Share tips of the week - 27 January 2023
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
This Milan-listed supercar maker enjoys profit margins and growth that make it more akin to luxury handbag group Louis Vuitton than General Motors. The rich rating of 36 times earnings is justified by an impressive growth outlook – 2023 will bring some hotly anticipated releases, including the Purosangue (pictured), Ferrari’s first sport utility vehicle (SUV). The group also plans an electric vehicle in two years’ time. “Now is a good time to take a ride.” (Buy, €221)
The Sunday Times
This FTSE-100 engineering conglomerate dabbles in everything from water purifiers and smart-motorway sensors to robots maintaining offshore wind farms. A focus on “safety, the environment and healthcare” should bring it through the downturn in stronger shape than other industrial businesses. The dividend has risen by at least 5% for 43 years. The shares trade on a discount to their five-year average. (Buy, 2,121p)
Legal & General
The Mail on Sunday
Legal & General is more interesting than the “rather boring” UK pension fund manager it initially appears to be. Half of the assets in the pension division are invested overseas and the group boasts a growing operation in America. It also has an arm dedicated to investing in “alternative assets”, such as retirement villages, clean energy, data centres and new science facilities at the University of Oxford. More companies will be looking to exploit rising bond yields to offload their defined-benefit schemes to specialists such as L&G, which could deliver a “step-change” in profits. The shares yield 7% and “should deliver long-term rewards”. (Buy, 255p)
Gloom about the outlook for the property market has pushed shares in this housebuilder down by 43% in a year, but on less than six times forecast earnings the “dire” near-term outlook is priced in. With £860m in cash, the firm has the resources to ride out the downturn and even snap up any land going for a discount. In the longer term, Britain’s structural undersupply of housing is not going away. “The best time to invest in any high-quality company is when its prospects are at their bleakest.” (Buy, 1,374p)
“The UK commercial property market is in the middle of the worst downturn since 2008,” which is bad news for the firm that is the “embodiment” of that sector. With the future of the office and bricks-and-mortar retail still in question, rental growth is sluggish and well below the rate of inflation. Management has also shown poor judgement recently by sitting out the warehouse and logistics boom only to enter the sector as the market peaked.
For now, the short-term outlook is simply too bad for the shares to be tempting. (Sell, 441p)
JD Sports Fashion
The self-styled “King of Trainers” has been “sprinting ahead” following strong Christmas trading and news that pre-tax profit should come in about 4% above previous guidance. On just over 12 times forward earnings the shares still look “good value” and the group appears well placed to capture more market share from rivals. Yet the shares have enjoyed a gain of more than 40% in weeks so lock in some profits now given the uncertain outlook for British retail this year, but retain a small position to take advantage of any further upside. (Sell, 162p)
F&C Investment Trust
F&C Investment Trust outperformed peers last year after getting out of overpriced US large caps in favour of income stocks before the wider market followed suit. The oldest investment trust in the world boasts a proud record of solid performance and a 51-year run of dividend increases. It is a “buy” for investors who are inclined to “outsource some of their global equities exposure” (Buy, 946p).
“Electronics engineering gem” XP Power helps operators across the semiconductor, aerospace, healthcare and transport industries meet their complex power needs. These markets may enjoy a better 2023 as inflation and supply-chain pressures ease. On a 2023 yield of more than 4% and forward price/earnings (p/e) multiple of 13.8, the shares appear “good value” (Buy, 2,365p).
Shares in German sportswear giant Adidas have taken a hit on the demise of Yeezy, its joint venture with rapper Kanye West. Yet with supply-chain problems easing and the big Chinese trainer market reopening, margins look poised to pick up. The long-term outlook is bright thanks to the growing trend for wearing “athleisure” clothing everywhere. (Buy, €151).
Informa, whose activities range from trade shows to academic publishing, is finally back in growth mode after a difficult pandemic that paralysed much of its core business. Disposals have bolstered the balance sheet and China’s reopening could be poised to give the events business a much-needed boost. Buy (661p).