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 motor-insurance business has operations in the UK, Europe and the United States and also owns the Confused.com price-comparison website. Admiral prides itself on its strong culture, happy workforce and steady management. These priorities have yielded results: a 10% jump in 2019 pre-tax profit compares favourably with falling earnings at rivals Direct Line and Hastings and enabled Admiral to raise the full-year dividend by 11%. The stock is a long-term buy. 2,238p
(The Sunday Telegraph) The online grocery specialist’s critics say it is loss-making and overvalued, but fans insist it will profit from the future of retail. Ocado’s proprietary technology is much in demand in the UK and overseas, which is why it is valued like an international technology business rather than a mere supermarket. The proportion of British consumers who buy groceries online has doubled over the past decade and today sits at 30%. Globally, online grocery sales are set to grow by 15% a year through 2024. Ocado offers compelling growth prospects. 1,122p
(Shares) Shares in this price comparison website surged last month on the back of an encouraging full-year trading update. The “indiscriminate sell-off” in the UK market has seen the price return to earth. But this is a firm with little direct exposure to the coronavirus fallout: house-bound people can still shop online for energy providers and insurance. This seems an opportunity to buy into a healthy business at its pre-rally price. 313p
Three to sell
The Restaurant Group
(The Sunday Times) Coronavirus-related disruption to cinema scheduling is the last thing that management at this struggling restaurant portfolio needed. The shares have halved since it announced the £559m takeover of Wagamama in 2018. “Tired” legacy brands such as Chiquito and Frankie & Benny’s have been hit by falling demand at retail and leisure parks. Wagamama itself is performing well, but until the firm finds a way to ditch its “fading” brands and pay down debt the shares are best avoided. 87p
Capital & Counties
(Investors Chronicle) This West End-focused property developer’s portfolio consists of a mixture of retail, food and beverage, office and residential property. Approximately 95% of CapCo’s holdings are in London’s Covent Garden, where property values fell 1.4% in 2019. A conservative loan-to-value ratio of 16% means the balance sheet is solid, but that is outweighed by the fact that half of group assets are let out to retailers. “In an environment where retail rents are in decline” there is little upside in prospect. A lack of dividend growth is a final bear point. Sell. 196p
(Investors Chronicle) HSBC is trying to redeploy capital from underperforming developed markets towards higher-growth regions in Asia and Mexico. This “painful” process will mean 35,000 job losses, but should save billions annually. The trouble is that with the covid-19 outbreak slashing global growth estimates and provoking emergency interest-rate cuts the outlook for interest margins and shareholder returns has taken a big hit. Sell. 555p
...and the rest
The Daily Telegraph
Slumping markets are creating buying opportunities. We suggest that bargain hunters take a look at foreign-exchange firm Equals, cruise liner Carnival, Jet2 owner Dart Group, easyJet, WH Smith, Whitbread, InterContinental Hotels and Legal & General (39.75p; 2,335p; 1,186p; 1,074.5p; 1,948p; 3,758p; 4,253.5p; 264p). A share-price slide at energy and healthcare distribution specialist DCC is a reminder that rich valuations are vulnerable in a market slump. There is still no reason to jump in (5,554p).
Premium food producer Cranswick has been capitalising on pork shortages in China to boost its exports and the dividend has increased for 29 consecutive years . Buy (3,352p). Rising gold prices mean that prospects are brightening at African miner Hummingbird Resources (23p).
Mid Wynd International Investment Trust, which focuses on high-quality businesses with “fortress balance sheets”, offers a diversified way to bet on a global market recovery (579p). Investment trust Law Debenture boasts defensive qualities, low charges and a good long-term record – buy (610p).
Shares in Legal & General look cheap and the group has growth opportunities from infrastructure investment. There is also a “juicy” 7% dividend yield (249.5p). Struggling industrials conglomerate General Electric’s “mammoth turnaround” won’t be made any easier by disruption from covid-19. Avoid ($10).