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 Mail on Sunday) Aim-listed Concurrent Technologies makes high-performance integrated computer systems that are used in such varied areas as telecoms, money printing and defence. The latter is the source of about 60% of sales and partly accounts for its “low stockmarket profile”. Loyal employees who often stay with the firm for years make for a distinctive company culture centred on innovation and research. The order book is strong and it boasts a record of rising dividends. Buy. 108p
(The Times) Business at Britain’s biggest logistics firm is already bouncing back after the lockdown induced by Covid-19. Activity is down by about one tenth on last year, but the slump seems to have bottomed out, with revenue advancing 7% on the month in May. The underlying business is robust, with grocery revenue up 26% in the year to 31 March and merchandise growing 5.8%. Long-term retail contracts with the likes of Morrisons, Sainsbury’s and Waitrose should underpin growth whatever turn the pandemic takes. 194p
(Money Observer) XP Power’s equipment is essential for certain industrial and medical applications. It has shown its resilience before; last year profit was hit by the shaky semiconductor market and US-China tensions, but the firm still managed to deliver an impressive return on capital. Management is shifting more manufacturing to Vietnam in response to the trade war. The valuation is not cheap, but still appears “compelling” for a high-quality business. 3,560p
Three to sell
(The Daily Telegraph) The oil price may have perked up, but BP’s investors are bracing for a dividend cut. The oil giant recently slashed its long-term forecasts for oil and gas prices over the coming decades, causing it to write £13.9bn off the value of its assets. Management thinks that the pandemic will only speed up initiatives to decarbonise the economy. The group’s solar power and biofuel operations give it future growth, but they generated a minuscule slice of last year’s £224bn in business revenue. The stock has rallied 38% since the March low. That could be an opportunity to take profits. 322p
(Shares) A strong brand and robust delivery network made Domino’s one of the early winners from lockdown. Yet a recent trading update provides a more nuanced picture, showing that customers are increasingly opting for lower-margin items, such as desserts. Margins are also being squeezed by spending on the hygiene measures needed to keep customers and staff safe from the virus. Rising revenue is nice, but thinner margins and less certain earnings are more important. Take profits. 310p
(Investors Chronicle) This FTSE 250 firm offers fuelling and hangar services to the private-jet market. The shares have soared by 70% since March. Yet the group’s flight activity fell by an annualised 77% in April. Longer term, downturns usually prompt corporations to cut back on private-jet spending, while long-distance meetings are becoming more fashionable. On a forward price/earnings ratio of 19 the shares are too richly priced given the risks. 224p
...and the rest
The Daily Telegraph
The events industry has been rocked by Covid-19, but exhibitions specialist Informa is well run and reasonably priced on 11 times 2021 earnings: a buy for those prepared to wait for a recovery (495p). Even a utility like National Grid has not been spared an earnings hit, but the dividend looks secure. Hold (950p).
Nestlé’s food empire encompasses more than 2,000 brands. That makes it highly diversified at a time when consumers’ habits are changing and supports generous returns of capital via dividends and buybacks. Buy (CHF104). Business is returning to normal at price-comparison websites and a period of economic weakness could prompt more interest in price switching, so consider switching some cash to GoCo Group (90p).
The Mail on Sunday
Shares in regulation, quality control and compliance software group Ideagen are up more than fivefold in six years. Some profit-taking may be in order, but recurring revenues, good growth prospects and a small dividend are reasons to keep at least some money on the table (180p). Translation specialist RWS is well positioned to harness post-pandemic trends in IT and life sciences – a “cracking Aim investment” that should deliver further gains (577p).
Investment manager Polar Capital focuses on structurally growing areas such as technology and healthcare and has an impressive record of delivering high returns on equity – buy (455p). Investment trust Hipgnosis Songs Fund turns musical hits into dividends, with the current 4.5% yield especially attractive for income seekers (116p).