Share tips of the week, 9 July
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
Three to buy
The Sunday Times
Sports betting and gambling company Entain rejected a bid from US casino giant MGM six months ago but the Americans look set to return with a better deal. Entain has performed well in recent months. Its joint venture with MGM, BetMGM, grew its net gaming revenue by 400% year-on-year between September 2020 and March 2021. Entain is also addressing its “image problem”: it will exit unregulated markets and drop the “tainted” GVC brand. Investors should place their bets now. 1,797p
The pandemic greatly accelerated the shift towards e-commerce, and delivery companies have reaped the benefits. FedEx “has thrived” during the pandemic. Sales jumped by over a fifth to a record $84bn in the year to 31 May thanks to higher parcel volumes in its domestic market. FedEx Ground, which delivers small packages, saw operating profit jump by nearly 60% to $3.2bn. FedEx Express, the firm’s larger business and international parcel courier, “has been capitalising on the “collapse” in commercial air travel. $303.69
The Mail on Sunday
Investing in coal might raise a few eyebrows, but Glencore is “doing its best to deal with environmental liabilities”. It recently acquired a “huge” Colombian coal mine, Cerrejon. Though the use of thermal coal is declining in the West, global demand over the next five years is expected to be stable thanks to South East Asia. Glencore is also a major producer of copper and cobalt, which make the batteries that store renewable energy. 321p
Three to sell
The German government invested over €300m in CureVac’s vaccine candidate. But the firm says the final late-stage clinical data was “disappointing”. The vaccine has just 48% overall efficacy against the virus in all age groups and it was not especially successful in preventing serious symptoms among those aged 60 and above. Yet the shares are trading as if the vaccine had succeeded. Investors should avoid them. $64.76
The Sunday Telegraph
Burberry CEO Marco Gobbetti’s departure has wiped £1bn off the firm’s market value. That’s partly because investors recognise his abilities, but also because his work at the fashion group was “not complete” after a “partially successful brand turnaround”. Replacing him may not be easy – a luxury house “will not prosper without a wellspring of creative energy” working harmoniously with “business brains”. Burberry faces two big challenges: it must catch up in leather goods and handbags, where it still lags rivals; and improve sales per square foot of retail space. Though “another good hire” is probably on the cards, it will be “several years” before results begin to show. Sell. 2,049p
Sports data and technology firm Genius Sports merged with a special purpose acquisition company (Spac) to float in April: online sports betting is being legalised throughout the US. It is valued at $5.4bn, a hefty 20 times this year’s sales and so far, it is unprofitable. Yet it has also just signed a six-year deal to become the exclusive gambling-data partner of the National Football League, agreeing to pay a “steep” $120m a year. Avoid. $19.32
...and the rest
The Daily Telegraph
Analysts expect housebuilder Crest Nicholson’s earnings-per-share to rebound from a loss in 2020 to 27p in 2021, 34p in 2022, and 41p in 2023. The company “still appears to offer long-term value”, so hold onto the shares (429p). JP Morgan’s variety of services, including investment banking and wealth management, make it a more appealing investment than other “plain vanilla” retail banks. The group’s sales have grown by 28% over the last five years and the stock allows investors to “play the growth in US banking”. Buy ($154).
Car retailer Motorpoint’s shares have jumped by 93% in a year. The group has just produced solid full-year results to 16 June and is encouraged by growth in online sales. It is now investing in technology, marketing, data and expansions to keep the momentum going. Buy (367p). Food producer Tate & Lyle is also a buy, having generated a “healthy” return on equity of 18% for the year to March 2021, showing its “resilience” to the pandemic 762p).
Data analysis company D4T4 Solutions’ “fast-growing cost base” weighed on its earnings for the year to March. But its core businesses “appear to be trading well”. Hold (348p).
A summer rebound for airlines isn’t guaranteed, but shares of International Consolidated Airlines Group, Ryanair and Wizz Air seem “inviting”. They have limited exposure to corporate travel, which is set to remain weak, and they should recover with recreational travel. “Consider jumping aboard” while they’re cheap. Buy (190p, €16.90, 4,896p).