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 Telegraph
A record of reliable performance has made this distributor of paper plates and surgical gloves something of a support services “pin-up”. Exposure to the US used to be a boon as a weak pound flattered revenues, but news of a hiccup stateside – underlying revenue growth has disappointed – sent investors “running for cover”. It is a sign that the “solid returns” of the past may be harder to come by, but on 16.5 times this year’s earnings and with scope to grow through acquisitions, it’s a buy. 2,090p
Britain’s biggest spread-betting firm has had a torrid few years, squeezed between tougher regulations on one side and periods of relative calm in markets (which reduces the number of punters) on the other. This is a “racy industry”, but a lot of the risks are in the price and the outlook has brightened: the return of volatility in recent months is bringing back customers, while management is focusing on growth opportunities in Japan and Hong Kong after new European rules clipped its wings. Buy. 534.25p
A decision to raise its full-year dividend to 5.77p is a testament to the defensive qualities of the UK’s biggest grocer. Investors fear that competition from discounters Lidl and Aldi will squeeze margins at the big players, but Tesco is exposed to the convenience-store trend and will benefit from the demise of the Asda-Sainsbury’s merger. Scaling back operations at Tesco Bank shows a welcome commitment to capital discipline. 237p
Three to sell
The Mail on Sunday
News of a dividend cut “sounds the last post” for Royal Mail’s investors. As letter volumes fall, management has pinned its hopes on “parcels and productivity”, but the plan has failed to deliver. Chief executive Rico Back has admitted that the dividend will fall from 25p this year to 15p next, while the service also faces the prospect of renationalisation by any Corbyn-led government (see page 20). A 7%+ yield may still tempt “die-hard income seekers”, but everyone else should sell. 211p
The number-two player in UK funerals used to deliver strong profits. Growing competition has shown this results from “a poorly functioning market” rather than any competitive advantage, prompting a Competition and Markets Authority probe. Average income per funeral fell from £3,222 to £2,973 last year as management fought for market share. A “mammoth” debt pile adds to the risks. 659p
More than a year on from the demise of Carillion, sentiment towards construction firms such as Kier remains “at rock bottom”. A “startling likeness” to the fallen outsourcer in the way in which Kier accounts for supply-chain finance is not helping matters and means that the company’s real debt situation has “arguably been understated”. The shares might look good value – they are changing hands for “next to nothing” – but continuing pressure on margins and a near-80% cut in the dividend mean that there is little upside in prospect. 312.5p
…and the rest
The market has shrugged off Facebook’s plans to launch a cryptocurrency – experience with Apple Pay has shown that Mastercard, Visa and PayPal have staying power ($257; $164.25; $112.5).
The Daily Telegraph
Ediston Property Investment trust has raised its dividend, but a move into retail parks is too bold for our taste, given the current climate – sell (104.25p). A 60% share-price plunge at recruiter Staffline following a negative trading update looks overdone – hold (326.5p).
More households than ever are switching energy suppliers, which should underpin growth at price-comparison website moneysupermarket.com (370p). Strong demand for rented houses and a shortage of new housing means reliable and growing income for residential landlord Grainger (259.5p).
The Mail on Sunday
Aim-listed cell-therapy group MaxCyte is working with top pharmaceutical groups and has the backing of some big institutional investors – expect the shares to rise (161p).
Stem (science, technology, engineering and maths) recruiter SThree trades at a 30%-40% discount to global peers despite great growth prospects and strong international diversification (290p). Media business and data-analytics specialist Euromoney issued a forecast-beating trading update – buy (1,376p).
The US move against Chinese tech has clouded the outlook for Cardiff-based chipmaker IQE, but it is well-placed to benefit from 5G – hold until the “Huawei fog lifts” (70.25p).
A German view
Qiagen is a core healthcare holding, says WirtschaftsWoche. The Dutch-German group provides a wide range of products to help diagnose diseases. Its most famous offering is QuantiFERON, a blood test to identify tuberculosis that has been applied to 60 million people. “Demand is huge” – 1.6 million die of the disease every year, reports the World Health Organisation. QuantiFERON accounts for a tenth of sales, while new tests for meningitis could be approved in the US soon. Oncology is a growing industry for Qiagen too – testing the effect of various treatments helps doctors tailor treatments to patients. Sales are expected to grow by 7% to €1.4bn in 2019 – a 15th successive year of growth.
Finally, an initial public offering (IPO) outside the tech sector: Hollywood talent agency Endeavour (whose clients include singer Rihanna and actress Charlize Theron) plans to float later this year. The group, valued at $6.3bn in 2017, has diversified into fashion, marketing and sports, notes the Financial Times. In 2016 it bought UFC, the mixed martial arts league, for $4bn, one of the biggest sports deals on record. But most of its sales stem from licensing or creating content for television and streaming networks. Cashing in on the content craze bodes well for long-term growth. A record 500 television shows were commissioned last year, thanks to the burgeoning streaming industry.