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
(Shares) Investors have yet to wake up to the attractions of this FTSE 100 financial group, which recently demerged from Prudential. M&G has 5.5 million retail clients and £341bn in assets under management, a figure that has doubled over the past ten years. That is partly due to the popularity of its “with-profits” PruFund, which offers exposure to the stockmarket but smooths out volatility. On nine times earnings and yielding 7.5% the shares look cheap, given the group’s “unique positioning”. Buy. 247.5p
Royal Dutch Shell
(The Sunday Times) This oil major has pledged to spend £1.5bn per year on greener energy, but the “Greta Thunberg effect” is starting to take its toll. Fund managers are shy of investing in fossil fuels, which has contributed to a lagging share-price performance over the past 12 months. Lower energy prices caused by bountiful US shale supply are another factor. Yet regardless of oil’s long-term prospects, the group has the “highest potential for cash returns of any player in the sector” and has not cut its dividend since the 1940s. It “could prove a good buy”. 2,200p
(Money Observer) The owner of such “illustrious consumer brands” as Imperial Leather soap has had five years of declining sales and profit. The board has reversed its acquisitive strategy and sold off struggling businesses. Cost-cutting has kept cash flow respectable and the group still earns a healthy return on capital. It must now deliver growth; boardroom changes may herald a new approach. On 12 times profits this is a buy for contrarians. 205p
Three to sell
(Motley Fool UK) Shares in BT have fallen by 17% over the past month and have been trending downwards ever since 2015. Contrarians may be tempted by the 7% forward dividend yield, but an income investor should look for a record of annual rises in the payout supported by generally rising cash flow and earnings. “BT fails that test” and has “a ton of debt” to boot. Without a catalyst such as improved trading figures, it is difficult to see how the current downtrend can be reversed. Investors should steer clear. 171p
(Investors Chronicle) Weakness in the construction market has caused two profit warnings at this building materials supplier since October, but there could be more disappointment to come. The group has been repairing high debt levels through disposals, but the business continues to struggle. Like-for-like sales fell by 8.3% in the second half of 2019. SIG’s shares are among the 20 most shorted in London, yet a forward price/earnings ratio of 22 appears to imply that the market expects a recovery soon. We disagree. Sell. 97.5p
(Investors Chronicle) Earlier this month, Card Factory unnerved the market with “a triple-whammy”. It announced a profit warning, a suspension of the special dividend and a review of its basic payout. Earnings have been falling since early 2017 and there is unlikely to be a turnaround soon. A tough retail environment, declining footfall, rising costs due to the national living wage and weak sterling have all played a part. An ongoing decline in like-for-like sales looks set to continue. It seems to be a on “a slow slide downward”, so it is now time for investors “to get out”. 96p
...and the rest
The Daily Telegraph
French lottery operator Française des Jeux, or FDJ, is a stable business that has the backing of the French state. Buy if the share price falls back towards €21 (€23.50).
Share-price performance at Eurocell, which makes and recycles “PVC doors, windows and roof products”, has been “choppy”, but on 12 times forecast earnings it is poised to benefit from a recovery in construction (261p).
The Mail on Sunday
Global demand for food is growing and agricultural land is at a premium. The upcoming flotation of the Global Sustainable Farmland Income Trust in London offers a new way to play the trend ($1). Upmarket student digs provider Watkin Jones should continue to deliver (248p).
Bus and rail business Go-Ahead offers a “cheap play” on a UK economic recovery and pays a 4.7% dividend yield while investors wait for it to get “back on track” (2,088p). A £90m acquisition in the US bears out our claim that this will be a good year for greetings card specialist IG Design (742p). There is no denying the regulatory clampdown on gambling, but Ladbrokes-owner GVC has responded well and has significant opportunities in America. Keep buying (895.5p).
Warehouse owner Safestore is the top self-storage business in the UK with 6.47 million square feet of lettable space. Ever-more cramped living spaces bode well. Buy (768p). Premier Inn owner Whitbread faces an uncertain outlook owing to the frail British and German economies. Avoid (4,429p).