Share tips of the week

published 1 November 2019

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

Fidelity Japan Trust

There are roughly 3,500 listed companies in Japan, about double the number in London and more even than the NYSE. As a result, many smaller firms are under-researched by analysts meaning opportunity for those willing to do the work. The Fidelity Japan Trust invests in 82 firms, including piano maker Yamaha. It trades on a 10% discount to net asset value and offers a good way to buy into Japan's brightening prospects. 155p

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Pennon

Investors Chronicle

Listed water companies, with their "predictable regulated returns", have long been favoured by income investors. Tougher oversight and the spectre of nationalisation now haunt the sector. But Pennon, owner of South West Water, is not just a standard utility: waste-management unit Viridor is emerging as its new growth engine. China's ban on recycling imports has lifted demand for its waste-to-energy plants. It is also well placed to tap into plastic recycling trends. On 17 times forecast earnings, the shares look cheap. 904p

Rotork

The Sunday Telegraph

This manufacturer supplies systems that manage the flow of liquids and gas, with applications in the water, chemicals and oil and gas industries. The latter contributes more than half of sales and the next move in the oil price is anyone's guess. Yet management has focused on what it can control, pursuing self-help measures such as tightening the supply chain and cutting stock levels. The dividend is "well covered" and a growing cash pile means there is room for acquisitions. It's one to tuck away. 298p

Three to sell

Colefax

Money Observer

The early noughties were "go-go years for the high-end property market" and this owner of posh fabric brands was one of the beneficiaries (new buyers like to redecorate). Yet revenue and profit plateaued just before the financial crisis and have remained stubbornly stuck ever since. What's more, Brexit is bad news for a business that imports much of its fabric from Italy. The company prefers to invest spare cash in buying back shares rather than trying to grow the business, yet this has generated sub-par returns. Sell. 414.5p

Kerry Group

The Sunday Times

This Irish food group is known for Richmond sausages and Cheestrings. But this is an industry undergoing "tectonic shifts" as consumers shift to healthier and more environmentally-friendly options. Kerry's taste and nutrition unit is trying to keep abreast of the changes and is attracting interest from investors. The firm has spent more than £2bn on acquisitions in the past decade. However, its opaque accounting makes it hard to value the business accurately. With the shares trading on up to 35 times earnings, investors must "rein in their appetite". It's one to avoid. €109

Royal Mail

Shares

A vote in favour of strike action has forced us to re-evaluate the investment case for the logistics group. Management is targeting 15%-18% productivity gains over the next five years, but the strike partly caused by disputes over plans for more automation casts doubt on those targets by threatening to disrupt one of the busiest times of year and damaging its credibility with clients. The shares are up 14% since the summer take profits. 226p

...and the rest

The Daily Telegraph

Trainline has cornered the market in the growing area of e-ticketing and is expanding on the continent (448p). The rise of e-commerce is good news for Canadian property trust Granite Reit, whose warehouse space is rented by the likes of Amazon and Samsung (C$64.01).

Investors Chronicle

Aim-traded currency broker Argentex is growing at an "extraordinary rate" (150p). Growing concerns about the environment and deforestation could hit demand for MP Evans' palm oil, which can easily be replaced by other vegetable oils sell (637p). Big shares sales by directors have sent the price of Russian iron and steel giant Evraz tumbling to an 18-month low. A 17.9% forward dividend yield looks attractive, but high debt and a drop in demand for steel suggest the fall will continue (379p).

The Mail on Sunday

Souring sentiment towards Aim stocks has hit Angling Direct hard, but double-digit turnover growth means it remains a good catch (60p).

Tap into high-yielding FTSE 100 blue chips via "dividend hero" Merchants Trust (484p). Smart Metering Systems, the only UK company that installs and maintains smart meters on behalf of big energy companies, should do well even if the wider economy goes south (470p).

The Times

ContourGlobal, which buys and operates power-generating plants, is highly cash-generative and well placed to tap into the shift to renewable energy. It's a bargain on 10.5 times forecast earnings (188.5p). Van hire specialist Northgate has been disappointing, but with the business recovering and the shares paying a dividend yield of 5.6%, there is scope for plenty of upside (337p).

A German view

Global electricity demand is set to jump by 60% over the next 30 years as populations and economies grow, while solar energy is likely to make up 22% of the global energy mix in 2050, compared with just 2.5% today. That makes Norway's Scatec Solar an appealing long-term bet, says Brse Online. It is a one-stop shop, encompassing planning and development of photovoltaic power stations (solar parks), construction and maintenance. Long-term power supply contracts with utilities mean revenues are secure and predictable. Scatec has branched out into emerging markets, notably Vietnam and South Africa, in recent years and now boasts total production capacity of 1.9 gigawatts in 13 countries.

IPO watch

Australia is enduring its toughest year for initial public offerings (IPO) since 2010, reports Bloomberg. Last week, Singapore-based real estate classifieds business PropertyGuru became the latest to shelve its IPO plans. The private equity-backed group had hoped to raise as much as $260m, but scrapped its listing "due to uncertainty in the IPO market". Earlier in the month, consumer lender Latitude Financial Group abandoned what would've been Australia's biggest IPO of the year. It had aimed to raise around $700m, but withdrew due to concerns that weak demand from investors would see the share price falter after its debut. So far this year $1.4bn-worth of share sales has been cancelled.