Share tips of the week, 2 July

Five to buy

Hipgnosis

Shares

Hipgnosis’s shares have gained just 6% in the year since we first recommended them. But in that time the firm’s market capitalisation has increased from £700m to £1.33bn, thanks to a series of capital-raises to fund song-catalogue acquisitions. The idea is to profit from the income from music royalties. The latest £150m raise of new shares at 121p has been set aside for a catalogue made up of “some of the most influential and successful songs of all time”, which presents “substantial revenue growth opportunities”. Since it listed the firm has built a portfolio of songs worth $2.2bn and has delivered a total net-asset-value return of 40.7%, despite “the most challenging social and economic backdrop of our lives”. The investment trust yields around 4% and “will appeal” to income seekers. 123p

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Lookers

The Daily Telegraph

Car dealership Lookers is facing disruption “on a number of fronts” as carmakers change the way they interact with customers and begin to focus on electric vehicles. “Digital disrupters” are also emerging. But Lookers’s boardroom is stabilising and trading is recovering, with brokers forecasting “big jumps” in profits over the next couple of years. Profits bounced from £4.2m in 2019 to around £10m in 2020 and are expected to increase to £40m in 2021 and £51.8m in 2022. These are big numbers against a market value of £273m. “A few years like that and you will get your money back whatever happens in the longer term.” 70p

Unilever

The Motley Fool

Consumer goods giant Unilever “is a popular choice for investors wanting income and growth”. The firm’s dividend has increased every year for the last 50 years thanks to popular brands such as Marmite, with the annual increase in the payout averaging around 7% since 2015. The stock has fallen by 5% over the last year, but has outperformed the market over the last five years, and the current weakness presents an opportunity to buy into a dividend-growth stock. Unilever’s current yield of 3.4% “should be a decent entry point for a long-term holding”. 4,273p

RBG Holdings

The Mail on Sunday

Shares in Aim-listed law firm RBG should keep rising. CEO Nicky Foulston is “a great believer in dividends, so payouts should become increasingly generous, even as the business grows”. The firm has become more efficient in recent years and fees are “collected more promptly”, which has increased profits “substantially”. The group took over corporate-finance boutique Convex Capital in 2019. Analysts expect RBG to deliver a 79% increase in turnover to £46m this year. A dividend of 4.75p “has been pencilled in for 2021”. It is expected to rise to 6.6p for 2022. 135p

Liontrust

Investors’ Chronicle

Liontrust Asset Management saw a 69% jump in pre-tax profits to £64.3m after a 30% rise in net inflows in the 12 months to 31 March. Its assets under management nearly doubled to £30.9bn in that period too and are predicted to grow to £42bn by the end of its 2023 financial year. This suggests “a moderation compared with the recent rate of growth”, but “still translates to strong double-digit growth”. The firm is also launching the Liontrust ESG Trust on 5 July. It is a riskier version of the group’s Sustainable Future Global Growth Fund, but “ethically minded investors will happily swallow” it thanks to the team’s strong record. The stock’s valuation remains reasonable. 1,662p

...and the rest

Investors’ Chronicle

Despite spending more than its rivals on players, Manchester United “has struggled to bring home the silverware in recent years”. The “already debt-laden” group has borrowed another £60m as the transfer window has opened. Investors should “not put their faith in the team”. Sell (15p). Robotics process-automation software company Blue Prism describes itself as “still under construction”, but its historically low spending record on research and development means it is lagging behind others in the sector. More evidence that the company is able to win and hold onto big clients is necessary. Sell (817p).

Motley Fool

The Restaurant Group was forced to close most of its restaurants last year owing to the pandemic, but sales and profits had been under pressure “for years”. It has lost money in three of the past five years and net debt has soared from £32m to £824m since 2015. A recovery could take years. Avoid (130p).

The Daily Telegraph

Specialist engineer Pressure Technologies presented “disappointing” numbers in its interim results. But the setback “feels temporary” and the potential for turnaround is “still substantial”. Hold (98p). ITV made its way back into the FTSE 100 this week, a move that highlights how a “cyclical upturn in advertising” could benefit it. Stay tuned and hold (128p).

The Times

It looks as though Associated British Foods is “being punished for being a conglomerate”. The company owns Primark, which was hit heavily by the pandemic because it lacks an online presence. But the group also owns household brands such as Twinings tea. Sales in its grocery department were up by 8% in the six months to April 2021. Hold (2,241p).