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
AFH Financial Group
An ageing population means more people than ever are seeking financial advice in advance of retirement, which is good news for this financial planner. Its customers are mostly aged between 55 and 70, with "a decent amount of cash to invest". The group puts more money into bonds and property than many of its peers, so it's less exposed to equity fluctuations and more attractive to cautious savers. AFH listed on Aim in 2014 and is "set to double in size" over the next three to five years. The progressive dividend policy also appeals. 320p
Mike Ashley once declared that "JD is crap", but the retailer has outperformed Ashley's Sports Direct in recent years. Chairman Peter Cowgill persuaded top brands such as Nike and Adidas to give his stores exclusivity over new products and also got in early on the "athleisure" trend. Now overseas opportunity beckons the company already makes 55% of sales outside the UK and is expanding operations in America. The shares have risen to a "punchy" 19 times next year's earnings, but this investment "has the makings of a marathon, not a sprint". Buy. 620p
London Stock Exchange Group
Stock exchanges worldwideare consolidating, which means a big "defensive moat" and high barriers to entry for would-be competitors. That ensures that margins and profits should stay robust for shareholders. It also bodes well that high-profile boardroom spats at the London Stock Exchange Group have finally been resolved, says Mike Fox of the Royal London Sustainable Leaders fund. 5,186p
Three to sell
This online "scrapbook" went public last month in New York. People use the social media platform to "find inspiration for their lives" but we doubt it will enjoy long-term success. It faces stiff competition in this space from the likes of Facebook, Instagram and Snap. Pinterest made a $63m net loss last year and is still in the early stages of monetising its activities through advertising, which is not very encouraging for a firm founded in 2010. And how will the business model fare if advertisers cut back in a downturn? $29.05
Strong cash generation and a "fat" forward dividend yield at this housebuilder appear to have blinded investors to worsening market conditions. Forward sales were £100m lower during the first four months of 2019 compared with the same period in 2018, while building costs are on the rise. Tighter eligibility criteria for Help to Buy only first-time buyers can use the scheme from 2021 also clouds the medium-term outlook. With the shares trading at more than two times forecast book value, they are due a fall. 2,190p
Bakkavor shareholders may be relieved to see the proposed Sainsbury's and Asda tie-up blocked on competition grounds but that is no reason to buy in. The group supplies pre-prepared foods to all of Britain's major supermarkets and could have been squeezed by a more powerful end-client. Yet higher milk and produce prices mean margins are coming under pressure anyway. Nor is the group especially cash-rich. Avoid. 118.75p
...and the rest
The Daily Telegraph
American cloud-computing business Zscaler is growing rapidly and has become profitable ahead of schedule ($66.36). A proposed merger between McGraw-Hill and Cengage will only accelerate a trend towards new ways of delivering educational resources and further undermine publisher Pearson's business model. Sell (810.5p).
Don't take fright after a share price pullback at Ferguson. The world's top trade distributor of plumbing and heating products has "strong foundations" and looks cheap (5,454p). Growing adoption of interactive and LED screens is good news for audio-visual trade supplier Midwich (628p). UK rail passenger numbers could double in 25 years, so "get on board" transport-software provider Tracsis (670p).
The Mail on Sunday
Profits at BT may tread water in the next few years as boss Philip Jansen tries to turn things around, but shareholders should hold on and enjoy the 7% dividend yield (209p).
FTSE 250 car industry supplier TI Fluid Systems offers a rare combination of earnings growth and yield, and trades on just 6.5 times next year's earnings (207p). Irn-Bru maker A.G. Barr is not cheap but is debt-free, dependable and defensive (817p). Resist the temptation to take profits following an excellent share price run at Next: "copious cash generation" and a "best-in-class" management team mean it is well-placed to navigate the high street storms (5,722p). Plant-based burger maker Beyond Meat is "priced for perfection"; however, it has "the right ingredients" for success. Consider it as "a bit of fun" within a diversified portfolio ($72.25).
A German view
Investors should look closely at Fielmann, says WirtchaftsWoche. The chain of opticians is Germany's biggest, accounting for half the glasses sold in the country; it also produces sunglasses, contact lenses and hearing aids. It has managed to grow sales for 15 years in a row, and an ageing population should ensure plenty of growth ahead. It is now concentrating on high-margin varifocals, growing the international business and the digital division. Customers will be able to take eye tests and try out glasses online thanks to 3D, augmented-reality technology provided by a recent acquisition, France's FittingBox. The balance sheet is solid and the stock yields 3.2%.
The latest initial public offering (IPO) from China "has plenty of froth", says Jacky Wong in The Wall Street Journal. Beijing-based Luckin Coffee, the Middle Kingdom's biggest coffee chain after Starbucks, is raising roughly $560m on America's Nasdaq exchange, implying an overall valuation of almost $4bn. It appears to be trying to cash in on the ongoing technology hype. Customers can order their drink with an app and have it brought to them within 30 minutes. Like other big tech names, however, Luckin isn't making any money. Expanding from nine outlets in 2017 to more than 2,000 today has seen it burn through cash and lose $300m in the past four quarters.