5p). Shares in Gamma Communications have risen by 20% since the start of this month and there are no signs of growth slowing down. Hold. (1,000p).
UK-focused building materials firm Marshalls has shrugged off Brexit uncertainty to deliver increasing margins, profits and dividends. The shares are not cheap, but the business is well run and the payout looks secure (570.5p). The increasing complexity of products across sectors as diverse as semiconductors, pharmaceuticals and carmakers will drive demand for the precision instruments and controls made by FTSE 250 engineer Spectris (2,696p).
Any good news about the size of a North Sea oil discovery could prove a catalyst for Jersey Oil & Gas (214p). A strong performance and rising synergies at Cineworld’s US Regal Entertainment acquisition should bring down debt. Keep buying (298p). The £1bn of net inflows last year at fund manager Miton Group reflects demand for its “genuinely active” model, which gives managers the freedom to select an unusually wide variety of stocks (58p).
News of another trading slump at womenswear retailer Bonmarché has brought a third profit warning in six months and could ultimately threaten the dividend (29.5p). Avoid Domino’s Pizza: a commercial dispute with its British franchisees and overseas “growing pains” are symptomatic of a maturing business (234.75p).
A German view
More and more people are producing more and more rubbish. Global population growth and the need for more recycling bodes extremely well for Norway’s Tomra Systems, a manufacturer of bottle deposit (also known as reverse vending) machines.
In recent years Tomra has branched out into sensor-based technology for sorting or recycling different materials, says business magazine Der Aktionär; it is now used in industries including food distribution and mining. In the fourth quarter of 2018 sales jumped by 21% year-on-year to NOK2.5bn (£200m) while operating earnings soared by 32% to NOK396m ( £35m). Long-term investors should scoop up the shares on this weakness.
Jeans maker Levi Strauss, which first went public in 1971, returned to the stockmarket last week. The initial public offering (IPO) was priced at $17 a share, reflecting a market value of $6.6bn,and had eclipsed $22 by the end of the week. But don’t get too excited, says Timothy Green on Motley Fool. Sales and operating income may have grown by 14% and 13% respectively last year, but “a single year doesn’t make a trend”. It’s far from clear that the group has worked out how to grow consistently: over the past 20 years sales have gone nowhere and operating profits have been “erratic”. That makes a price/earnings (p/e) ratio of 30 – or 20 if a one-off tax charge is ignored – a bit steep.