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.

Three to buy

Ricardo 

(The Mail on SundayBritish engineering group Ricardo “is helping the US defence department to make its [Hummer trucks] safer” with devices that keep them stable; they are prone to rolling over. The Indian army is a customer too, but the company is diversifying towards helping public and private bodies “prepare for a low-carbon future”. Ricardo compiles Britain’s annual greenhouse-gas inventory, which records emissions and progress towards net-zero, and advises NHS Scotland and Her Majesty’s Prisons, among others, on cutting energy use. 435p

Gym Group 

(SharesRetail closures have “increased the availability of high-quality sites” that were previously beyond low-cost fitness firm Gym Group’s budget. It now plans to open new gyms in Oxford, York and Cambridge. A study by consultancy firm PwC , meanwhile, estimates there is “headroom for low-cost gyms to increase their market shares”. There is plenty of pent-up demand: 87% of gym members are set to resume their memberships, and 27% of those who were not members are  likely to join. 247p 

Greggs

(Investors’ ChronicleThe bakery chain is hitting the ground running as lockdown loosens. It will open 100 new shops this year on top of its existing outlets. “Investors were not worried” by the firm’s 2020 pre-tax loss, its first since listing in the 1980s, and the shares have doubled over the last six months. New outlets “show the company is confident those coming out of lockdown haven’t lost their fondness for sausage rolls”. 2,241p

Three to sell

Purplebricks 

(Investors’ Chronicle) Housing transactions have rocketed since the introduction of the stamp-duty holiday on properties valued up to £500,000, and estate agencies have benefited from the boom. Shares in Purplebricks have more than doubled as a result. The firm has left the US and Australia, which has cut marketing costs by nearly a quarter and produced the first pre-tax profit since it floated in 2015. But “the consensus forecast for earnings per share stands at 1.11p”, so at 105p the shares are valued at a “lofty price/earnings multiple of 94”. The housing market boom is also fickle and unpredictable. Sell. 105p 

Dr. Martens 

(The Sunday Times) Dr. Martens listed in January and is now “on the cusp” of joining the FTSE 100. Underlying earnings “leapt” from £85m to £185m in the year to March 2020 thanks to the group’s focus on selling directly to consumers through 130 stores and the website. A third of the 11 million pairs of shoes it sold last year were sold through the firm’s own channels, and the idea now “is to lift this to 60%”. But brands that “focus on short-term profits tend to store up long-term problems”. Avoid. 494p 

Française des Jeux 

(The Daily TelegraphShares in French national lottery operator Française des Jeux have gained 76.3% since January 2020 owing to US gaming companies’ enthusiasm for “takeovers of European rivals”. Française des Jeux is “safe from a takeover” thanks to the state’s 22% stake, but the firm could now “decide to make some acquisitions”, although it has no experience in the costly business of takeovers. That possibility, along with a full price, makes it a sell. €41.45

...and the rest

Investors’ Chronicle 

High-street retailer JD Sports has seen “robust trading” despite the “unprecedented” challenge of the pandemic. It is also looking into “significant” expansion in the US, a growing market boasting “exceptional” trading. Buy (927p). Revolution Bars reports that more than 10,000 customers have booked in from 17 May, when it should be able to serve patrons indoors. But this “does not automatically translate into cash flow” and net debt is worth three times the firm’s market value. Sell (31p)

The Mail on Sunday 

Shares in carpet maker Victoria have reached an all-time peak of £8.80 thanks to record turnover for the year to April 2021, driven by homeowners that “chose to spruce up their flooring” in lockdown. “This is an opportune moment to bank some profit”, but don’t sell out completely (880p)

Shares 

Domino’s Pizza was boosted by the boom in food delivery throughout lockdown, but “that horse has run its race”. Pent-up demand for visiting restaurants will mean fewer people order in, and as the weather improves more people will head out. Sell (366p). China’s e-commerce giant Alibaba was recently hit by a $2.8bn antitrust fine by Beijing. But this represents “barely 10% of the company’s annual free cashflow”. Its “underlying growth story” is unchanged and it is on a 20% discount to peers. Buy ($256)

The Daily Telegraph 

Covid-19 has “destroyed” cruise firm Carnival’s revenues and share price, but the firm has raised “plenty of money from investors to ensure it can survive the crisis”. It is a “good way to play a recovery from the pandemic”. Hold (1,670p).

Recommended

Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in
Investment strategy

Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in

Many people scoff at cryptocurrency speculators pouring money into an asset they may barely understand. But the same could be said of investors in man…
26 Jan 2022
How to invest in energy and metals as tech stocks crash
Commodities

How to invest in energy and metals as tech stocks crash

It’s been a terrible week for stockmarkets. But not everything is crashing – “real” assets such as metals and energy are holding up well and should ha…
26 Jan 2022
Shareholder capitalism: the world’s most powerful asset manager wants you to have your say
ESG investing

Shareholder capitalism: the world’s most powerful asset manager wants you to have your say

Under shareholder capitalism, the owners of the companies the big fund managers invest in are us – yet our voice is rarely heard. Now one asset manage…
26 Jan 2022
Julian Brigden: markets are at a huge inflexion point
Investment strategy

Julian Brigden: markets are at a huge inflexion point

Merryn talks to Julian Brigden of Macro Intelligence 2 Partners about the unwinding of the US stockmarket's super-bubble, and the risks and opportunit…
25 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022