Three to buy
Bunzl
(The Sunday Telegraph) This distributor often flies under the radar, but its deliveries of medical equipment, cleaning kit and disposable cutlery were vital to keeping the economy going during lockdown. First-half underlying sales grew by 5% Profit margins are expected to expand. Management “prudently cancelled” the dividend but a robust balance sheet suggests that the payout drought will be short. Bunzl will also be keen to resume its usual hunt for “bolt-on” acquisitions. 2,198p
Knights
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(Shares) Lockdowns have disrupted the traditional legal partnership model, creating new opportunities for this legal and professional services business to lure high-flying lawyers into the fold. Specialising in corporate and commercial law, and boasting about 18,000 clients, Knights looks set to emerge from the downturn in a relatively strong position thanks to cash-saving measures such as deferred spending and staff salary cuts. Expansion into regional legal markets has brought greater diversification and leaves room for further growth. Buy. 398p
Roche
(Investors Chronicle) This “Swiss healthcare giant” is at the forefront of the battle against Covid-19 thanks to its diagnostic and antibody tests. It is also examining six different treatments for the disease “across 28 clinical trials”. The group also boasts a promising drug pipeline of non-Covid treatments, the fruit of research and development spending equivalent to 11% of revenue last year. A dependable 3% forward dividend yield is also attractive. CHF327.50
Three to sell
Hammerson
(Motley Fool UK) The pandemic has left this shopping-centre owner scrambling for cash. Rent collection in the current quarter sits at over 30%, leaving Hammerson to turn to the government for a loan that will only increase leverage. The shares fell again this week when it confirmed that it is looking to raise more funds through a rights issue. The group was already struggling before the virus struck and the future of bricks-and-mortar retail is deeply uncertain. The shares are cheap because the firm could “follow Intu into administration”. Avoid. 58p
ITV
(The Sunday Times) A proposed government ban on junk food advertising before the watershed is more bad news for the TV industry. Advertising at ITV halved “overnight” when the virus struck despite higher viewership, with severe disruption to the production of programmes. This summer’s schedule is thus full of repeats. Its new Britbox streaming venture is entering a fiercely competitive market. The shares have slumped by 60% this year but still aren’t a bargain. Avoid. 57p
Microsoft
(Interactive Investor) This “tech star” has led the market rally, gaining 60% over three months to hit an all-time high last month. Microsoft’s cloud-computing services are a natural winner from the rise of distance-working. But the tech rally may be overdone. Apple, Amazon and Microsoft now make up one-third of the Nasdaq 100 index, while a rating of more than 35 times earnings leaves Microsoft vulnerable to all but perfect news. Take profits. $203
...and the rest
The Daily Telegraph
Real estate investment trust AEW UK Reit shows that unglamorous property – past investments include a Belfast retail park and regional industrial units – often produce better returns. It offers an 11% dividend yield with “no prospect” of a cut. Buy (73p).
Investors Chronicle
Computer services firm Computacenter has been a big winner from the new demand for remote-working. Highly cash-generative and with zero net debt, the stock looks a bargain on a forward price/earnings multiple of 18 (1,942p). Topps Tiles is expanding in the commercial market and government efforts to juice the property market, which will mean more renovations, provide an extra fillip. Buy (43p).
The Mail on Sunday
Fantasy game store Games Workshop has grown into a “£3bn behemoth” worth more than Marks & Spencer.Lockdown has re-acquainted many people with the pleasures of an “evening-in” with a board game but the shares are pricy, so “buy on weakness” (8,780p). The world will be “elbow deep in Dettol” for the foreseeable future, so hold consumer goods giant Reckitt Benckiser (7,706p).
Shares
Shares in The Coca-Cola Company have lagged the wider rally, presenting a rare opportunity to buy into a “defensive colossus” ($48.48).
The Times
Catering giant Compass is languishing amid the slow global recovery. This high-quality operator will one day thrive, but “not yet”. Avoid (1,069p).
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