Share tips of the week

Six to buy

Coca-Cola HBC 

(Shares) Coca-Cola HBC has lagged the wider stockmarket this year. But there is plenty of upside for the soft-drink bottling group as the global economy reopens. A first-quarter trading update showed that despite Covid-19 restrictions continuing, sales were up by 6.1% year-on-year. The company’s “geographic diversity” also allowed it to benefit from “accelerating sales in emerging markets”, with Russia and Nigeria both posting double-digit growth. 2,509p

Marks & Spencer 

(The Sunday Telegraph) Marks & Spencer (M&S) has had a series of “turnaround” executives who have failed to tackle the “deep-seated decline in its fortunes”. Its record pre-tax profit of £1.2bn was achieved in 1998. Last year’s figure was just £67.2m. But new executives Archie Norman and Steve Rowe could turn that around. Norman grasps what customers want: “a clearly understandable product range that offers reliable quality and value”. Concentrating on a smaller range of products is easier to manage and costs less. M&S is also renewing its online presence better to compete with rivals. The group could soon be “materially more profitable, and the shares could be materially higher”. 153p 

AT&T 

(Barron’s) AT&T has now slashed its payout to $8bn from $15bn. Investors are understandably concerned, but over time the smaller dividend is a “reasonable price to pay for a company that has less debt and more cash to spend on its core mission around 5G and broadband”. That business could enter a whole new growth phase as the 5G-rollout gains momentum. The firm is also “reversing course” on its $106bn purchase of Time Warner. The latter’s spin-off and merger with Discovery should help AT&T regain its “telecom leadership”. The stock is “a sound investment”. $29.93

Card Factory 

(The Times) Card Factory has been profitable since its flotation in 2014. It began offering personalised cards last year to compete with newer online rival Moonpig, which benefited from shop closures while Card Factory “lost out” on Valentine’s Day and Mothers’ Day sales. The group has announced a £225m refinancing and will raise £70m to repay debt early. Recent sales were “a touch below” those in April and May 2019. But Card Factory is “well-run with a profitable business model… it may be a long road ahead, but there is optimism”. 73p

BT 

(The Mail on Sunday) BT’s share-price performance has been “execrable” recently; “even the dividend gravy train dried up last year”. There was no final payment for 2020 or for the year to March 2021, when turnover fell by 7% to £21bn and profits slumped by 23% to £1.8bn. The group is spending billions on upgrading its fibre-cable network. But CEO Philip Jansen is optimistic:  he purchased £2m worth of BT’s shares last week. Although turnover for the year will be flat, profits should rise and dividend payments will resume. Over the next few years they “may increase substantially”. 178p 

Experian 

(Investors’ Chronicle) Data-services specialist Experian’s organic revenue increased by 4% for the year to 31 March, thanks to a 17% increase in consumer services, which helped offset a “flat performance” from its business-to-business arm. For the current year the company is expecting sales to grow by between 7% and 9%. “Experian’s record of growth through adversity, with a notable acceleration as economies emerge from the pandemic, sets it apart.” It is currently trading at 31 times consensus 2022 earnings, but the valuation isn’t unreasonable when considering its high margins and the “long-term structural demand” for its services. 2,544p

...and the rest

The Daily Telegraph 

The pandemic has boosted online shopping and hence Royal Mail, with parcels’ revenue eclipsing sales from letters for the first time. The shares look cheap. Nonetheless, it is not yet clear if those earnings can be sustained as the pandemic winds down. Avoid for now (519p). 

Shares 

UDG Healthcare’s shares have gained nearly 50% since we tipped it in July 2020 and the latest surge has come following a bid from a private-equity group; “others have noted the value we saw” in the company. Sell now to lock in a “handsome profit” (1,023p). Alcoholic drinks giant Diageo has continued to perform well, and it is now benefiting from the reopening of bars, clubs and restaurants in Europe. A positive recent trading update makes the stock a buy (3,365p).

Investors’ Chronicle 

Housebuilder Countryside Properties has been “lifted by a booming housing market”, but its partnerships division, which works with local authorities to deliver a mix of private and affordable housing, has been hampered by pandemic-related costs. But there are reasons for optimism: the forward order book is 16% ahead of March 2019’s level. Hold (469p). 

Motley Fool

Cloud business Zuora’s revenue growth has “decelerated sharply for three consecutive fiscal years” and despite high hopes for a recovery “it will be hard [for the stock] to keep defying gravity after another uninspiring quarter this week”. Avoid ($15.25). Grayscale Digital Large Cap Fund, a cryptocurrency investment vehicle, lost a third of its value last week as digital currencies plunged. There could be a long-term opportunity here, but for now avoid it ($27.23).