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
An arms race between major video-games studios means that the “geeks have never been more in demand”. That is good news for Keyword Studios, one of the biggest providers of third-party services to the industry: it helps developers with everything from visual effects to games testing. The growing complexity of games means that such outsourcing may grow more quickly than the broader market. Google’s recent announcement of new investments in “cloud gaming” also bodes well. 1,156p
Pension freedom reforms have increased the demand for professional financial advice, with independent financial advisers (IFAs) moving in to fill a gap left by big banks in the wake of the PPI scandal. SimplyBiz helps IFAs with compliance and business services. It listed last year and has performed strongly, with sales gaining 15% and operating profit climbing by 20% in the year to December. The group’s online Centra support platform, billed as a “one-stop shop” for financial planners, also gives it a stake in the wider shift to a digital economy. 206.04p
The Mail on Sunday
More and more savers are opting for “passive” market trackers, but this boutique fund shows that there is still room for clever money managers. Profits jumped by 34% in 2018, when the fund attracted more than £1bn in new money. Many active investment funds are glorified trackers with high fees, but Miton’s “genuinely active” approach encourages managers to opt for stocks with strong fundamentals and, hopefully, higher returns. 55p
Three to sell
Lyft became the first ride-hailing start-up to go public last week. The shares promptly surged, valuing the business at more than $24bn. Investors are excited about Lyft’s promises to disrupt the transportation market and eventually deliver 20% profit margins. Yet Lyft, which has an image as a more socially responsible “anti-Uber”, made a loss of $911m in 2018 and “doesn’t appear to be anywhere close to profitability”. America’s number-two ride-sharing, America-focused app also lacks Uber’s international exposure and the industry faces growing regulatory risks. “Avoid booking a ride.” $85
The Sunday Telegraph
One year on from the introduction of the sugar tax and drinks makers have defied predictions of doom, with performance boosted by last year’s long, hot summer. Shares in the maker of Robinsons and J2O have gained 33% since 2017 and now trade on 16 times this year’s forecast earnings. That is not expensive, but given a tough trading outlook in France and a new plastics tax on the horizon it would be sensible to bank some profits now. 952.5p
Aston Martin Lagonda
Shares in this luxury carmaker have been “in Skyfall” since listing for £19 last October. Elevated debt levels, concern over accounting policies and fears that a no-deal Brexit will hit suppliers have all contributed to the slide. Management’s ambitious growth plans sound positive, but some investors fear that overexpansion could put a dent in the exclusivity and prestige of the group’s brand. A post-float lock-up on share sales by former owners ends this month, creating another potential downside catalyst. Sell. 1,039p
…and the rest
Discounter B&M European Value Retail will benefit from a consumer shift towards value and convenience. It is also resilient because during downturns floods of cash-conscious shoppers come through its doors (372.75p). Cruise operator Carnival offers exposure to trends such as population ageing and Chinese tourism (3,797p). The London Stock Exchange is exposed to “some of the strongest structural trends in the finance industry”, including exchange-traded funds (ETFs), over-the-counter (OTC) clearing and quant investing (4,627p). Foreign exchange specialist Alpha FX is growing strongly, but has barely scratched the surface of a vast market (670p).
The Daily Telegraph
Boss Geoff Wilding has transformed Victoria, which makes carpets for the royal family, into a pan-European flooring operation, but heavy debts have kept a lid on the share price. It’s a buy for the brave (438.5p).
Kazakhstan-based Nostrum Oil & Gas looks too exposed to oil-price volatility and keeps missing supply targets – sell (97p). Shares in US-focused healthcare service provider Cello Health look good value for a business with good growth prospects in a consolidating market (125p).
Primark-to-groceries firm Associated British Foods is a quality business, but on a modest 2% yield and 17.3 times forecast earnings there is better value elsewhere (2,370p). There is fierce competition among motor insurers, but Sabre Insurance’s small, focused operation and margin discipline appeal (286p).
An American view
People all over the world are lavishing more care and attention on their pets. Meanwhile, as consumers in emerging markets get richer, their protein intake increases. These trends explain why the global animal-health market is worth $36bn and set to grow by 5% a year between 2017 and 2023. A key beneficiary will be Zoetis, the world’s number-one producer of medicines and vaccinations for pets and livestock. It’s “firing on all cylinders”, says Lawrence Strauss in Barron’s. Sales are climbing at a mid-single-digit rate, while net margins have doubled to 24% since 2013. It has a strong line up of popular drugs, “solid management” and an “effective” research and development department.
Africa’s first unicorn (a privately owned start-up worth over $1bn – see page 7) plans to list in New York. Jumia, launched in 2012 in Lagos, is an e-commerce platform selling everything from household furniture to gadgets such as smartphones, says Euan Jones on Seeking Alpha. It has been compared to Amazon or China’s Alibaba; its services include an online marketplace connecting companies (the business-to-business, or B2B, division). Jumia’s sales are rising, but it has yet to make a profit. There should be ample scope for growth, however. McKinsey, a consultancy, estimates that Africa’s e-commerce market should be worth a “whopping” $75bn by 2025.