Three to buy
CVS Group
Rolls-Royce
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(Shares) Shares in this aviation engineer have soared on hopes that a vaccine will soon have us all flying again. Rolls-Royce is part of an “effective global duopoly” with General Electric for civil aviation engines, an area that accounts for more than half of sales. The medium-term outlook for aviation is foggy, but Rolls-Royce’s more lucrative nuclear-power systems and defence divisions should keep profits buoyant. On a free cash-flow yield of 8.4% for 2022, the shares look “great value” for patient investors. 107p
VinaCapital Vietnam Opportunity Fund
(The Times) Vietnam has been a trade-war winner as the likes of Apple and Microsoft move manufacturing there from China. This fund buys both listed and private companies in the hope of delivering long-term capital growth. It is particularly exposed to domestic property and construction: a growing population and expanding infrastructure needs bode well for these sectors. An expanding middle class is also driving demand for financial services. The valuation is still attractive and a dividend yield of 2.3% is a final boon. 365p
Three to sell
National Grid
(The Daily Telegraph) National Grid should be “the perfect income stock”.Its customers can hardly switch to another provider, ensuring a predictable flow of revenue. But that is where the regulator Ofgem steps in. A forthcoming framework could “halve the regulated return” of the group between 2021 and 2025, although we will have to wait a few weeks for more details. Even worse, there are reports that the government is considering an outright breakup as part of its carbon reduction strategy. Even if National Grid dodges that bullet, lower profits will mean either a dividend cut or higher debt. The risks are too high. 881p
Kandi Technologies
(Barron’s) There’s a new kid on the electric-vehicles block. This Nasdaq-listed Chinese maker of vehicles and batteries has seen its share price roar this year, but it has been a volatile ride. The company is loss-making, but the upcoming launch of the K27, a “Mini-Cooper size” electric car, has unleashed speculative excitement. But beware. Imported compact cars have a long history of underperforming in the US (remember the fate of the Yugo in the 1980s). $12
Palantir Technologies
(Motley Fool UK) Palantir, which listed in New York in September, builds software to help financial companies, carmakers and intelligence agencies to corral vast amounts of data. Full-year sales should eclipse $1bn, a 44% rise on last year. The problem is the price: on a price-to-sales ratio of 45 there is considerable downside. The fact that the founders have offloaded tens of millions of dollars of stock since the listing is also hardly reassuring. Avoid. $28
...and the rest
The Daily Telegraph
It would take a brave investor to bet against the “tidal wave of cash” heading into the renewable-energy sector. Utility SSE, which is working on the world’s largest offshore wind-farm project at Dogger Bank, looks well-placed to profit. Hold (1,361p). Shares in Covid-19 treatment and testing specialists Synairgen and Avacta have fallen back on the vaccine news, but both are set to adapt their expertise to other conditions. It’s a “speculative buy” (89p; 113p).
The Mail on Sunday
A strong first-half performance at cake chain Cake Box shows that consumers are finding a sugary way to beat the lockdown blues. The shares are up by 37% since July 2018. Some profit-taking may be in order, but shareholders should keep a stake: it makes sense to have some cake as well as eat it (188p).
Shares
New York-listed medical science firm Boston Scientific makes everything from pacemakers to catheters. Cancelled elective procedures have seen the shares stall this year, but there is now a backlog to clear. Rising margins and judicious acquisitions should also prove a tailwind ($33.33).
The Times
A DIY and renovation boom has driven “stunning” sales at B&Q and Screwfix owner Kingfisher. Further progress will depend on whether the housing market can hold up, but this is proving to be a successful turnaround story. Buy (271p). Trading at Greggs will bounce back swiftly next year but on 43 times forward earnings the shares are pricey – hold (1,799p). It will take more than a perkier oil price to make up for past disappointments at Tullow Oil. Avoid (32p).
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