Three to buy
Beazley Group
(The Times) This Lloyd’s of London insurer, which specialises in marine, property and life insurance, has not covered itself in glory during the pandemic. It painted an overly rosy picture of the outlook earlier this year, only to warn last month that its Covid-19-related losses could be $340m, double the previous estimate. Yet with the shares down by 45% in 2020 this could prove a buying opportunity. Beazley may need another rights issue, but rising insurance rates mean it is “well-placed to grow” on the other side of the pandemic. 318p
Smurfit Kappa
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(Shares) This packaging group supplies 64,000 customers across 35 countries. That scale enables it to respond rapidly to clients’ demands, such as when eBay UK orders five million boxes with ten days’ notice. Free cash flow rose by almost 50% in the first half thanks to previous cost-saving measures and rising industry prices should now provide a further boost. On 13 times earnings and yielding 3.5%, the valuation is “undemanding” for a business enjoying structural growth thanks to e-commerce. 2,940p
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Home Reit
(The Mail on Sunday) The number of homeless people in Britain has soared over the past year. This real estate investment trust will step in to provide newly built and refurbished housing at cheap rents to local authorities, which are responsible for managing the problem. It floats later this month. It is too late to subscribe for the initial share issue, but the shares should continue to deliver capital growth. It’s a “genuinely worthwhile investment”.
Three to sell
Babcock International
(Investors Chronicle) Shareholders in this defence contractor have had a lousy decade, with the stock down from 1,300p in 2014 to 235p today. Covid-19 could weigh on defence budgets, while Babcock is not well-placed to serve the state’s growing interest in space and cyber capabilities. Large pension liabilities will crimp cash flow for the foreseeable future. Investors might hope for a takeover bid, but they would do better to sell this “value trap”. 235p
European Opportunities Trust
(The Daily Telegraph) This trust was caught up in the Wirecard fallout earlier this year. At its peak the disgraced German payment processor made up 17% of the trust’s assets. We had hoped that this imprudently large bet was a rare miss from star manager Alexander Darwall. Yet he later allowed the trust’s holding in Grenke, another German business, to hit 5%. In a case of déjà vu, the short-sellers are now circling that firm and demanding to see the books, although Darwall has since sold out. The latest episode has deepened our doubts about his judgement, so sell. 673p
Greatland Gold
(Motley Fool UK) Investors in this Australia-focused gold miner have had a magnificent run, with the shares up more than 1,000% this year. That’s not bad for a business that is still exploring and is not yet profitable. “Very positive results” from its Havieron deposit in Australia have helped drive the rally, as has this year’s strong run for gold prices. Yet the good news is now priced in and the share price looks vulnerable to any disappointments. “Now could be a decent time to bank some profits.” 22p
...and the rest
The Daily Telegraph
Taser-maker Axon Enterprise, listed on the Nasdaq, is well on the way to dominating the policing market in everything from body cameras to data management. Buy ($88.33). The second coronavirus wave has brought job cuts at Premier Inn-owner Whitbread. Yet the business will survive and could eventually emerge from the pandemic with fewer competitors. Hold (308p).
Investors Chronicle
“There is a business buried beneath” the rubble of past disappointments at Virgin Money. A cheap valuation, a “high-quality loan book” and cost-savings from the 2018 merger with CYBG make this a contrarian buy (74p).
The Mail on Sunday
Working from home has only deepened the nation’s “love of a cuppa”. Shares in kettle safety specialist Strix yield 3.3% and are a “strong hold” (234p).
Shares
Hotel Chocolat will shrug off the pandemic disruption: rising online sales and promising growth in the US and Japan make for a bright long-term outlook (345p). The pandemic has hit sentiment towards greeting-cards group IG Design, but investors should hold until a trading update later this month provides a clearer picture (420p).
The Times
Activity at paving-slabs maker Marshalls had returned to pre-pandemic levels by August thanks to a home improvement boom. Yet the shares are “richly priced”, so hold (659p). With office canteens closed and sporting events cancelled, catering giant Compass Group is having a rotten year, but it remains a “class act” – hold (1,168p). Investment trust 3i Infrastructure has a solid record, but weak energy and aviation markets could hit revenue. Hold (290p).
