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
(The Times) This industrial-equipment renter makes 90% of its profits in North America. There is speculation that it could eventually choose to shift its listing to the US, although there are no such plans for now. It offers construction essentials such as generators, air conditioners and cranes, and has diversified into barriers and lights for festivals and even refurbishes offices. That should make it more resilient during a poor year for US construction. On just 12.6 times forecast earnings the shares are a “solid buy”. 2,765p
(Investors Chronicle) This waste-management specialist has a bumpy record, but is now moving into higher-margin growth areas. New taxes and regulations on landfill have opened an opportunity in the energy from waste business. More environmental awareness should also help support the plastics-recycling operation. Waste businesses have good defensive characteristics, an advantage enhanced by long-term contracts that provide predictable earnings. The stock looks reasonably priced on 12 times 2021 earnings. Buy. 297p
(The Mail on Sunday) This drinks manufacturer and distributor sells 44 million gallons of Tennent’s lager and Magners and Bulmers cider every year. That is the equivalent of “950,000 pints a day”. These mainstays are complemented by an “extensive roster” of 600 gins, wines and spirits, as well as a soft drinks range catering to the rising demand for non-alcoholic options. The shares have slipped on news of the retirement of CEO Stephen Glancey, but should recover when a successor is chosen. Buy into a well-positioned business that boasts “strong brands and an extensive distribution network”. 377p
Three to sell
(Shares) This oil major accounts for 5% of the entire FTSE 100. Together with Royal Dutch Shell it has made 20% of all dividend payments by UK-listed firms over the past decade. New CEO Bernard Looney has announced plans to become a net-zero carbon emitter by 2050. Growing pressure from institutional investors leaves BP with little choice. But such major restructuring is likely to mean cuts to the fat dividends that attract income investors. With so many uncertainties it is time to sell. 464p
(Motley Fool UK) Would you knock 22% off the price of your house for a quick sale? That it what this FTSE 250 Reit has done after being caught on the “wrong side of the retail-property slump”. The group has sold seven retail parks for £400m, a 22% discount to book value. Management seems eager to raise cash to pay down debt. The 11% yield is generous for a reason: a cut seems likely soon. It’s “a stock to avoid”. 224p
(The Sunday Telegraph) This Gulf-focused healthcare firm operates 200 facilities and treats more than 8.5 million patients every year. This is a “fiendishly complicated” business – witness recent confusion over the size of the stakes of major shareholders. News of “complicated share dealings” involving other directors and questions about NMC’s growth numbers have further dented confidence and raised questions about the quality of internal controls. This is still a business with potential, but it lacks credibility and is “no place for private savers”. 855p
...and the rest
The Daily Telegraph
Most pet owners would rather cut spending on themselves than on their cat or dog. That makes businesses such as Pets at Home defensive picks that also offer good growth prospects at a reasonable rating. Buy (309p).
“Nearly-new” car dealer Motorpoint is enjoying good sales growth and offers a 3.1% forward dividend yield – buy (295p). Peru-focused gold and silver miner Hochschild Mining has ramped up production at just the right time as precious metals prices surge. It’s a speculative buy (174p). Identity fraud and tougher data protection rules have created a $20bn global market opportunity for identity data specialists such as GB Group. A p/e ratio of 39 is high, but the growth opportunity is huge (699p).
Builder Persimmon is “getting its house in order” after previous mistakes, but still trades on a discount to peers. It also offers a 7% yield (3,215p). A positive trading update confirms our view that motor finance outfit S&U is a “great way to play a UK recovery” (2,440p). Centrica is being weighed down by weak natural-gas prices and energy-price caps, but the shares are so cheap that patient, risk-tolerant investors may eventually be rewarded (73p). Lighting specialist Luceco’s Chinese factory has been caught up in the coronavirus shutdown, but this should not detract from the group’s prospects for strong growth and margin improvements (124p).
Apple’s coronavirus woes will have knock-on effects for both semiconductor maker IQE and retailer Dixons Carphone in the UK. Existing investors can hold on for now, but new investors should “leave well alone”(57p; 135p).