Three to buy
Oxford Metrics
(Investors Chronicle) The once niche field of movement tracking is entering the mainstream as smartwatches and fitness trackers become more popular. Aim-traded Oxford Metrics is the world leader in “high-precision motion measurement analysis” through its Vicon division. There are opportunities in fields as varied as medicine, films and virtual reality. Even space agency Nasa is a client. A robust net cash position leaves Oxford Metrics well placed to grow through acquisitions. Strong forecast earnings growth and a varied client base make this a long-term buy. 109p
Polymetal International
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(The Sunday Telegraph) FTSE 100 investors in search of a “counterweight” to the market slump don’t have many ways to gain exposure to the gold bounce. Russia and Kazakhstan-focused Polymetal is the index’s “only precious metals miner”. Underlying earnings increased 31% in 2019, thanks to disciplined cost control. Income investors will like the 5% yield and record of special dividends, while value investors will see a “margin of safety” with the shares trading on 13.2 times earnings. A miner exposed to Russia will always be high risk, but Polymetal could prove a safe haven during the Covid-19 pandemic. 1,220p
WH Smith
(The Sunday Times) A burgeoning travel business has set apart WH Smith from the woes of the wider high street in recent years, but now the coronavirus has ensured that last week it became the first retailer to issue a profit warning because of the outbreak. Yet with leverage at just 0.9 times underlying earnings and £109m of free cash flow last year, it is better placed than many to ride out the storm. The shares are a bargain” at this price. 1,119p
Three to sell
Cineworld
(Shares) This global cinema operator’s debt-financed takeover of Canada’s Cineplex couldn’t have come at a worse time. The deal takes gearing up to about four times EBITDA, a level that “statistically… significantly increases the chances of default”. Management had pledged to reduce leverage over the coming years, but the coronavirus is likely to deal a severe blow to cinema attendance as customers re-assess the appeal of “spending a couple of hours sitting next to complete strangers”. 89p
Premier Oil
(Motley Fool UK) It has been a miserable period for oil stocks in the wake of the Saudi-Russian price war. Smaller independent operators have been hardest hit. North Sea producer Premier Oil crashed 88% at one point last week before staging a rally last Friday, with management pointing to hedging strategies and plans to preserve cash flow by delaying investment. Yet the recovery could well prove a “dead cat bounce”. Oil may fall into the low $20/barrel range, which is too low for the firm comfortably to be able to service $2bn in net debt. It’s a “very risky share” best avoided. 13p
Trainline
(Investors Chronicle) This rail and coach ticketing platform was performing well in the UK and on the continent before Covid-19. A full-year trading update showed UK consumer revenue up 30% and the small international division saw 41% net growth in ticket sales. Yet with the travel market tanking and enormous uncertainty over how long quarantine restrictions will last, this is one to sit out. In the longer term, moreover, we are sceptical that Trainline has a “sustainable competitive advantage” that will keep earnings high. 348p
...and the rest
The Daily Telegraph
Specialist infrastructure supplier Hill & Smith, which produces galvanised road barriers and the like, has big opportunities in America and the opportunity to consolidate a fragmented market. Buy on weakness (1,310p).
Investors Chronicle
Defence engineer Chemring used to be an unpredictable investment, but significant restructuring and higher US defence spending mean that it is now best regarded as a reasonably priced defensive play (236p). A broad portfolio and stable revenue model have helped industrial royalties business Anglo Pacific hold its value better than most during the market sell-off. On a price-to-book ratio of 0.85 it offers long-term value (126p). Data specialist Experian, best known for consumer-credit scoring, is a long-term growth story with a strong market position across the UK, US and Latin America (2,470p).
The Mail on Sunday
Infection prevention specialist Tristel will have an important role to play in fighting Covid-19, while the epidemic may also mean stronger long-term demand for disinfectant products. Buy (445p). Shares in corporate trainer Learning Technologies are up sixfold in six years and the outbreak will prove a tailwind for its digital learning model (135p).
Shares
Royal Dutch Shell is now a buy for the brave. An 11% dividend yield would normally be a warning sign, but the company has not cut its dividend since World War II (1,347p). Social care and education services provider CareTech has growth opportunities in areas that appear insulated from the virus fallout. Buy (435p).
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