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
This educational products supplier sells IT equipment and footballs to schools, and e-marking software to examination boards. The group took a major hit when the government’s Building Schools for the Future programme was axed in 2010, but the hangover has left the shares cheap even as it has managed an impressive turnaround to become “highly profitable” once more. A price/earnings (p/e) ratio below 12 looks good value for “a decent business”. 236p
The Renewables Infrastructure Group
The Sunday Times
This FTSE 250 green investor, known as “Trig”, owns wind, solar and battery farms across Europe. Last year its assets generated enough electricity to power more than half a million homes, with most earnings coming from reliable fixed-price contracts and subsidies. The shares trade at a 12.9% premium to net asset value, but that is similar to peers and there is a 5.6% dividend yield to boot. 126p
Royal Dutch Shell
A market cap of more than £200bn makes the Anglo-Dutch oil major by far the largest company on the UK stockmarket, accounting for about 10% of the FTSE 100 index. That makes its performance and generous dividend – it yields 5.7% – a crucial consideration for most British investors. Some worry that the long-term shift to renewable energy will leave it obsolete, but the world will not wean itself off fossil fuels overnight. That means Shell, which has not cut its dividend since World War II, should remain a core income play for some time. 2,552p
Three to sell
Shares in the AA have lost more than three-quarters of their value since they listed in 2014. Paid personal membership continues to decline, slipping 2% in the year to the end of January to 3.21 million. That has prompted more spending designed to “attract and retain” customers, which in turn has put pressure on margins. The group is “drowning in debt” and a Financial Conduct Authority study of insurance pricing practices could generate regulatory problems. Avoid this “value trap”. 58.8p
Marks & Spencer
The Mail on Sunday
Investors in M&S have endured yet “another set of disappointing results”. A faltering turnaround has left the shares at a ten-year low and down more than 40% since Steve Rowe took charge three years ago. The retailer is pinning its hopes on a tie-up with unprofitable Ocado, which is to be funded by a one-for-five rights issue at £1.85. All but diehard “loyalists” should sell their rights in the market rather than take them up, and consider opting for some “higher growth and better-value retailers”. 225p
The Sunday Telegraph
The recent collapse of Jamie’s Italian is a reminder that high-street dining can make for a perilous investment. Restaurant Group operates more than 650 sites in an overcrowded market. The group’s “tired formats”, such as Frankie & Benny’s, are too often to be found in bad locations, such as struggling leisure parks. Last year’s pricey £559m Wagamama acquisition was meant to correct that, but it may not make up for weakness in other brands. Given the risks, this firm “is a long way from being dish of the day.” 130p
…and the rest
The Daily Telegraph
Impressive loan-book growth at specialist lender OneSavings Bank suggests that the “death of buy-to-let has been greatly exaggerated” (407.4p). Shares in investment platform AJ Bell have enjoyed strong price momentum since listing in December, but on 44 times forecast earnings it would be wise to take profits (423p).
Some of the best returns come from early stage tech firms. Venture capital business Draper Esprit offers a ticket into a world that is difficult to access for retail investors and boasts an excellent record (461p). Specialist IT training and consultancy business FDM is delivering steady growth and pays a 4.2% forward dividend yield (943p).
Energy, healthcare and technology distribution specialist DCC is highly disciplined and its different business lines offer diversification (6,668p). SANNE Group is a funds administrator carrying out back-office paperwork for firms. Growth has been strong, but with the shares more than tripling since listing in 2015 they now look fully valued – avoid (685p). New government subsidies for offshore electricity generation could “put the wind back” into energy firm SSE’s “sails after a torrid year” – buy (1,044.5p). The brick market is structurally undersupplied, so market leader Ibstock could make for a “useful building block” in any portfolio (242.7p). Motor-finance lender S&U offers the “winning combination” of a high dividend yield and growth at a decent price (2,220p). Technology giant-focused Scottish Mortgage Trust looks a “superb” long-term investment (507.5p).
A German view
Building materials are a long-term growth market, says WirtschaftsWoche. Population growth, urbanisation and investment in infrastructure are boosting global demand for concrete, cement and aggregates by 2%-3% a year. That bodes well for LafargeHolcim, the industry’s biggest player with a market capitalisation of €28bn. It is heading for a record year. The building booms in North America and Europe, which jointly comprise 49% of sales, are keeping order books full, while rising cement prices in India are also fuelling growth. Sales climbed by 6% year-on-year in the first quarter while operating profits jumped by a fifth. The stock yields almost 4%.
The online rail and bus ticket sales platform Trainline is set to float in London next month, says Elizabeth Burden in The Times. The group, which now sells tickets for 220 rail and bus brands in 45 countries, was founded by Virgin Trains in 1997. It was subsequently owned by two private-equity companies. The second, KKR, is now taking it public after acquiring it for £500m in 2015. Trainline plans to raise around £75m to fund future growth. Its initial public offering (IPO) could see it reach an overall value of £1.5bn. Business is booming: sales have doubled since 2015, reaching £3.2bn in the 12 months to February 2019. Operating profits jumped to £10.5m after three years of losses.