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
Associated British Foods
The Sunday Telegraph
This food conglomerate is best known for its ownership of clothing chain Primark, which accounts for about 47% of group activity. Renewed lockdowns have forced stores to close, but past experience shows customers simply purchase more items on reopening to compensate. The ingredients and grocery arms – which include Twinings tea – are well-diversified and defensive. That provides a steady anchor while Primark makes a play for post-pandemic high-street dominance as rivals go to the wall. 2,219p
This Lloyd’s of London insurer had a tricky 2020 as claims for cancelled conferences and other pandemic expenses prompted a dividend suspension and a near-$300m cash call from investors. Yet Beazley now has the liquidity it needs to see it through a difficult period and the outlook for the industry is positive. Rates are heading up and risk-averse businesses will not be cutting insurance budgets. On a forward price/earnings (p/e) ratio of 12 the shares look cheap on a historical basis. The turnaround “may be bumpy”, but there are reasons for optimism. 365p
The Sunday Times
The FTSE 250 business behind Mr Kipling cakes has enjoyed a lockdown boost as British shoppers turn back to old favourites. Sales rose by 15% year-on-year in the six months to 26 September. The latest lockdown should ensure continued robust demand and talk of more remote working could make this a durable trend beyond the pandemic. The stock has soared by 190% over the past year, but talk that the dividend could return after a prolonged hiatus means it could have further to climb. 107p
The Mail on Sunday
Building work will continue during the lockdown, cheering backers of this builders’ merchant. Grafton owns brands across the UK, Ireland and the Netherlands, of which Selco is the best-known. Management has been shifting its focus away from cheap high-volume products such as plasterboard to specialised, niche wares that command higher margins. Recent acquisitions include an interior ironmonger and a maker of “bespoke wooden staircases”. The latest lockdown may see more people planning home-improvement projects, so buy for the long term. 957p
Motley Fool UK
The collapse in global air travel has hit Rolls-Royce hard. Its civil aviation business accounted for more than half of sales the year before the pandemic. Yet management has reacted well to the crisis, raising cash through a rights issue and cutting costs to keep things shipshape. The defence business has also helped keep the group ticking along. The shares are down by 50% over the past year, so now could be an opportunity to buy on weakness ahead of a hoped-for recovery in airline passenger numbers later this year. 105p
Department stores are going the way of “the dinosaurs”, but some should be able to adapt and survive. This US luxury chain has invested heavily in online operations and boasts a “user-friendly app”, something many peers still lack. Store closures and downsizing have cut the dead weight from the bricks-and-mortar operation while maintaining the benefits of a physical presence. The shares have rallied over the past few months, but on a mere seven times pre-crisis earnings they could have more room to rise. $31.53
...and the rest
The Daily Telegraph
Smithson Investment Trust, which invests in small and medium-sized businesses worldwide, has performed well during the crisis and is likely to prove a steady performer in the long term. Note, however, that a 0.9% management charge is a little on the high side, so “buy on weakness” (1,696p). Electronics giant Samsung should have a good year as a global semiconductor cycle gets under way. Buy ($1,907). Investors in Royal Dutch Shell have endured a miserable period and the long-term outlook is unclear. However, with the shares still yielding more than 4%, committed contrarians will prefer to hold on in case the gloom proves overdone (1,259p).
Mail on Sunday
Shares in shipbroker Braemar Shipping Services have soared by 50% since May. Cautious investors may be inclined to take profits, but those with a long-term focus should hold on as a new global economic cycle begins in Asia (149p).
Dutch tech play ASML is the world’s leading supplier of photolithography, a crucial step in making semiconductors. Continual research and development spending keeps it ahead of the competition and it is a British fund managers’ favourite. Buy (€406).
Gas and fluid control specialist Spirax-Sarco Engineering is well managed, but the shares appear too expensive given a weak outlook for industrial markets in the US and elsewhere. Avoid (116p). The latest lockdown will only boost corporate IT spending, meaning more business for IT infrastructure firm Softcat. Buy (1,516p).