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
From concerts and sports arenas to festivals and high streets, LED screens are now “pervasive in the business and entertainment worlds”. Midwich, the largest independent audio-visual company in the world, sits at the centre of this global growth industry. It installs display screens for Ferrari showrooms and is working on the audio equipment for Tottenham Hotspur’s new stadium. The business is expanding at a “fair clip”, having grown sales every year since 2006. Buy. 526p
Triple Point Social Housing Reit
The Daily Telegraph
With ten-year gilts yielding 0.7%, rental yields above 5% look highly appealing. This real estate investment trust (Reit) owns social housing, renting out buildings to state-backed housing associations. Its specialism – supported housing for vulnerable adults – is “well down Jeremy Corbyn’s list” of nationalisation targets should he come to power. Many of the leases are index-linked, and the trust has “made little use of borrowed money”. On a discount of 15.2% this is a “secure income stream at a highly attractive price”. 88.25p
One of the most intriguing flotations this year is RealReal, a $1.5bn luxury resale specialist. Its staff authenticate the jewellery, watches and brands that are sold in its marketplace by consignors. That reassures internet buyers that they are purchasing the real deal. The business keeps an average of 37% of the sale price, a handsome “take rate”. This is an intriguing long-term tech play operating in a fragmented market. $16.93
Three to sell
This American TV streaming giant’s fans point to the group’s leading market position and the scope for overseas growth. Yet the bull case rests on subscriber growth and that has been slowing, with 2.7 million new customers in the second quarter falling well short of analyst predictions of five million. Growing competition from the likes of Amazon and Disney will force the business to continue spending heavily on original content, which could hamper long-term profitability. With debts forecast to “top $10bn by the end of 2019” the risk is too great at the current price. Avoid. $295.27
This “former stockmarket darling” is struggling with “declining profit quality, rising debt and slowing growth”. Plans to grow the UK store estate from 1,103 to 1,600 have come unstuck as franchisees worry that the openings will cannibalise their existing client bases. The dispute with franchisees is unlikely to be resolved quickly. A loss-making overseas division does not help. There may be further downside before a new boss turns things around. Sell. 250p
The Sunday Times
The Burford Capital imbroglio has thrust other litigation funders into the spotlight. This insolvency litigation specialist, which helps creditors claw money back from businesses that have gone bust, raised £16m when it listed last year. Management says that the shorter duration of its cases helps it dodge the uncertainties that have dogged Burford. Still, with the sector under the microscope all but the bravest investors will steer clear. 510p
…and the rest
A pork shortage in China caused by African swine fever presents a significant growth opportunity for animal genetics specialist Genus (2,846p). JPMorgan Global Emerging Markets Income Trust’s focus on stable, well-governed companies helps investors to mitigate some of the risks of investing in developing economies (136.5p). Shares in corporate online trainer Learning Technologies are up almost 60% in five months but solid first-half results mean they are still worth buying (119.75p).
Northern England-focused housebuilder MJ Gleeson is bucking negative trends hitting its southern counterparts. A potential dividend yield of 4.4% is attractive for a business that is more defensive than industry peers (846p). Business is booming at music and audio products specialist Focusrite amid rapid growth in the global market for recorded music: buy (530p). A cooling global economy and the grounding of the Boeing 737 Max are weighing on performance at aviation services business John Menzies. Throw in high debt levels and “investors should disembark” (394p).
Stockbroker and investments provider AJ Bell is well-positioned to tap into the long-term structural growth in savings and investment among the UK population (409.5p). Housebuilder Springfield Properties has huge opportunities in its Scottish home market, where demand is more robust than south of the border (110p). Shares in car retailer Pendragon have fallen by more than two-thirds since the spring owing to poor car sales, a botched expansion strategy and a dispute with a business partner. Springfield also has no boss at present. It has “managed to reverse itself into a wall” – avoid (9.75p).
A German view
Krones lost €3m in the second quarter of 2019, notes Wirtschaftswoche: high labour and material costs were key culprits. But the long-term outlook for the group, which notched up sales of €3.85bn last year, is auspicious. It provides beverage bottlers and food groups with individual machines and entire production lines to make and fill food packages and drinks containers. Global population growth and rising demand for food and drink imply steady revenue growth for years to come. A new factory in Hungary, due to open next year, should provide a near-term fillip. The stock looks reasonably priced on a 2020 price/earnings ratio of 11 and a yield of just over 2%.
Home and room rental platform Airbnb has confirmed that it will file for an initial public offering (IPO) in the US next year, making it the latest tech unicorn (a private company worth over $1bn) to go public. The flotation is set “to be a blockbuster”, says Danielle Abril in Fortune. Airbnb’s valuation when it last raised money privately was $31bn. Unlike Lyft, Uber or WeWork, which are heavily loss-making, Airbnb looks in solid shape. It says it was profitable on an Ebitda basis in 2018 while its sales totalled $1bn in the third quarter of last year. The company offers more than six million places to stay in 191 countries The first listing was an inflatable mattress in the founders’ flat in San Francisco in 2008.