Three to buy
Legal & General
(Evening Standard) “There’s no pleasing” some people. This life insurance and annuities giant has bucked the trend by announcing that it will pay the same dividend as last year, only to receive a “share-price clobbering”. Investors had been hoping for an increase. Covid-19 has made only a small dent in L&G’s profits and the business should enjoy structural growth from an ageing population and corporations looking to transfer pension risks. A recovery may be some way off, but on a dividend yield of almost 8% shareholders can afford to be patient. 220p
Softcat
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(Investors Chronicle) Corporate demand for computer software and hardware is soaring and IT resellers are quids in. Softcat has become one of the UK’s top players in the sector, with operating profit advancing about 20% in the first half. Just over one-third of sales are made to the public sector, which provides some protection if the economy tanks again. On a price/earnings ratio of 34 the shares are not cheap, but they should still offer value given the encouraging long-term growth outlook. 1,261p
M&G
(Motley Fool UK) This investment manager demerged from Prudential last year and joined the FTSE 100 in its own right. It boasts more than five million retail customers across 28 markets. The shares look “insanely undervalued” on a price/earnings ratio of just 4.2 and offer a 7% dividend yield that is well covered by profits. M&G won’t deliver world-shaking growth, but for boringly reliable cash generation it is one to buy and hold. 170p
Three to sell
Beyond Meat
(Interactive Investor) It has been another volatile week for this meat-substitutes maker, whose shares have traded as high $235 and as low $54 since it listed in May last year. Investors are excited by the growth potential in a market forecast to be valued at $50bn by 2025. Yet on 20 times “possible sales this year” the valuation looks “very full”. Such a vertiginous rating leaves investors’ capital at risk. Avoid. $133
Spotify
(Shares) Shares in this New York-listed Swedish music-streaming service have more than doubled since April. Spotify’s quandary has long been that it boasts massive reach, yet remains barely profitable. Investors hope that a “bold move” into podcasts and talk shows will provide part of the solution by bringing in new audiences and more advertising revenue, but it will be several more years before regular annual profits are expected. On more than 40 times 2024 earnings the valuation “asks too much of investors” given the risks in the meantime. Avoid. $254
Naked Wines
(The Times) This online wine retailer operates in the UK, US and Australia. It offloaded its Majestic Wine retail stores last year and has managed to “decant very strong sales figures” thanks to locked-down consumers looking to drown their sorrows. The shares have doubled this year and management thinks the first half may have proved an “inflection point” as more customers than ever buy wine online. Yet the second half is set to prove tougher as the lockdown boost gradually ebbs. The group also needs to spend more on gaining customers, which will eat into earnings. Avoid. 426p
...and the rest
The Daily Telegraph
Shares in self-storage specialist Big Yellow are worth “locking up somewhere safe” – hold (1,003p). H&T, Britain’s biggest pawnbroker, is priced at roughly book value, which limits downside risk for investors in uncertain times. Hold (326p).
Investors Chronicle
Shares in Urban Logistics Reit are trading at an unjustified discount to forecast net asset value, but the group is geared towards structural growth in e-commerce. Buy (143p). Online retailer Asos boasts a strong balance sheet and has skilfully avoided the ethical controversies dogging its peer Boohoo. “The future looks bright” – buy (3,358p).
The Mail on Sunday
Dividend-starved investors should take a look at motor insurers Direct Line and Sabre Insurance as well as cashless payments specialist PayPoint. All offer 5%+ dividend yields that should be “backed up
by earnings” (334p; 265p; 636p).
Shares
A strong cash position leaves Premier Inn-owner Whitbread ideally positioned to profit from the woes of peer Travelodge. Buy (2,220p). Aim-listed digital consultancy The Panoply Holdings stands to gain over the next few years as the public and private sectors both shift operations online. Buy (90p). Smart Metering Systems has more than tripled the full-year dividend, thereby confirming its position as a refuge from the woes of the wider economy (619p).
The Times
Credit checker Experian will benefit from growing consumer appetite for credit in the UK and Latin America, but on 37 times forecast earnings the shares are far from a bargain – hold (2,766p).
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