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
(Mail on Sunday) Millions of people around the world took advantage of stay-at-home orders to add a pet to their families. The trend bodes well for animal-drugs group Dechra Pharmaceuticals, whose products range from thyroid pills for cats and dogs to flea treatments for rabbits; it also produces premium pet food. The company posted “upbeat” half-year results to 31 December, “including an 8% increase in the dividend”. Brokers have forecast a 12% increase in sales to £576m and an 18% jump in profits to £137m for the full year. Dechra is a well-run business with sound prospects. 3,430p
(The Sunday Telegraph) House-price growth in the past year has fuelled concern about affordability, so investors might be put off buying housebuilders such as Persimmon because they think demand for new houses will fall. But record low interest rates suggest UK homeowners may be able to spend more of their earnings on mortgages, which could translate into higher demand for new homes. “Persimmon’s sales could be further boosted by a perennial undersupply of property.” With a cash position of £1.2bn the firm is in a “strong position” to deliver and ride out market uncertainty. 2,590p
(Barron’s) “Ross Stores offers shoppers a chance to find overlooked ‘treasures’ among a heap of discards. [The] stock could offer investors the same opportunity.” The company, which mostly sells high-end clothes, accessories and home goods repurchased from other retailers at big discounts, had a tough time during the pandemic. It doesn’t have a big online presence, a disadvantage when people were forced to stay at home. But as vaccines are given out and recovery accelerates, the outlook is improving rapidly. Ross’ earnings per share are expected to rebound from $1.21 in fiscal 2020, which ended in January, to $4.53 in fiscal 2021. Sales are also expected to rise 34% year-on-year to $16.8bn in 2021. $124
(Investors’ Chronicle) Precious and rare-earth metals miner Hochschild Mining was negatively affected by Covid-19. Profits and sales fell in 2020 despite rising gold and silver prices because lockdowns shut down operations in Peru and Argentina. “But all is not lost.” The company has increased its dividend and reached its first net-cash position in nearly a decade. The group’s strong financial footing is allowing it to pour $34m into mine expansion works and $11m into asset exploration. Profits are expected to climb by half this year to $412m. The company “lacks the impressive valuation increase of fellow Americas-focused precious metals miners… but still offers plenty to shareholders after a very difficult year”. 214p
(Shares Magazine) Building-products firm Marshalls’ rebound from its March 2020 lows has stalled and it’s currently underperforming. Investors should see this as an opportunity. The client base runs from “big governmental and corporate clients... to tradesmen putting in patios and driveways in people’s homes”. The company will benefit from the government boosting infrastructure spending to help accelerate the post-coronavirus recovery and from people looking to “scrub up their outdoor spaces” as living habits change after the pandemic. Marshalls also “ticks ESG boxes”, paying staff a living wage and ethically sourcing materials. Furthermore, most of its domestic customers are over 55, the age group least affected financially by the crisis. 639p
...and the rest
Consumer-goods group PZ Cussons saw its sales climb by 15% in the six months to 30 November thanks to robust demand for its home-cleaning and hygiene products. The stock has risen steadily over the past 12 months and is a “speculative buy” (247p).
Auto Trader looks well placed to capitalise on the recovery, having endured “extremely challenging trading conditions in the past year”. The firm’s sales fell, but it strengthened its financial position, raising £182.9m in an equity placing in April 2020 and cancelling its dividends. Auto Trader’s financial position suggests it could survive “present difficulties”. Buy (585p).
Aviva’s mission to turn into a business focused on the UK, Ireland and Canada is successfully under way. Ditching its French operations to a local insurer brought in €3.2bn, and follows the sale of its businesses in Hong Kong and Vietnam last December and in Italy and Singapore in November. Buy (379p). Care-home investor Target Healthcare Reit has “remained a reliable source of income” and as vaccinations roll out across care homes, occupancy levels should rebound. The firm recently announced expansion plans. Buy (112p).
Mail on Sunday
Warehouse owner Tritax EuroBox owns huge sites across Europe. The group intends to double in size within the next few years. Investors have enjoyed “robust” dividends since the firm floated three years ago and at its current price it looks attractive. Buy (103p).