Three to buy
ASML
(Shares) The market crash has created an opportunity to buy this Dutch monopoly. ASML is the only company in the world able to produce the precision ultraviolet tools needed to manufacture certain types of microchips. The semiconductor industry is investing heavily in new technologies as part of its “shrinkage roadmap”, which should underpin future orders. On a price/earnings multiple of 23.2, the shares haven’t been this cheap since 2017 and would need to rise 30% from here to regain their pre-crash rating. €265
Whitbread
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(The Daily Telegraph) Shares in the owner of Premier Inn hotels and the Beefeater and Brewers Fayre restaurants have slumped so much that the firm is trading close to book value. Most recent results showed a company with “minimal net debt and a pension surplus”. A £400m cash pile and government credit should help tide the business through this tough period. A strong competitive position, coupled with a history of double-digit profit margins and healthy cash flow will reassure those with “patience and nerve” that the firm can blossom again. 2,700p
Wm Morrison
(The Mail on Sunday) Morrisons has been going the extra mile during the pandemic, offering discounts to NHS workers and working on deliveries for the elderly. These measures cost money but will cement its long-term reputation as a community-oriented business. Management is refurbishing stores, doubling down on local produce and developing the online division. A healthy balance sheet should facilitate a decent dividend. One to tuck away. 188p
Three to sell
Rolls-Royce
(Investors Chronicle) With about two-thirds of the world’s planes currently grounded, the aircraft engine maker’s share price is “in a tailspin”, down almost 50% since the beginning of March. Bulls will point to an entrenched market position in civil aviation and a steady defence business, which makes up about one-fifth of revenue. Yet it could take several years for airlines to recover and even longer before they think about ordering new planes. In the meantime, JPMorgan warns that the business is “severely under-capitalised”, which raises the prospect of equity dilution down the road. It’s time to “head for the emergency exit”. 333p
BH Macro
(The Sunday Times) This closed-ended investment trust has been one of the winners of market volatility. It has enjoyed strong returns from interest-rate trading, options and foreign exchange. The shares rose 23% in the first quarter. There is money to be made even in bad markets, yet in periods of calm – such as the six years to 2018 – investors in “hedgie” trusts have had a leaner time of it. The trust “is more interesting to watch than to dabble in”. 3,310p
Barclays
(Motley Fool UK) This high street giant passed pre-pandemic Bank of England stress tests and the shares have slumped by 50% this year. Yet even the worst pessimists were unprepared for the prospect of the British economy “sinking at the fastest rate for hundreds of years”. One estimate suggests that UK banks’ domestic loan loss rate could spike to five times the level of recent years. Barclays has already suspended its dividend. The shares are just too risky. 89p
...and the rest
The Daily Telegraph
Newly promoted to the FTSE 100, water utility Pennon has plenty of cash on hand and seems unlikely to disappoint, so “dive in” (1,121p). Bank shares are cheap and Barclays is the pick of the bunch. It has a large investment banking operation “making hay” as companies desperately need to issue new debt and equity (87p).
Investors Chronicle
Commercial landlords are feeling the pain from social distancing, yet German-focused Sirius Real Estate is defensively placed. The country’s businesses are benefiting from generous state support and Sirius boasts a “diversified”, high-quality tenant base and robust balance sheet. Buy (66p). Russian miner Highland Gold Mining is in an expansion phase that should leave it well-placed to benefit from buoyant gold prices (221p). American medical devices business Abbott Laboratories is “at the forefront” of Covid-19 test development. The pandemic aside, the group’s broad range of healthcare specialisms and a 96-year record of paying dividends justify a rich forward price/earnings multiple of 26. Buy ($96).
Shares
A “transformational pension deal” and strong trading for the year ending 28 March make Mr Kipling-owner Premier Foods a much “sweeter” buy (41p). Insolvency and advisory firm Begbies Traynor will have plenty of work in the coming months. Buy this portfolio hedge for troubled times (91p).
The Times
Business should hold up at Croda International as housebound consumers buy more personal care products made with its specialist chemicals. Hold (4,635p).
