Three to buy
Chubb
(Barron’s) Shares in this New York-listed global insurer have fallen by 20% this year. Insurers pick up the tab when disasters such as Covid-19 strike. Yet although the insurance industry’s pandemic losses could ultimately reach $80bn-$100bn, that is less than the $150bn wiped off the sector at the lowest point of the market rout. Earnings should bounce back over the coming years, thanks in part to higher premiums as the industry reassess risks. On a little over book value, the shares look decent value. $124
Inspecs
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(Shares) This Bath-based eyewear frames specialist has a “clear growth vision”. It is a “one-stop shop” for retail chains in search of frames for sunglasses and spectacles. A focus on affordability also leaves the company well-positioned for an era of consumer belt-tightening. In the longer term, the $131bn global eyewear market is growing, thanks to increasingly wealthy emerging-market consumers. As a small and agile outfit, the firm’s growth prospects are auspicious, although there is always the risk of competition from larger players. Buy. 190p
McBride
(The Sunday Telegraph) This manufacturer produces own-brand cleaning products such as bleach and soap powder for European retailers. Performance has been weighed down by rising raw-material costs and higher marketing spending from big brands, leading to three profit warnings in a year. Yet with the pandemic turning us all into “hygiene addicts”, the outlook has brightened. On just 7.6 times next year’s earnings the shares look due for a rerating. 57p
Three to sell
easyJet
(Motley Fool UK) News that easyJet will restart some flights from 15 June has cheered investors, but the industry still faces huge challenges. The UK quarantine rules are likely to dampen summer demand and it may take years for passenger numbers to return to pre-pandemic levels. A rights issue may be needed to repair the balance sheet. Warren Buffett recently bailed out of his US airline investments, declaring that “the world has changed” for the sector. It seems wise to follow his lead. Avoid. 700p
TI Fluid Systems
(Investors Chronicle) This vehicle fluid specialist helps produce about one-third of the world’s brake and fuel lines and 15% of its plastic fuel tanks. Management is also pushing into hybrid and electrical vehicles, which should ensure the group’s long-term viability. Yet there are more immediate problems. The US-China trade war meant that sales were weakening even before the virus. This is a cyclical industry heading downwards. Sell. 176p
Wood Group
(Investors Chronicle) This Aberdeen-based energy services company has been diversifying, but nonetheless remains worryingly reliant on the fortunes of oil and gas businesses. Oil prices have stabilised somewhat since US prices fell below zero in April, but remain historically weak. That means new exploration projects are being cancelled or delayed by clients. The firm’s margins are unimpressive compared with its peers’. Management has slashed salaries and paused the dividend in response to the crisis, but that leaves investors with little reason to stay put. Sell. 202p
...and the rest
The Daily Telegraph
British mid caps have had a rotten time, but the Schroders UK Mid Cap trust offers a way to buy into the recovery at a “striking” discount (420p). LondonMetric Property owns the sort of large distribution centres and localised “last-mile” facilities that are in high demand from tech giants. Buy (201p). Low interest rates make water utility Severn Trent’s forecast 4.3% yield attractive, but revenue could take a hit if customers miss bills because of the virus. Hold (2,371p).
Investors Chronicle
Retailer Halfords stands to gain from a new £2bn government cycling programme, helping it draw a line under a disappointing period (166p). The pandemic has accelerated existing trends towards online retail, but warehouse landlord Tritax EuroBox looks unduly cheap. Buy (81p).
The Mail on Sunday
Capital Drilling provides gold miners with up-to-date drilling kit and expertise, enabling them to unearth more of the metal. With gold at eight-year highs, the shares should shine (61p).
Shares
A profit warning from Pets at Home is disappointing news, but pet care is a resilient market and management has also maintained the dividend – keep buying (236p). The reopening of car showrooms is a positive tailwind for used-car retailer Motorpoint. Keep buying the shares (215p).
The Times
News of a joint venture between pubs and brewery group Marston’s and Denmark’s Carlsberg has put some “fizz” into the shares, which are a buy on 10.6 times forecast earnings (67p).
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