Three to buy
GlaxoSmithKline
(Shares) GSK’s shares are on a deep discount compared to peer AstraZeneca. They yield 6.5% but analysts think dividend cover next year will be tight. Yet the market is missing key strengths: a robust vaccine division – notably thanks to its Shingrix vaccine – and a “strong pipeline” at the oncology franchise. The consumer healthcare joint venture with Pfizer will also unlock cost savings and better margins. On a price/earnings ratio (p/e) of 11 the stock is appealing. Buy. 1,221p
Hiscox
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(The Mail on Sunday) “Should you buy an insurer in the middle of a global catastrophe?” Hiscox is a diversified player, offering everything from “big ticket insurance” of oil rigs to niche retail policies for art and kidnap cover. With Covid-19 striking so broadly this has been a “torrid” year, but recent trading updates suggest the ship is steadying and premium income has kept growing. With the stock down by half since July 2019 Hiscox could prove “a good policy”. 942p
Kingfisher
(Investors Chronicle) Lockdown is no problem for the B&Q and Screwfix-owner, which operates in the UK, France, Poland and Romania. Classified as “essential”, the stores are likely to see a sales surge as housebound Europeans look for something to keep themselves occupied. New management is de-centralising operations to make managers more responsive to local conditions and more people are getting the DIY bug. On 15 times 2022 earnings this is a reasonably-priced turnaround play. Buy. 287p
Three to sell
Dropbox Inc.
(Forbes.com) This cloud-storage specialist reported more than 15 million paying users in the third quarter. Yet its ability to take market share from larger rivals remains in question. The group is struggling to distinguish itself from Google, Apple and Microsoft, which offer more services and are frequently more competitive on price. The shares are priced for implausibly rapid growth. The current valuation implies 46 million paying users by 2027, or 30% of Amazon Prime’s US membership. Given the rich valuation, the risks are tilted to the downside, so avoid. $19
Mercantile Investment Trust
(The Times) This FTSE-250 Trust offers concentrated exposure to the UK market through quality holdings such as Computacenter and Games Workshop. The portfolio is focused on the industrial, financial and consumer sectors but avoids oil and gas. British stocks are trading near 50-year lows and some money managers sense long-term opportunity. Perhaps, but with a double-dip recession looming the FTSE still faces significant headwinds, so all but “the fearless” should avoid. 199p
Ryanair
(The Sunday Telegraph) Ryanair’s latest update showed sales down 78% and a near-€200m after-tax loss over the six months through September. Impressive cost savings and €4.5bn of cash mean that “it will survive” and there will be fewer competitors on the other side of the pandemic. Yet survival is no guarantee of returns, especially with the shares only 14% below their pre-pandemic level. Stick to shares that are less likely to face continued turbulence. €13.34
...and the rest
The Daily Telegraph
Gresham House Strategic Trust has been hoovering up deeply discounted UK micro-cap shares. Patient, risk-tolerant investors could be rewarded when the market turns. Buy (985p). British software “gem” Blancco helps companies delete old data to comply with data-protection laws. It is a leader in this niche and the longer-term growth opportunity is very promising – buy (191p).
Investors Chronicle
US-based Thermo Fisher Scientific is a leading provider of scientific laboratory kit. Business has received a fillip during the coronavirus, while the group should also enjoy a long-term tailwind from rising healthcare spending. Buy ($481).
The Mail on Sunday
Self-storage is a rare bright spot amid the gloom for commercial landlords. Lok’nStore may also gain from the house-buying boom as people need storage space between moves. Hold (565p).
Shares
Newly listed Canadian gold play Wheaton Precious Metals is a “streaming” company – meaning it invests in mining without directly assuming operational risks. There are few comparable businesses on the London market and it offers a new way to buy into the ongoing strength of the yellow metal (3,725p). Microsoft continues to beat analysts’ forecasts thanks to the work-from-home boom, justifying its central role in many a portfolio.Keep buying ($202).
The Times
Packaging firm DS Smith is exposed to the e-commerce boom and on just nine times forecast earnings the shares “look wildly undervalued”.Buy (290p).
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