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 Sunday Times) “Offices are lying dormant” and social distancing means that many will operate at only half capacity for the rest of this year. That is bad news for this owner of workplaces in London and Manchester. It specialises in buying shabby buildings in “vibrant” areas and refurbishing them in a “modern, quirky style”. The dividend may be axed, but “rock-bottom interest rates” and “negative bond yields” mean property remains attractive. 365p
(The Daily Telegraph) Covid-19 has turbocharged existing trends favouring electronic payments at the expense of cash. There is still significant scope for card penetration in emerging economies and the likes of Germany, where only about 15% of payments are made by card compared to over 80% in Sweden. Fat operating margins and growing markets would normally attract competition, but Visa enjoys an entrenched position thanks to its relationships with 100 million merchants, thousands of banks and a brand that is known for “reliability and ubiquity”. The shares are not cheap but still appealing given the outlook for future earnings. Buy. $171
(The Mail on Sunday) Britain’s second-largest data-storage business works with the government, the NHS and thousands of businesses to shred sensitive documents, digitise paper records and recycle old IT equipment. The storage division benefits from recurring revenue and the IT side has enjoyed a bump from the rise of distance working. Restore’s reputation for “service” and “security” in handing confidential data will stand it in “good stead”. Buy. 380p
Three to sell
(Shares) Shares in this IT security firm have surged two-thirds since the pandemic-induced lows of March. An “impressively stable” first quarter, “robust” balance sheet and rising margins – which were already above 55% last year – have reassured investors. More distance working should boost the group’s paid products, but that is to be set against the prospect of lower advertising revenue and continued weakness in the mobile security business. The recent rally is a good chance to take profits. 451p
(Investors Chronicle) Sainsbury’s is forecasting a £500m hit to underlying pre-tax profits because of the pandemic. The extra costs of protecting staff and falls in fuel, clothing and general merchandise sales should be offset by better grocery performance and business rates relief. Yet panic-buying is temporary, while weaker consumer confidence will be with us for some time. Financial services, which account for 8% of underlying pre-tax profit, will also be hit by the economic downturn and rising debt delinquencies could also drag down the share price. 201p
(Investors Chronicle) Shares in this challenger bank have suffered a “cataclysmic drop” since peaking at 4,000p in 2018. The bank’s heavy reliance on UK current accounts makes it one of the most exposed to near-zero interest rates and the bank’s depositors have shown themselves to be “flighty” when panicked. An expensive branch-led model is an added headache. Metro is the seventh-most shorted share on the London market, so it could yet have further to fall. Sell. 90p
... and the rest
The Daily Telegraph
Centrica has long disappointed shareholders, but the crisis could sweep away upstart rivals who can’t compete with the amount of cash on the British Gas owner’s balance sheet. A risky buy (39p). Next has suspended its dividend to preserve cash but this is an “exemplary business” that should “prosper once this is all over”. Hold (4,726p). Wide discounts on private equity trusts can be misleading because the value of their assets have not always been updated since the market crash. However, we think that ICG Enterprise, which has defensive exposure and cash to spare, has fallen too far – buy (708p).
Engineer Spirax-Sarco is surprisingly defensive thanks to its exposure to pharmaceutical and biotechnology markets, while its virtues as a quality stock make it a fund managers’ favourite – buy (8,742p). Craneware’s software helps US hospitals identify areas of waste and a newly launched cloud-based product suite brings enhanced growth prospects. Buy (1,950p).
Construction businesses should be among the first to reopen after lockdown so buy into the “solid foundations” of builders’ merchant Travis Perkins (1,015p). IT consultant Kainos’ focus on the public sector and healthcare leaves it well-placed for the recovery. Keep buying (677p).
Strong results have taken shares in online fashion retailer Boohoo to new highs. The company pays no dividend but it has proven that it can grow through thick and thin – buy (329p). Upmarket mixers brand Fevertree won’t let Covid-19 “steal its fizz”: a low-cost operating model and no debt make it resilient heading into an eventual recovery (1,802p).