Three to buy
Rank Group
(Shares) Shares in the owner of Mecca Bingo and Grosvenor Casinos have some “serious momentum” after a series of analyst upgrades. The latest half-year results showed a 70% increase in operating profit. Digital is a key part of the growth strategy and will be helped by last year’s £115m acquisition of online bingo operator Stride Gaming. Over the next few years revenue growth should produce a significant cash-flow boost, which can be used for further acquisitions, or for extra dividends. On a forward price/earnings ratio of 14.7, the shares still look attractive. 302p
Howden Joinery
(The Sunday Times) Shares in this kitchens and joinery supplier have been on a tear. The FTSE 250 group, which sells to builders and tradesmen, is up by 45% over the past year and is now valued at £4.4bn. The chain has a 50% market share and its healthy balance sheet has enabled it to spend £240m on share buybacks over the past three years. Rising real wages in the UK bode well for demand. For long-term investors this business remains a “kitchen dream”. 728p
Royal Mail
(Motley Fool UK) Industrial-relations woes and structural problems have seen shares in Royal Mail fall by 35% in a year. Yet they could now offer value. A 0.39 price-to-book value and a 13.5% dividend yield could tempt in buyers and help the share price to rally. Parcel deliveries are offsetting falling letter volumes, so long-term prospects could be brighter than the rating suggests. Brave contrarians can make a “small investment” at the current price. 181p
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Three to sell
Man Group
(Investors Chronicle) The world’s largest listed hedge fund manages $110bn (£84bn) in assets, mostly for institutional investors. Underperformance against passive products has given many hedge funds a tough time in recent years and Man Group is no exception. The firm offers its clients an “enormous list” of investment strategies to pick from, but that comes with a high wage bill. This “array of mandates” also leaves it with no clear strategy and provides “myriad excuses” for an erratic performance over recent years. Sell. 158p
Devro
(The Daily Telegraph) After three years and a 10.6% capital loss our patience with this sausage-skin maker is wearing thin. Last month brought “yet another lukewarm trading statement” and more bad news on volumes. Devro needs more sales if it is to reach its potential. Likely disruption due to the coronavirus will only complicate that effort. The 5% yield may encourage income-seekers to cling on, but those hoping for capital gains should look elsewhere. Sell. 167p
Plus500
(The Times) Annual results from this financial-betting business made grim reading, with revenue halving and pre-tax profit slumping by more than 60%. A significant factor was tighter regulation of contracts-for-difference (CFD), which enable punters to bet on everything from share prices to commodities and currencies without owning the underlying asset. Concern that most people who bet on CFDs lose money, with leverage worsening the problem, is not limited to Europe. Australia will also soon introduce restrictions. Sell. 911p
...and the rest
The Daily Telegraph
The Edinburgh Worldwide Investment Trust is well connected in Silicon Valley and is looking for the “Amazons and Googles of the future” (215p).
The Mail on Sunday
New BP chief executive Bernard Looney has vowed that the firm’s carbon footprint will be net zero by 2050, but big questions remain about the strategy and whether it will affect the dividend, which currently yields 7%. Only “the bravest investors who are prepared to hold for the long term” should consider buying (457p).
Investors Chronicle
The relatively underdeveloped US hire market offers a big growth opportunity for industrial-equipment renter Ashtead and a £500m share buyback programme provides a further tailwind (2,629p). The energy-price cap and lower commodities prices drove Centrica to a £849m loss last year. The shares have retreated by 40% since last March and there could be further downside to come. Sell (71.5p).
Shares
Decent revenue growth and rising occupancy confirm our bullish stance on self-storage play Lok’nStore – keep buying (730p).
The Times
A “data-harvesting furore” at cybersecurity firm Avast has sent the shares backwards, but on 17 times forecast earnings they are now attractively priced for a software stock. This is a buying opportunity (285p). Shares in tool and equipment hirer Speedy Hire are up by almost 60% over the past six months, but a solid turnaround should continue to deliver results. Hold (79.5p).
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