Three to buy
(Investors Chronicle) Segro, the largest UK-listed real-estate group, develops and leases big-box and urban logistics warehouses. Segro differs from many of its peers in that 31% of its rental income comes from the less developed European market. This should “pay off in the long term” as companies invest to strengthen supply chains. It may take a short-term hit to rental income now, but its balance sheet is robust enough to cope. Investors should take advantage of the weak share price. 812p
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(Shares) Semiconductor bellwether Texas Instruments is the kind of “resilient technology business” that belongs in a diversified portfolio. Its microchips are “vital components in all electronics”, a market full of growth opportunities. Its own chip designs, intellectual property and long-standing manufacturing expertise all bode well. The group has $5.4bn in cash and just $400m in debt – a “drop in the ocean” for a company with $5.5bn in free cash flow. The dividend “looks safe” with an implied yield of 3.2%. $114.42
(The Times) Quality-control specialist Intertek has thrived in the pandemic as the need for testing and certifying expands in almost every area, from cargos at borders to personal protective equipment. Demand is only going to increase as a “more cautious world gets back to work”. Trading in the four months to the end of April was “stronger than expected”. The balance sheet is healthy. The shares look pricey, but “quality doesn’t come cheap”. 5,238p
Three to sell
Marks & Spencer
(Investors Chronicle) Marks & Spencer is predicting a 70% slump in sales in its key clothing and home food division in the four months to the end of July, compared with its original 2020/2021 outlook. But even before the virus arrived the division was in trouble. “Supply mishaps” contributed to a 37% fall in annual operating profits in the year to the end of March. The group is “struggling to adapt to a fast-evolving retail environment”. Sell. 86p
(The Times) Imperial, whose brands include Winston and Gauloises, sold £7.7bn of cigarettes and rolling tobacco in the year to October 2019; pre-tax earnings totalled £3.4bn and dividends £1.9bn. “Yet this is a company under pressure.” The structural decline in the number of smokers is lowering cigarette volumes by 3%-4% a year. It hardly helps that in torrid times smokers opt for cheaper cigarettes. Regulators are becoming increasingly sceptical about vaping products. A debt pile of £14.1bn, more than four times profits before tax, looks too high. The dividend is dwindling: the interim payout was cut by a third last week. The stock is cheap, but the overall outlook is unappealing. Avoid. 1,546p
(Barron’s) This US online homeware shop offering 18 million products ranging from furniture to lighting has had a lucrative lockdown. April’s sales rose by an annual 90%. But this can’t justify the stock’s surge from $22 to $197. When bricks-and-mortar shops reopen competition will intensify. Wayfair has also struggled to turn sales into profits: its net loss doubled last year. On 1.2 times forward sales, Wayfair is too pricey. $175
...and the rest
Software company Kainos has an “exciting future” in Europe. Buy for the long term (806p). Wealth manager Mattioli Woods is in better shape than its “more battered peers” and “the valuation looks very reasonable”. Buy (688p).
“A wave of… stimulus should support gold prices further and [Egypt-based, London-listed gold miner] Centamin is well placed to benefit. Keep buying” (180p).
The Daily Telegraph
Power generation business ContourGlobal is sheltered from downturns and produces plenty of cash. The near-8% yield makes it a buy (162p).
The Sunday Telegraph
Tighter regulations remain an ever-present danger for 888 Holdings. Even so, the online-casino operator has benefited from the absence of professional sport for punters to bet on during lockdown and that makes the shares “worth a flutter” (135p).
The Mail on Sunday
Braemar is a “global leader in the shipbroking field” and trading has held up well in spite of the pandemic. That the shares have been “savaged… seems unjustified” and they are now “undervalued”. Buy (99p).
The share price of property website Rightmove has fallen by 17% this year, yet it is still too pricey for buyers. However, “owners should hang on” (521p). The Renewables Infrastructure Group specialises in green power. It is “locked into stable growth” (121p). The pandemic has been “seriously bad news” for Greggs, but the high-street baker is a proven survivor. Hold (1,634p).
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