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
This Aim-listed business specialises in managing fat, oil and grease for commercial kitchens. Filta works with more than 6,000 customers each week – including the likes of McDonald’s, Pizza Hut and Hilton hotels – to drain and filter their used cooking oil. Most of the fat can be recycled, making it an environmentally-friendly operation. Many restaurants still use inefficient processes to clean their frying vats themselves, which presents a huge growth opportunity in the UK, US and Germany. 156p
Bank of America
Bank of America, one of America’s “big four” banks, was “almost destroyed” during the financial crisis but has since bounced back. The shares slumped to $3.14 in March 2009 but today trade at $30.17, a reminder that “real money is often made when others think there isn’t any opportunity and the risks seem high”. For all the talk of a coming recession, this is a well-run company that counts Warren Buffett as its biggest shareholder. “People will always need to borrow and manage money”, while a 2.4% dividend yield is “like a cherry atop a sundae”. $30.17
The aerospace and defence sectors are booming. That bodes well for this engineer, which makes parts for wheels, brakes, valves and sensors. Civil aerospace accounts for 55% of revenue; three-quarters of military sales are made to the US armed forces. The £4.9bn business is set to rejoin the FTSE 100 this month after a four-year hiatus. The shares are “not overly expensive” for a well-managed firm with good growth opportunities. 632p
Three to sell
Higher gaming duties in the UK and Europe have dented profits at this Gibraltar-based casino. Half-year results showed that earnings before interest, tax, depreciation and amortisation fell 20% to $41.8m. Fierce competition saw poker revenue slump 24%. That was meant to be offset by rapid growth in the casino operation, but on these numbers it remains to be seen whether the business is on a sustainable growth path. Take profits. 157p
Halfords sells car parts and bicycles through a network of 451 stores in the UK and Ireland, while a fifth of total sales are made online. Management has blamed the second profit warning in a year on the weather and the general gloom on the high street. The company is reacting to falling sales by trying to improve efficiencies, but a pattern of downward revisions to guidance makes us wary. This business seems to have stalled and “a big dividend cut looks a given”. 172p
Motley Fool UK
This litigation finance provider has been locked in a war of claim and counter-claim after a report from US short-seller Muddy Waters criticised its business and accounting practices. Burford has responded by replacing its finance director but there could be further downside ahead. If questions about the firm undermine Burford’s ability to raise capital then its business model may be at risk. With shares on a price-to-tangible book value of 1.4, in the worst-case scenario the price could fall 30%. Don’t wait around to see what happens next. 856p
…and the rest
Chemicals firm Synthomer is trading close to its lowest rating in a decade but is “on the cusp of global expansion” amid booming demand for its products. Just keep an eye on rising debt levels. Buy (330p). Next is deftly managing the move online and is one of our favourite businesses on the London market – buy (6,134p). Shares in AstraZeneca hit a record high earlier this month on news of positive drug trials. Yet on the current rating any minor setback will hit the shares, so sell (6,857p).
Language and intellectual property specialist RWS helps clients to navigate foreign business environments. There are promising expansion opportunities in China and there is plenty of scope to consolidate a fragmented market. Buy (606p). A weak diamond market has hit sales at Gem Diamonds and with no dividend to enjoy through the bad times it is time to sell (75p).
The Mail on Sunday
Existing shareholders may wish to take some profits after shares in pet drugs maker Dechra Pharmaceuticals more than tripled over the past four years. However, they should hold onto most of their stake as pet ownership becomes a new status symbol in the developing world (2,890p).
Buy catering business Compass Group. Its US operations are booming and European markets are proving resilient (2,010p). Tech investor Draper Esprit is a rarity on the London exchange: “a listed venture capital firm that aims to give ordinary shareholders access to private equity-like returns”. It is reasonably priced, too (464p). Lloyds Banking Group has turned itself around since the crisis, but its large exposure to British consumers looks unwise. Avoid (52.5p).
A German view
Care homes are a long-term growth market, says Wirtschaftswoche. Another one million people are expected to need carers in the next 15 years; if a third of them – the same proportion as today – end up in a home, that means another 230,000 places will be required. Private care homes are expanding very quickly. Enter France’s Orpea, a European leader in this field. It operates 950 facilities with around 97,000 beds across 14 countries. Overall sales rose by almost 10% to €1.84bn in the first half. Homes containing another 17,400 beds are in the pipeline. The group is also eyeing up Latin America, where another 700,000 people are expected to need care over the next decade.
Europe has a new technology giant. Prosus, a collection of consumer internet investments belonging to South African e-commerce group Naspers, floated in Amsterdam last week. It was valued at €125bn, making it the exchange’s third-biggest firm after Shell and Unilever. Prosus contains Naspers’ 31% in Tencent, the Chinese social media group that boasts the popular WeChat platform. Naspers’ $34m punt on Tencent at its inception in 2001 was “one of the most lucrative bets in corporate history”, says Toby Sterling on Reuters. Tencent is now worth $130bn. Prosus shares are being distributed to Naspers’ shareholders rather than being sold directly to the public.