How the UK press’s share tipsters fared in 2020, and what they’ve picked for 2021
In a turbulent year for markets, the UK press’s share tipsters acquitted themselves well. Here's how they fared, and what they're tipping for 2021.
|Share tips for the year ending...|
|The Sunday Times||12.17%||-20.1%||30.8%||7%|
|The Daily Telegraph||21.53%||-13.4 %||9.6%||-1.3%|
In a turbulent year for markets the share tipsters acquitted themselves well, with all but two beating the FTSE 100 and FTSE 250. That said, given that the FTSE 100 slumped by 14.3% in 2020, beating the London market did not necessarily mean making any money.
Things were happier for those who braved the small-cap Aim index, which returned 14.4% in 2020. New entrant Interactive Investor’s Aim-focused portfolio reaped the rewards with an impressive 70.1% gain, placing it head and shoulders above the competition. Its best tip was battery specialist Ilika (see page 28). All its other tips also made money, save for industrial equipment supplier Northbridge Industrial Services, which fell by 27%.
Money Observer’s 12 tips came in second place, with games developer Team17 gaining 150% in a year when lockdowns turbocharged the video games industry. British gas owner Centrica proved its worst idea, slumping by 41%. Nevertheless the 21.7% overall return is a creditable showing for Money Observer’s last ever portfolio; sadly, the publication no longer exists.
The Daily Mail took the bronze even though most of its tips lost money. Marks & Spencer was its worst pick, falling by 37%. Barclays and RBS also ended 2020 nursing double-digit losses after another miserable year for banks. However, the portfolio was rescued by S4 Capital. Sir Martin Sorrell’s newish advertising venture rocketed by 155% in 2020, showing that occasionally one inspired choice can make (or break) a portfolio.
It was a disappointing year for US magazine Barron’s. While its 9.9% gain looks impressive to British eyes it was far short of the US benchmark S&P 500’s 18% total return. Barron’s attributes that to the emphasis it placed on value stocks; S&P 500 value shares returned -1% last year, while growth stocks set the pace with a 31% total return. Royal Dutch Shell, which fell by 34.4%, was its worst idea but the portfolio saved face with a 49.7% gain from Dell Technologies, its best performer. The Sunday Times leads the middle of the pack with a solid 7% return. Nasdaq-listed phone chipmaker Qualcomm was its top tip, soaring by 83% as the 5G rollout gathered pace. Brickmaker Forterra proved to be anything but “safe as houses”. It slumped by 30.3%.
The Sunday Times’ daily stablemate did a worse job, shedding 10.1% but still beating the FTSE 100. Safety and hazard detection business Halma was its top idea, gaining 15.7%, appropriately enough for a year where hazards were on everyone’s minds. Yet Jupiter Fund Management was “clobbered by falling markets” and finished down 31.1% to make it the paper’s worst pick.
As Shares notes, the trouble this year was that portfolios were produced with a “reality” in mind that the pandemic then “entirely overturned”. The magazine had some good picks – LED lighting specialist Luceco made a 117% return. Yet Lloyds Banking Group proved a stinker and Shares compounded the error by selling out in mid-September to crystallise a 63.4% loss. The stock has since rallied by 48%.
The Daily Telegraph held onto Lloyds until the bitter end, but with a 41.7% loss for 2020 as a whole it was still the paper’s worst tip. Happier times were found with video games specialist Sumo Digital, which rallied 85%. The closure of hotels dented profits at Johnson Service Group, the Investors Chronicle’s tip. The laundry firm slumped by 36%. But a bullish call on copper miner Antofagasta proved on the money. It gained 54% as prices of the industrial metal soared.
How are the mighty fallen
The Evening Standard topped the table on its first appearance in 2017 and repeated the feat in 2018. Yet a 19.8% loss is its worst performance to date and wins it the wooden spoon this time. Its 2020 portfolio opined that “the world will always need oil”, making BP a “solid punt”. But lockdowns and net-zero pledges have shaken that logic, with BP plummeting by 48.7% last year. Ted Baker proved a rotten tip, with an excruciating 71% loss making it the Standard’s worst. The paper’s tipsters were ahead of the game on the gold rally, however, with a 73% gain at miner Fresnillo their best idea. In past years The Guardian and The Independent have often fared poorly in recent years and they now seem to have finally given up, with no tips forthcoming for 2020 or 2021.
Annual share tip portfolios should not be taken too seriously. The comparison between portfolios is inexact as some publications liquidate their picks in mid-December. Long-term investors try to avoid buying and selling after just 12 months, but the following ideas do at least provide some food for thought.
What they’ve picked for the year ahead
Chinese e-commerce behemoth Alibaba’s online-listings businesses are less capital-intensive and more profitable than those at Amazon. On a valuation less than half that of its US peer the shares look interesting for those prepared to stomach the risks ($256). Iron ore and copper producer BHP stands to gain from a bull market in industrial metals. The firm’s “commodity mix” and “ESG [environmental, social and governance] credentials” are superior to some of its rivals’. A forecast 2022 dividend yield of 5.7% is not too shabby either (1,983p). A recovery is gathering pace at medical-products firm Convatec. The return of elective surgeries this year and the structural tailwind of an ageing population promise a “new phase of profitable growth” (204.5p). Spirits maker Diageo is a “quality business” that will profit from the reopening of the hospitality sector this year (2,945p).
Paris-listed Eurofins Scientific tests everything from food and pharmaceuticals to cosmetics across more than 800 laboratories in 50 countries. This is a world leader with a good track record of using investors’ capital well but the shares trade at an unjustified discount to their peers (€70). Aim-listed eyewear designer and manufacturer Inspecs only joined the stockmarket last February and remains obscure, creating an opportunity to buy early into its burgeoning “global growth journey” (271p). Ocado should be a winner as supermarkets everywhere react to growing online grocery demand by seeking out its technological know-how (2,301p). PZ Cussons, the business behind consumer goods such as Carex and Imperial Leather soap, has disappointed before but its compelling brand portfolio spells opportunity in emerging markets such as Nigeria. One for the “risk-tolerant” (233p).
Defence technology firm Qinetiq is a high-quality operator that offers predictable revenue thanks to long-term contracts with defence ministries. On a forecast 2022 price/earnings ratio of 14.2 the shares look undervalued (299p). Translation and intellectual property specialist RWS’s recently completed £854m purchase of peer SDL “marks a step change” for the growth outlook (534p). Transport analytics business Tracsis is known for having a “golden touch” with acquisitions and will become more profitable as it concentrates its efforts on the highly profitable rail sector (630p). The “cockroach of the high street”, pub chain JD Wetherspoon, will gain market share as weaker rivals fold. A buy for those who think the pandemic nightmare will be over soon (1,007p).
Shares in Google owner Alphabet rose by 31% last year and have further to go as travel advertising returns. A valuation of 28 times 2021 earnings is not unreasonable for “one of the great global franchises” with formidable growth prospects ($1,757). Apple shares are not cheap, but strong demand for the iPhone 12 and a work-from-home boost to other product lines make the firm a winner ($128). Berkshire Hathaway disappointed last year, but if 2021 delivers a cyclical recovery then its portfolio looks poised to deliver the goods ($222). Half of Coca-Cola sales are made in out-of-home venues such as “restaurants” and “stadiums”, making the franchise a natural recovery play. About 75% of profits come from outside the US so performance will be strong even if the dollar falls ($53).
Electrical equipment conglomerate Eaton offers a way to gain exposure to new renewable energy projects in the US ($115). Goldman Sachs isn’t getting enough credit. It has delivered two quarters of very impressive earnings but trades on ten times 2021 earnings and 1.1 times tangible book value, a discount to peers. Show it some love ($244). You’ll know the pandemic is over when the entertainment industries of New York and Las Vegas resume normal service. When they do, concert venue business Madison Square Garden Entertainment will be singing again ($79.5).
Pharmaceutical stocks represent a pocket of relative value on the S&P 500, so buy Merck, which boasts an impressive drug portfolio ($79.75). Inflation is a risk for the year ahead and miner Newmont offers a reasonably priced way to hedge ($60).
Rightmove has emerged as the “go-to” property website, enabling it to tap into the sort of “network effect” that has helped so many tech giants prosper. Its competitive edge can be seen in its “astounding” 75% historical underlying operating-profit margin. Expect it to remain dominant (661p). American payments giant Visa boasts “sky-high margins” and the seemingly unstoppable march towards a cashless society could see earnings double in four years ($211). Don’t be put off by Danish wind specialist Ørsted’s frothy-looking rating (the forward price/earnings ratio is 27). The market’s “largest renewables pure play” will benefit as the “multi-decade” push for net-zero emissions has only just begun (DKr1,150). Aim-listed Warehouse Reit is less well-known than bigger peers and on a forward discount to net asset value of 11% offers a cheaper way to buy into the e-commerce boom (114p).
Monks Investment Trust offers exposure to some of the world’s best growth companies but with greater diversification and “less aggression” than the Scottish Mortgage Investment Trust, its better-known Baillie Gifford twin (1,360p). Small-cap markets promise outsize returns but also carry more duds. The BlackRock Smaller Companies Trust focuses on “high-quality, cash-generative” stocks that should outperform in the long term (1,740p).
Environmental investment trusts are still surprisingly rare. Impax Environmental Markets is the pick of the crop (423p). Worldwide Healthcare Trust invests in biotech, healthcare and US health insurance brokers and should benefit from ageing populations and better sentiment towards the sector after its efforts to contain Covid-19 (3,725p).
The big question for 2021 is whether value stocks can continue to outpace their growth counterparts. If you think they can, then Anglo-Australian miner Rio Tinto is well-placed to profit from strong commodity demand and the 5%+ dividend yield is nothing to sniff at (5,470p). Where other airlines have slashed capacity, Wizz Air has announced more than 280 routes and is “aggressively” going after Gatwick landing slots. The risks of such frenetic expansion are obvious, but if the “huge gamble” pays off there will be big rewards from capturing so much market share (4,564p). Rare diseases biotech business Amryt Pharma has cash to spend and could secure regulatory approval for a skin treatment cream soon. The risks are high, but there are reasons to be optimistic (189p).
Scottish Mortgage Investment Trust has had a superb year thanks to bets on the likes of Amazon. Investments in smaller tech firms and China mean it should do well in 2021 too (1,214p). WHSmith looks to be a “retail survivor” thanks to returning travel demand and its Funky Pigeon online greetings cards division. Down 40% last year, the shares have ample room to rise (1,510p). Liontrust has bucked negative trends in fund management thanks to its popular ethical investment offering. A better year for the FTSE and low interest rates that will push more cash into stocks mean this lion could roar (1,300p).
The pandemic and the prospect of higher food and drinks prices hardly make pub stock Marston’s the most intuitive pick. Yet a joint beer venture with Carlsberg UK has freed up cash to pay down debt while it waits for a recovery and the firm could also become a takeover target (76p). Utility SSE’s sale of its retail energy business leaves it free to focus on its wind operations and puts it in the forefront of Britain’s energy transition (1,500p). Political tensions between East and West have stoked controversy at HSBC. Yet greater calm under the Biden administration and a stimulus-fuelled economy mean the shares could bounce back after slumping in 2020 (379p). West country water utility Pennon boasts an imposing £2.7bn cash pile following the disposal of waste division Viridor. That money will either go on a large acquisition or be returned to investors, both of which are reasons to hold the shares (950p). Games Workshop has a higher market valuation than Marks & Spencer for a reason. Its “enduring” and “patent-protected” Warhammer franchise justifies its rich rating of 38 times 2021 profits (11,200p).
The Sunday Times
Shares in West End property owner Shaftesbury slumped by 39% last year, but vaccines should bring the tourists back to the capital’s shops and restaurants in 2021 (565p). This has been a transformative year for distance learning and Pearson is well-placed to profit. Low debt and a “whiff of tech” could even generate a takeover bid (681p). It has never been easier to set up an online store, courtesy of New York-listed Canadian platform Shopify. Profits surged last year and the “vast” growth potential justifies a rich share-price valuation ($1,220). There is enormous “pent-up demand” for holidays, so expect business at easyJet to take-off just as soon as it is safe. The shares were trading at £16 before Covid-19 and could soar again (838p).
Long Covid-19 could cause a rise in the prevalence of lung fibrosis and other ailments. Biotherapeutics firm PureTech is working on a treatment and also has stakes in nine other businesses, enabling it to diversify risk in an unpredictable sector (373p). Prolonged lockdowns have sent many of us to the pet store. That has delivered a 14.6% jump in pre-tax profit at Pets at Home and with so many new pooches to pamper and kittens to coddle the business is set to consolidate those gains next year (416p). Chrysalis Investments is trying to give London more tech champions. The 0.98% management fee is worth paying to gain exposure to the formidable growth potential of proven start-ups before they go public (175p). A £1bn rights issue last year has put Premier Inn-owner Whitbread in a strong position ahead of a likely resumption of business travel later this year (3,100p).
The Daily Telegraph
Security threats are on the rise as well as health ones, so buy defence firm BAE Systems. Little affected by Covid-19, it will gain from resilient defence spending on both sides of the Atlantic and trades at a discount to many American peers (489p). Dublin-headquartered Keywords Studios provides art, sound and marketing services to video-games firms, making it a potentially steadier earner than classic developers (2,860p). AstraZeneca’s vaccine collaboration with Oxford has dominated the headlines, but the firm also has a “pipeline bursting with late-stage drugs” (7,324p). In these turbulent times the “desperately dull” field of “cloud computing and accounting software” feels reassuring, so buy Sage as the shares are going through a period of unwarranted weakness (582p).
After a year of few pleasures, fans of baker Greggs will be happy to rediscover the delights of a pasty on the go – a share to buy for the rebound (1,790p). Next’s CEO Simon Wolfson has piloted the firm admirably through the pandemic squalls; a “slick” online offering has kept it profitable and the dividend should return this year. Still 15% off the 2015 highs, the shares should deliver more upside (7,092p). Online wine business Naked Wines has enjoyed an 80% bump in interim sales as people drink at home instead of in bars (669p). Some think the housing boom will cool, but the recovery could ease lending conditions for first-time buyers. That will support the “value” end of the market in which housebuilder Persimmon operates (2,767p).
Credit hire and legal-services business Anexo has had an unimpressive year as lockdowns meant less business for its traffic-accident division. Yet on just nine times 2021 earnings, there is “room for a re-rating” (130p). The state will start withdrawing Covid-19 support this year, sending more work the way of insolvency specialist Begbies Traynor (87p). SourceBio International’s laboratories have been much in demand because of Covid-19 testing; strong long-term demand for its DNA sequencing and health diagnostics services means management’s biggest headache is what to do with a growing cash pile (160p). Midlands-focused Real Estate Investors could get a boost from the 2022 Birmingham Commonwealth Games and the shares carry a prospective yield of more than 10% (31p). Lettings and sales estate agent Belvoir Group has profited from the surprising strength of the housing market and also yields an appealing 4.6% (151p).