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 Mail on Sunday
Fuel cells have been "around for years", but uptake has been limited because many require "expensive materials" such as platinum to function. Ceres Power's cells are made from ordinary steel and use hydrogen or natural gas to generate electricity and heat. That makes them more environmentally friendly, cost-effective and efficient. The group is loss-making for now, but sales are growing fast and it has partnered with Germany's Bosch and other big businesses in Asia and America. 175p
This digital outdoor advertising specialist is already the fourth-largest player in the UK market, where it sells advertising space in prominent locations. Outdoor marketing looks a good bet at a time when big businesses are worried about being associated with online extremist content. The London-listed group has also developed vehicle-detection technology that could one day display different advertisements depending on the type of car driving past. This industry has come a long way since the days of "a guy with a ladder pasting a poster to a wall". $7.80
The Daily Telegraph
This technology group boasts an extraordinary monopoly: the wholesale rights for "top-level" internet addresses including .com, .net and .gov. Its registries account for roughly 50% of all global domain names, especially the popular ".com". Operating margins are 60% and continued internet penetration among small businesses will fuel further growth. The shares are not cheap, but buy on any dips. $189.39
Three to buy
The Sunday Times
News that this peer-to-peer lender is winding down its investment trust is a warning sign. The sector has flourished since the financial crisis, stepping in to fill a lending void to small businesses and giving investors a decent interest rate in return. Yet as growth slows, defaults and insolvencies are on the rise; losses rose to more than £50m last year. The shares floated at 440p last September, but could "struggle to recover" those "heady" levels. Sell. 326p
Shares in this transport group have lost a fifth in three weeks on news that the government has disqualified all three of its current bids to run rail franchises. That leaves it more reliant than ever on its UK bus division, but this faces "long-term structural challenges" owing to falling consumer footfall on high streets. Net debt in October stood at a "staggering" £463m. The shares aren't expensive, yet prospects "may get worse before they get better". It's time to sell. 120p
A worsening geopolitical outlook has led to higher military budgets in recent years, yet valuations in the defence sector now look too high. The US is unlikely to boost military spending much further, while the UK defence budget is threatened by both weaker growth and a Jeremy Corbyn-led government. Growing scrutiny of arms sales to Saudi Arabia where BAE makes 17% of sales also bode ill. Poor results from recent development programmes mean BAE may have to spend more on investment, hitting cash flow. 504p
...and the rest
The Daily Telegraph
Some profit-taking at station and airport caterer SSP may be in order following a 73% gain in just over two years. But growth in global air travel and expansion in the US mean that it is worth keeping some of the shares for the long term (714p).
FTSE 100 insurer RSA operates in an "overcrowded" and competitive sector and looks somewhat "accident-prone" avoid (546p). McColl's Retail offers exposure to the growing convenience market, but with competition intense and costs rising investors should steer clear for now (80p).
Peppa Pig-maker Entertainment One looks a likely takeover target amid a mergers and acquisitions "feeding frenzy" in the media content market (462p). Analysts have repeatedly downgraded staffing group Impellam because of a worsening outlook, yet the stock still trades at an unwarranted premium valuation sell (460p).
Student accommodation-focused real-estate investment trust Unite Group will not suffer from Brexit: just 2% of its users are EU nationals and the portfolio is tilted towards elite institutions where demand is more stable (925p).
Aim-listed Filta, which recycles cooking oil from the likes of McDonald's, is demonstrating that "where there's muck there's brass" buy (222p). Kurdistan-focused oil play Gulf Keystone Petroleum is not an investment for the faint-hearted, but special dividends mean that it could yield almost 7% in 2019 (247p). Tougher regulation and the threat of a Labour government have hit shares in National Grid, but the dividend looks reasonably secure and it yields 5.7%(819p).
An American view
US trainers retailer Foot Locker appears to have found its feet after a turbulent year, says Jack Hough in Barron's. That was largely due to some rare "fashion misses" by key customer Nike, but things are now back on track. More popular Nike trainers helped boost sales by an annual 10% in the three months to the end of January. Analysts are pencilling in an 11% rise in earnings per share for Foot Locker this year, while the group's gradual shift from basic retail outlets to "experience-based stores" looks promising. These large venues offer city-specific shoe designs and treats such as visits by athletes and musicians, along with collection points for goods ordered online. The stock yields 2.5%.
There are finally signs of life in the Dubai initial public offering (IPO) market. Following a 17-month hiatus, three flotations are now looking likely, according to Dubai Financial Market, which operates Dubai's stock exchange. The companies in question are reportedly in the industrials, oil and gas and healthcare sectors. A fall in oil prices in recent years has reduced the appeal and liquidity of regional markets, notes Filipe Pacheco on Bloomberg. Companies from the United Arab Emirates seem popular elsewhere, however, judging by the successful recent flotation in London of Dubai-based payments processor Network International.