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.
Five to buy
(Shares Magazine) Shares in Unilever have been “out of favour” since November, when the market began to prefer value stocks to “expensive defensive” companies such as the consumer-goods giant. Disappointing full-year results released in early February have also dampened sentiment, but this dip presents the best buying opportunity in a year. Over the past decade the stock has delivered a 204% return compared with 71% from the FTSE All-Share index. Its products are in demand “in both good and bad economic conditions”; and “it is delivering on positive environmental, social and governance factors”. Buy. 3,974p
(Mail on Sunday) One of the largest listed companies in the UK, paper and packaging group DS Smith’s half-year figures were affected by the pandemic. Sales declined, costs rose and profits slipped by 54% to £97m. But confidence continues to grow and a strong rebound is predicted for the company, which specialises in cardboard boxes for clients ranging from “Nestlé to Next and... L’Oréal to Unilever”. The group makes over 40 million boxes every day, most produced from recycled material; DS Smith is Europe’s largest recycler of paper and cardboard. Despite last year’s turbulence, a 4p dividend has been reinstated. Shareholders should “keep the faith”, and new investors could find value if they buy now. 405p
City Pub Group
(The Sunday Times) City Pub Group “should emerge from the Covid-19 wreckage relatively clear-headed”. Results for last year “were not pretty” despite a summer rebound between lockdowns. But the company managed to cut costs by centralising marketing and booking operations, and streamlining its menus. It shrank its workforce from 1,200 to 1,000 and “all but eight employees are on furlough”. But the cost-cutting will stand it in good stead when it is permitted to reopen: sales at just 50% of previous levels are needed to break even. The company is also set to benefit from the predicted “boom” in domestic tourism. Shares have sunk 38% from their pre-pandemic levels, and it is not out of the woods yet, but City Pub Group should be one of the winners over the next few months. Buy. 139p
(Investors Chronicle) Insurer Beazley had a difficult 2020 owing to a “deteriorating claims environment” and weak investment returns. Full year numbers “spelled this out in black and white”, but it wasn’t all bad news. The results defied the “gloomiest” of forecasts. And because it cancelled its dividend last year, its surplus capital is sitting at a comfortable $476m, ensuring that claims will be covered comfortably. There is scope for an increase in premiums of between 15% to 20% in 2021. The firm’s recovery has been faster and stronger than the market was predicting, but it remains undervalued. Buy. 361p.
(The Daily Telegraph) CureVac specialises in vaccines based on messenger RNA (mRNA), a new technology. These are easier to manufacture than traditional rivals. While far from under the radar — it works with the government and has a joint venture with GlaxoSmithKline to develop the new mutation-resistant Covid-19 vaccine — its share price has been “volatile” and any setback in the price should be taken as “an opportunity to buy”. The shares have soared in the past few months, but the “growing case” for mRNA vaccines as a way to fight Covid-19’s tendency to mutate “arguably justifies a high valuation”. $117
...and the rest
The Daily Telegraph
Moderna has begun “moving on to the next stage of the vaccine story”, and its valuation has become “demanding”. Sell ($180). BioNTech, however, has a “personalised” cancer-treatment business, which could yield interesting results. Hold ($118). Scottish soft-drinks maker AG Barr, best known for Irn Bru, has had a difficult 12 months. But it is an “efficient” firm with “powerful” brands and sales for the year to January 2021 will meet expectations. Hold (497p).
Mail on Sunday
eEnergy helps schools switch to energy saving bulbs and save money. Its lighting service has been adopted by over 450 schools across the country, but there are over 32,000 across the UK and 80% of them still rely on old lighting. It has “plenty of potential for growth” and demand has been increasing. Buy (19p).
Shares in Ocado have soared by 117% in the past year. Yet it holds only 1.7% of the UK market and “true to its tech unicorn status” doesn’t turn a profit. It has delivered returns for shareholders but not that many groceries. Sell (2,655p). UK-listed cybersecurity firm NCC should be able to build on its “modest growth” this year, and it looks as though it can weather the rest of the coronavirus storm. Hold (268p).
GlaxoSmithKline’s 2020 profits were in line with guidance, but pushed any “meaningful” improvement to 2022. Still, the results also “provided evidence of good strategic progress”, and 20 new product launches are due by 2026. The latest dip in its share price presents an opportunity. Buy (1,290p).