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.

Six to buy

Morgan Stanley

(Investors Chronicle) There are plenty of reasons to dodge the banking sector: rock bottom interest rates and economic weakness will weigh on profitability over the coming years. An “ever-shifting” regulatory backdrop means investment banks are no haven, but Morgan Stanley is better placed than most. Its growing wealth-management and investment-management divisions provide valuable diversification, and the bank has little exposure to the rickety consumer credit and mortgage markets. On a price/earnings (p/e) ratio of 9.5 the shares have room to close a valuation gap with peers. $51.70

Saga

(Interactive Investor) Shares in this over-50s insurer and cruise operator have jumped on hopes for the vaccines in development. The insurance side has broken even this year thanks to lower vehicle claims as lockdowns keep more people off the roads. The outlook now “hinges” on the cruising division. The industry has plenty of devoted fans and Saga’s premium cruise offering occupies an “attractive marketing” niche. If you think new vaccines will help release “pent-up demand” from prosperous pensioners next year, then buy. 183p

Schroders British Opportunities Trust 

(The Mail on Sunday) The rout in the London market has left many of the best small and medium-sized British businesses strapped for investment cash, hampering their growth prospects. This soon-to-float trust aims to remedy that problem. The plan is to invest in about 30 to 50 companies split evenly between publicly listed and private businesses. Schroders has a good track record and the trust’s liquid structure will save investors from a Woodford-style meltdown if things go wrong. The deadline to apply for the share issue is November 26. “A patriotic buy.” 100p

Starbucks Corporation

(Shares) This “coffeehouse colossus” has 32,000 stores across 80 countries. American and Chinese sales have rebounded strongly since the first wave of lockdowns, with lower footfalls partially offset by higher-priced drinks and an “industry-leading” digital-ordering platform. The group is likely to emerge from the pandemic even more dominant as lockdowns decimate the competition. The shares are not cheap on 31.9 times 2021 earnings, but this is “a business full of beans”. $95

WHSmith

(The Sunday Telegraph) WHSmith’s shift from the floundering high street to outlets in transport hubs looked “inspired” until the pandemic struck. Its resilience in the face of the challenge has been “exemplary”: cost cutting means it needs only half of its normal footfall to break even. That is a testament to a strong corporate culture, helped by a succession of CEOs who have been recruited internally and know the business inside out. The firm is poised to profit from the rebound and the shares offer value. 1,353p

Wizz Air

(The Wall Street Journal) This London-listed Hungarian airline offers the best of both worlds: a pandemic recovery bet combined with a growth play. Around 65% of Wizz’s passengers are travelling to visit family and friends elsewhere in Europe, making the business “unusually resistant” to the frail tourism market. Indeed, Wizz briefly became the continent’s biggest airline during the spring lockdown. On a longer view, structural growth in its “core eastern European market” will provide a tailwind. The travails of Norwegian also create an opportunity to break into the long-haul market. 4,280p

...and the rest

The Daily Telegraph

Housebuilder Vistry trades on a 24% discount to net asset value (NAV) but the government will prop up the housing market “come what may”. Buy (711p). The Baillie Gifford China Growth Trust has an excellent track record but given an “eye-watering” 19% premium to NAV it is time to take profits. Sell (532p)

Investors Chronicle

“Digitally-focused” academic publisher-to-business analytics business Relx boasts a vast “archive of content and data” that helps fend off competition. A 2.6% dividend yield is also appealing. Buy (1,837p)

The Mail on Sunday

Post-pandemic construction and garden upgrades are auspicious for outdoor paving specialist Marshalls. A “robust, long-term investment” (795p). 

Shares

The pandemic is accelerating the “mega-trend” towards online retailing. Leading digital payments service PayPal is ideally placed to profit – buy ($184.72). The Aberdeen Standard Asia Focus investment trust offers exposure to important Asian growth themes such as rising healthcare demand and e-commerce (1,031p). Shares in Mr Kipling cakes-owner Premier Foods have doubled since April but on a forward p/e of 9.4 they still look a tasty morsel. Hold (98p)

The Times

Shares in private-equity investor 3i Group have done well recently but on a forward p/e of just 6.3 this diverse portfolio still has room to deliver. Buy (1,111p). Building supplier Grafton Group is cashing in on the lockdown DIY boom but is still on a discount to historic levels. Buy (816p).

Recommended

Changpeng Zhao: Binance founder undaunted by the crypto winter
Bitcoin & crypto

Changpeng Zhao: Binance founder undaunted by the crypto winter

Changpeng Zhao, the founder of controversial cryptocurrency exchange Binance, has been severely battered by carnage in the sector. But the future is b…
3 Jul 2022
Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
Just how powerful is artificial intelligence becoming?
Tech stocks

Just how powerful is artificial intelligence becoming?

An uncannily human response from an artificial intelligence program sparked a minor panic last month. But just how powerful are machines getting – and…
2 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022

Most Popular

Five dividend stocks to beat inflation
Share tips

Five dividend stocks to beat inflation

During periods of high inflation, dividend stocks tend to do better than the wider market. Here, Rupert Hargreaves pick five dividend stocks for incom…
30 Jun 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022
UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022