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.
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
"Even Tony the Tiger couldn't have roared They're gr-r-reat'" about the recent performance of the shares at this food giant. The New York-listed maker of Rice Krispies and Frosties breakfast cereals has lagged sector peers, but a combination of cost-cutting, growth in snacks and a bet on emerging markets leaves it poised for better things to come. On 16.2 times this year's earnings the shares look reasonable. A 3.7% dividend yield is a nice bonus to enjoy while you wait for the stock to pick up. $62
Legal & General
On a forward price/earnings ratio of just eight, this "insurer-come-asset manager" looks "suspiciously cheap". The uncertain economic outlook may have hit sentiment, but this is a well-diversified business enjoying momentum in its pension operations. Much of the investment arm holds non-sterling assets, a welcome hedge against uncertainty over Brexit. On an 8% forward dividend yield, Legal & General is an enticing income pick. 236p
In addition to their natural beauty, the Scottish Highlands boast "sizeable gold and silver deposits". Amateur prospectors have panned in the region for centuries, but Scotgold, which is in the final stages of developing a mine close to Loch Lomond, is taking things to a new level. The Cononish mine should produce about 12,000 troy ounces (370kg) of the yellow metal every year and has the backing of local communities, who welcome the employment it will bring. Scotgold also has exploration rights for 1,000 square miles of land in the region. Buy. 54p
Three to sell
Private equity flogged this motoring association to the stockmarket in 2014. It was "hobbled from the start". The "buyout barons" loaded the AA with £3.3bn in debt and "extracted hefty dividends" before selling it. The shares once traded above 400p, but are now below 50p. Membership has fallen from four million in 2014 to 3.19 million. Although still cash-generative, it will "take decades" to clear the debt pile at this rate. Avoid the stock. 46p
Marks & Spencer
On a yield of 7% and a valuation of less than nine times forecast earnings, shares in this high-street stalwart are undoubtedly cheap. We also think that the current management team is more willing than its predecessors to take the tough decisions needed to turn things around. Yet the pace of change still feels too slow, especially given rapid developments elsewhere in the world of retail and e-commerce. Sell. 171p
"We have to hold our hands up." We thought that a "lot of negative news" about this luxury clothing business was already in the price, yet failed to anticipate a "shocker" of a first-half trading result. Profit warnings and the departure of founder Ray Kelvin meant that Ted Baker was already having a bad year. Now news of a £23m pre-tax loss and a fall in group revenue has been accompanied by a decision to more than halve the interim dividend. A chastening reminder that a stock with a record of bad news often serves up more. "Stay clear." 459.25p
...and the rest
Intertek's work providing "assurance, testing, inspection and certification services" sounds dull, but ever-growing regulatory burdens and significant scope to expand global market share make this an exciting growth opportunity (5,250p). Nasdaq-listed online dating business Match Group boasts a family of well-recognised brands. Just remember that, "as with online dating, the stock is not for the faint-hearted". Buy ($72.42). A restructuring at Coats brings upside potential for the industrial thread maker's unloved shares (71.5p).
The Mail on Sunday
Pawnbroker Ramsdens is bucking the high-street gloom thanks to strong gold prices. A 17% gain since last year means that some profit-taking could be in order (194p).
Defence firm Ultra Electronics' expertise in niches such as marine warfare and cybersecurity makes it a resilient pick at a time of economic uncertainty and global turmoil (1,979p). Shares in 3i Infrastructure aren't cheap, but as risk appetites subside investors are eyeing up dependable infrastructure income streams (286p). The latest update from leisure group Hollywood Bowl confirms our view that it can continue to grow through times fair and foul (225p).
Hargreaves Lansdown, Britain's dominant investment platform, seems to have dodged the worst of the fallout from the Woodford affair and boasts superior customer service (1,767p). Online travel agent On The Beach is well placed for growth, but yields just 0.84%. There are more compelling opportunities elsewhere. Avoid (389p).
An American view
Most pharmaceutical companies are grappling with a political and regulatory environment likely to reduce their pricing power. But Zoetis doesn't have to worry about that, says Kiplinger's Personal Finance. The world's biggest animal health group provides vaccines, medicines and diagnostic tools for farm animals and pets. It has established itself as a major, trusted brand and faces little competition from generic drugmakers. The regulatory backdrop for animal drugmakers looks relatively benign, while the growth outlook is positive. Credit Suisse is impressed by the group's drugs pipeline and expects earnings to rise by 14% this year and 11% next.
An investment of £150,000 two decades ago could now earn two brothers a place among Britain's richest 30 families, says Callum Jones in The Times. Mohsin, 58, and Zuber Issa, 47, from Blackburn are co-chief executives of the EG Group, a petrol stations and convenience stores business considering a flotation that could value it at £10bn. EG Group was created three years ago when the brothers' Euro Garages merged with TDR Capital's European Forecourt Retail Group, leaving the siblings with 56% ownership. The Issas employ 25,000 staff across Europe and North America. They bought their first petrol forecourt in Greater Manchester 20 years ago.