Three to buy
Bloomsbury Publishing
(The Mail on Sunday) Harry Potter continues to work his magic for this publisher, which is profiting from housebound Britons looking for a good read. Profits rose by 60% on the year in the six months through 30 September and Christmas should herald a new wave of book buying. Bloomsbury’s cookery titles have also enjoyed an excellent year, while the digital academic division has benefited from the demands of remote learning. Bloomsbury’s own investment story, then, is also compelling. Buy (279p).
Carvana
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(The Sunday Telegraph) his online used-car retailer is disrupting America’s $800bn second-hand market. The website offers buyers an Amazon-like range of choice, financing options and can even deliver via automatic roadside “vending machines”. The younger generation should be especially keen on Carvana as they are accustomed to doing everything online and haven’t developed the habit of heading to a local dealership. Around 97% of the used-car business is still mediated by such “bricks-and-mortar” sites, making this a “huge” disruption opportunity. $266
Greggs
(Investors Chronicle) Closed shops, lower high-street footfall, a suspended dividend: 2020 has been miserable for this value baker. But Greggs has invested in its supply chain, with centralised baking facilities making it more efficient and responsive to changes in demand – witness 2019’s launch of the popular vegan sausage roll. A more sophisticated digital offering is also helping. On 1.5 times 2019 sales, the stock is “oven ready” for an economic recovery. 1,657p
Three to sell
Foxtons
(The Times) Stronger property sales in its core London market have helped this estate agent to raise its forecasts. Yet this remains a tricky business: property sales in the capital hit a 25-year low last year and revenue was down by 15% year-on-year for the first 11 months of 2020. The estate-agent sector is also “wildly competitive”, with rivals including Purplebricks and Rightmove muscling in. With the shares now on a forecast price/earnings (p/e) ratio of 49 there is better value on offer elsewhere. Avoid. 49p
Imperial Brands
(Motley Fool UK) Shares in this tobacco giant have had a volatile year to finish down by about 16%. A chunky 8.7% dividend yield looks less impressive when you realise that it is only covered once by earnings. Investors are pinning their hopes on next-generation cigarette alternatives, but sales in this department have disappointed recently. Growing regulatory scrutiny of e-cigarettes and an ethical shift that is prompting more institutional investors to steer clear of tobacco are also likely to weigh on the shares in the long run. Avoid. 1,573p
Kraft Heinz
(Shares) With sales soaring as people consume more food at home and a modest forward p/e ratio of 14.1, what’s not to like about the maker of Heinz ketchup and Philadelphia cream cheese? There are several problems undermining the group’s prospects. Next year is likely to bring disappointing growth as consumption patterns normalise and the group’s margins look vulnerable to competition from supermarket own-brands. While peers such as Nestlé are investing in the “foods of the future”, Kraft Heinz’s portfolio of much-loved brands is also starting to look “tired”. $33.50
...and the rest
The Daily Telegraph
Tackling problem gambling is a commercial imperative thanks to pressure from regulators and fund managers. Ladbrokes’ owner Entain (formerly GVC) boasts market-leading technology in this area and is well on the way to reinventing itself as a leisure company. Buy (1,090p). Equity-income trusts have proven their worth in this year of dividend cuts, with the vast majority maintaining payouts. With good reserves and a 4% yield, trust-cum-professional services stock Law Debenture is the pick of the bunch (654p).
The Mail on Sunday
Profits are poised to more than double at online retailer Gear4Music thanks to a lockdown boom in demand for musical instruments. The shares have soared over the last five years but there should be more upside ahead (700p).
Investors Chronicle
XP Power, which makes “mission-critical” power converters, will see long-term growth from the growing importance of energy efficiency. Little wonder then that it has become a fund managers’ favourite (4,320p).
Shares
Often overlooked, soft-drinks bottler Coca-Cola HBC is a geographically diversified, cash-generative business with a solid earnings outlook. Buy (2,338p). Trading has held up at Spanish Zara-owner Inditex and the firm provides a euro-hedge for those worried about the outlook for sterling (€27.50).
The Times
“Faded high street giant” Marks & Spencer has a new lease of life thanks to its well-timed joint food venture with Ocado. Buy (134p). Bus and coach operator National Express has made the best of this year’s “bumpy ride” and the shares are cheap on 10.5 times earnings. Buy (245p).
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