Three to buy
Biffa
(Shares) Waste-management group Biffa hit the ground running this year, making “bolt-on” acquisitions that have bolstered growth. The group has spent £198m on 45 purchases since 2014, “actively consolidating a fragmented market”. It has increased efficiency on the routes on which it collects waste by 20% since 2002 while reducing carbon emissions by 65%. Shareholders have benefited from growing profits, which have increased 18% every year for the past six years. Biffa also operates a leading plastic-recycling business. Consistent, sustainable growth and “strong green credentials” make the group an “attractive long-term investment”. 270p
Sainsbury’s
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(The Daily Telegraph) Sainsbury’s has come a long way from its failed merger with Asda in 2019. The grocer is Britain’s fourth-largest online food retailer and it has a solid online presence, so it is “well placed” to benefit from the boom in digital sales as more people do their food shops online. Cost-cutting should yield £600m over the next three years to reinvest in new products. The stock’s potential does “not appear to be fully reflected in its current valuation”. 231p
Vistry
(Investors’ Chronicle) Housebuilder Vistry has forward-sold 65% of the units forecast for this year as demand for housing continues to boom ahead of the stamp-duty tax holiday deadline, which was extended in the Budget to the end of June. Vistry ended last year with net cash of £38m despite the pandemic, prompting management to reinstate the dividend. The shares are on a 7% discount to forecast net asset value. It’s an attractive opportunity. 943p
Three to sell
IWG
(Investors’ Chronicle) Flexible-workspace provider IWG swiftly reduced its offerings in response to reduced demand after the pandemic hit. But the outlook for rents across the office market remains poor as companies shift to hybrid or remote working. Flexible-workspace providers could become more appealing thanks to the former, but it remains to be seen whether IWG has the liquidity to take advantage of a longer-term opportunity. IWG’s lease liabilities are an “eye-watering” £6.6bn. Throw in uncertain demand and the shares are too risky. 362p
Sundial Growers
(Barron’s) Shares in cannabis grower Sundial Growers have benefited from a rebound in the industry. But the shares are still far below their $11 peak. They “tanked” in 2019 and 2020 amid reports of its cannabis being rejected by customers because of its poor quality. New management has “drastically improved” the balance sheet in the past few months, but the fundamentals – sales growth, profitability and positioning – don’t support the stock’s valuation. Recreational pot sales declined by 30% in the third quarter of 2020 from the second quarter despite growth in the broader industry. Sundial needs “top-line momentum”. $1.31
Nissan Motor
(InvestorPlace) Nissan Motor is “feeling the heat” amid a shortage of semiconductors; the car industry increasingly relies on chips. To mitigate the impact of the shortage the firm is halting production of the Note compact car in Japan. Revenue is unlikely to grow in the near term. Nissan posted a loss in its most recent quarter and the“overleveraged balance sheet” is another worry. Nor does it bode well that Nissan is lagging behind in electric vehicles. $11.21
...and the rest
Investors Chronicle
Infrastructure specialist John Laing agreed close to £700m in sales last year, will raise its dividend, and should return to full-year underlying growth in 2021. Buy (316p). Orders at Just Eat jumped by 88% in the first two months of this year. Revenues grew by over half in 2020, but the group still did not manage to turn a profit and losses rose to €147m from €88m the previous year. Competition is getting fierce as rival Deliveroo prepares to float in London. Hold (6,888p).
Shares
Diversified Gas & Oil is benefiting from the recent improvement in sentiment towards the oil sector. It reported record annual production earlier this month, up by 18% from the year before, which underpinned a 14% year-on-year increase in the dividend. Buy (127p).
The Daily Telegraph
Fevertree’s international expansion prospects make it an attractive option. The company stands to benefit from a “resurgent economy” and double-digit growth forecasts justify the valuation. Buy (2,441p). Legal & General’s pre-tax profits fell by 15% to £1.8bn in 2020. Earnings at the insurance division slid by 40% as a result of the unusually high proportion of deaths caused by the coronavirus, while the investment arm was affected by the housing-market “freeze”. But these setbacks should be “one-offs” and the dividend yield of more than 6% looks very attractive. Hold (287p).
The Times
Shopping-centre operator Capital & Regional’s portfolio value fell by £200m in 2020 and rental income slid by £15m to £34m. But its rent-collection rate has been stronger than many, and the firm’s “community-based centres anchored around a grocery tenant put it in a strong position”. Hold (888p).
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