Share tips of the week – 16 July

Five to buy

CareTech

(Shares) A successful acquisition and reduced leverage mean social care-services provider CareTech is “well positioned to continue growing its share of a fragmented market”. Its “significant” freehold property portfolio, valued at £774m in 2018, will be revalued at the end of August, which could give the stock a fillip. Profits have increased tenfold over the past 15 years, and in its latest half-year results the company confirmed that it had several new sites, along with improvements in its existing portfolio, in the pipeline. It is also hoping to become a tech-enabled care-management business thanks to the acquisition of assistive technology firm Smartbox, a side of the business “expected to make up a sizeable chunk of revenues” over the next five years. 619p 

Dunelm

(The Sunday Telegraph) Home-furnishings retailer Dunelm has been a beneficiary of the pandemic. Pent-up demand has boosted revenue as people seek to redecorate their homes. Sales were 59% higher for the seven weeks from the end of March 2021 compared with the same period in 2019, “the most recent ‘normal’ year”. It launched its online platform in December 2019, which allowed it to make money in the lockdowns. The company has net cash and produced a return on capital, a key gauge of profitability, of over 20% for 2020, “high for a retailer”. The shares have doubled in two years but remain a good investment. 1,421p

Porvair 

(Investors’ Chronicle) Filtration and environmental-technology firm Porvair’s laboratory-instruments sales grew by a third in the six months to 31 May thanks to higher demand for Covid-19-related diagnostic products. Adjusted operating profit rose by 4% to £9.1m. The company managed to offset the cost inflation brought on by supply-chain disruption by passing price increases on to its customers. The aerospace and industrial businesses have suffered in the pandemic but should recover as the aerospace sector begins to rebound. The “appetite” for molten metal filters and water-quality products is also rebounding. The firm’s momentum “should continue to improve”. 578p 

Signet Jewelers 

(Forbes) Signet, the world’s biggest diamond jewellery retailer, suffered large losses under its previous leadership, which “neglected” to update the group’s merchandise, marketing and e-commerce strategy. But new management is undoing the damage “as it overhauls every aspect” of the firm. It is expanding the company’s marketing to reach new customers, offering “products that customers want” and simplifying the buying process. Increased spending by customers thanks to “generous” government stimulus cheques and tax refunds has helped too. A post-virus increase in weddings has also led to unexpectedly high profits and a 50% rise in full-year profit guidance in the latest quarter. The firm is becoming “much more relevant, profitable and valuable”. $75.67

Prudential

(The Motley Fool) Prudential is a “well known and trusted” insurance company. It focuses mainly on Asia, where the middle classes’ wealth is growing. The number of people with life-insurance and pensions is also “relatively low” compared with Western markets, which “presents a considerable opportunity”. Prudential is also “one of only a few” Asia-focused equities in the FTSE 100, and “considering the region’s growing economic importance” it’s a good one to buy into. 1,371p 

...and the rest

The Daily Telegraph 

Spirits company Diageo boasts high returns on capital and strong cash generation. It looks well placed to benefit from the global post-pandemic recovery. Though consumers worldwide are drinking less alcohol by volume, they are choosing more expensive drinks, such as the ones made by Diageo. Buy (3,434p). Spirax Sarco is a specialist in steam engineering with a reputation for quality and reliability. Buy (13,391p).

The Times 

Clinigen’s latest “shock profit warning” wiped 25% off the shares. The firm was affected after Covid-19 “kept cancer patients away from hospitals” and demand for its drugs fell. But investors were most spooked by the firm’s “apparent failure to see this coming”. Analysts think the firm is “the most vulnerable among its peers to a bid from private equity”. The challenge now is “whether to take a bet on a bidder emerging”. Hold (625p).

Investors’ Chronicle 

Global foreign-exchange services group Argentex saw a 30% dip in operating profits to £8.7m for the year to March, but it also revealed record client activity throughout the second half. Sales for the first quarter of its current year are up by 34% year-on-year, and opportunities are growing as banks exit the market. Buy (125p). 

Shares

BlackRock North American Income’s new sustainability strategy is “likely to be welcomed by the market”. It is also expanding into mid-cap firms to add to the large caps that dominate its portfolio now, and looking outside the US to other parts of North America. Buy (183p).