Share tips of the week – 26 May
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
This FTSE 100 underwriter manages seven Lloyd’s of London syndicates specialising in areas such as property, cybercrime and political risk. Gross premiums rose by 12% on the year in the first quarter due to price hikes and robust demand from the property and cybercrime divisions. Disasters such as last September’s Hurricane Ian haven’t unduly hurt the bottom line. On “barely seven times forecast earnings” and yielding 2.4%, the shares are worth buying given Beazley’s solid record. Buy, 611p
The Mail on Sunday
UK retailers spend £2bn every year kitting out their shops with carpets, tiles and other floor coverings. This firm aims to offer them better prices and “swifter deliveries” than competitors. That requires “strategically located warehouses and well thought-out logistics”. The recent share-price slide amid cost-of-living pressures is overdone. Buy, 24p
This video-games giant is getting better at monetising its “treasure trove” of intellectual property, which includes much- loved characters such as Donkey Kong. In April, the release of The Super Mario Bros. Movie gave Nintendo its first huge hit beyond the gaming sector. The firm has a “pristine balance sheet” and is cheaper than its peers. Buy, ¥5,725
This engineer works in “defensive and highly regulated niches”, with its products used in everything from Nasa’s Mars Rover to green-hydrogen projects. With its fingers in so many pies, maintaining focus is a challenge, but management has been making the right moves – selling off the medical division in 2021, for example. This should improve the firm’s low returns on capital employed. With the shares on a 25% discount to peers on an enterprise value-to-Ebitda basis, there is scope for a rise. Buy, 1,699p
Management at this online “fast-fashion merchant” has “warned investors that things are going to get worse before they get better”. Profits halved in 2022-2023 as shoppers returned to physical stores and bosses have warned that sales in 2023-2024 will flatline “in a best-case scenario”. The group is pinning its hopes on expansion in markets such as the US, but its overseas offering remains hampered by lengthy delivery times and elevated costs. With £331m of cash in the bank, Boohoo does enjoy a “strong liquidity position”. Yet the shares still look too richly valued given the risk of further earnings letdowns. “We don’t see much cause for optimism... Sell.” 42p
This one-time monopoly is preparing for the end of its £15bn broadband build out by announcing “swingeing job cuts”. It intends to “cut its workforce by more than 40%” by the end of the decade. But cuts to this “lumbering giant” won’t fix its cash-flow troubles as the full-fibre rollout and a pensions shortfall continue to gobble up resources. Management hopes it will eventually be able to turn a profit on its costly fibre investments, but rivals such as Virgin Media have other ideas. The “shares will struggle to move higher”, so avoid. 141p
Life-sciences software business Instem works in a niche to which few comparable UK-listed businesses offer exposure. While business has seen something of a post-pandemic slowdown, long-term prospects are auspicious as pharmaceutical companies look for ways to “streamline and automate the costly drug-trial process”. Buy, (631p).
The stock of biscuit and chocolate giant Mondelez International is close to all-time highs as its strong brand portfolio proves its inflation-beating credentials. On 24.5 times forecast 2023 earnings “the shares aren’t cheap” but this high-quality company is worth sticking with as the world economy faces possible recession. Hold, ($78).
Drinks giant Diageo has leveraged its strong brands to raise prices and ride out inflationary pressure. It is well placed to benefit from the “premiumisation” trend, which sees consumers increasingly opt for posher beverages. A forward price/earnings (p/e) ratio of 21 looks a fair price for a firm offering defensive attributes coupled with growth potential and emerging-market exposure. Hold, (3,530p).
The Sunday Times
Shares in pharmaceutical giant GSK have fallen by 20% since it spun off its consumer- healthcare arm in 2022. Dividend cuts have put off income investors, yet revenue growth is strong and the drug pipeline robust. On a forecast p/e of 9.6, the shares trade at a discount to the average of 15 for competitors, so “stock up your medicine cabinet” Buy, (1,423p).