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.

Three to buy

Morgan Advanced Materials

Shares

There is more demand than ever for new, smart materials for use in everything from solar panels to microchips. This materials engineer is at the cutting edge of the new industrial revolution. It makes high-performance ceramic and carbon-based products that are highly specialised, which limits competition. A disappointing few years have left the shares trading on a deep discount of less than ten times 2020 forecast earnings. That implies considerable upside potential for shareholders. 246.25p

Nestlé

Barron’s

The world’s largest packaged-foods business is “having a great year”. Shares in the Swiss corporation have gained 30% in the past 12 months as it has “[upgraded] its cupboard”: a licensing deal with Starbucks and plans to launch its own pea-based burger shows that management has its finger on the consumer pulse. The group also has significant pricing power, which provides protection against inflation. On a yield of 2.3% this defensive consumer play is a competitive alternative to bonds. Expect the recent “tasty gains” to continue. CHF108

Tritax Big Box

The Sunday Telegraph

This real estate investment trust (Reit) is a play on the e-commerce boom. Tritax owns very large logistics warehouses in Britain, leaving it ideally placed as retailers boost their online offerings. Retail e-commerce revenue is expected to rise at “an annualised rate” of 6% until 2023. Big land investments this year give Tritax scope to “more than double” its portfolio. On a price-to-book ratio of just 0.9, the shares are a buy. 140p


Three to sell

Photo-Me International

Investors Chronicle

Known for its photobooths, Photo-Me also makes unmanned equipment for use in laundry and digital-printing kiosks. It has 46,700 unattended vending units across Europe and Asia. Falling sales and profits – caused by declining high-street footfall – have prompted management to focus on growing operations in the “fresh juice and banking” arenas. Yet we fear that this may mean a loss of focus on the core business and the task of managing diversification across multiple markets is fraught with risk. Sell. 103p

Sage

The Sunday Times

Britain’s biggest listed tech company must reinvent itself lest it be “dragged into the corporate graveyard”. The accountancy software business is struggling to adapt to the rise of cloud-based computing, which requires it to switch to a subscription-based model. Software subscriptions rose 28% in the nine months to June. That leaves Sage a “straggler” compared with peers. With the shares down 14% since July, investors seem to be losing patience. Overseas earnings have been flattered by the weak pound. Avoid. 700p

System1

Money Observer

This market-research agency uses insights from behavioural science to evaluate the success of advertising campaigns. Often the best ones – such as “John Lewis Christmas advertisements” – say “next to nothing about the product”, they just make people feel good. Yet for all its expertise, the business has struggled to secure work with marketeers at the big brand owners and revenue has been flat. Its new Ad Ratings app – which allows advertisers to compare the performance of their advertisements with those of rivals – is a bold plan, but could prove a long shot. It is time to cut losses. Sell. 214p


…and the rest

Investors Chronicle

Clothing retailer N Brown has a diversified portfolio and serves niche markets, yet many sales are made on credit and with arrears rising the business is badly prepared for a downturn. A recent dividend cut bodes ill too. Sell (110p). More and more businesses are turning to outsourcing to fulfil complex regulatory requirements. That leaves compliance specialist Marlowe with ample scope for growth in a fragmented market (405p).

Shares

Temple Bar Investment Trust’s portfolio of cheap, dividend-paying stocks should outperform if markets turn sour (1,170p). An encouraging update at Middle East and Africa digital-payments operator Network International shows this is a “story with long-term growth potential” (597p).

The Daily Telegraph

New Zealand-based infrastructure investment trust Infratil specialises in “alternative” assets, such as data centres and mobile-phone towers, which offer superior returns (NZ$4.60).

The Times

Avoid shipbroker Clarksons: with global trade in decline and uncertainty over tariffs rampant, sentiment is anything but buoyant (2,320p). Marshalls, Britain’s biggest provider of paving and landscaping products, is a high-growth business that investors think will shrug off a downturn (692.5p). A turnaround at Imperial Leather soaps maker PZ Cussons will take time. Trading on 16.6 times forecast earnings, the shares are not attractively priced – avoid (205.5p). PureTech Health invests in a promising portfolio of science and technology firms. Buy (292p).


A German view

Investors should dip their toes into Fluidra, says Börse Online. This family-run Spanish company is the leader in a fragmented market: it supplies all the key components of residential and commercial swimming pools (everything except the concrete and the water) and all the paraphernalia needed to maintain them. Sales and profits are set to rise now that Fluidra has completed the acquisition of a US rival, Zodiac, a key player in the industry’s most important market. The overall sector turns over around €7bn a year and Fluidra aims to expand its share of the pie to €1.7bn in three years, from €1bn now. As pools age they require more looking after, while emerging markets should also drive growth.


IPO watch

This has been the worst year for European initial public offerings (IPOs) since the financial crisis. A mere 84 companies have listed this year, say Justina Lee and Swetha Gopinath on Bloomberg, raising the lowest amount of money since 2013. It hardly helps that European growth is turning down, while a dearth of fast-growing tech unicorns has tempered animal spirits too. But as on Wall Street, IPOs appear to be in structural decline. The number of stocks listed in developed Europe has fallen by 29% since 2000. There is plenty of money floating around in the private market these days, so firms remain private for longer. Cheap credit also reduces the demand for equity funding.