Share tips of the week – 13 August

Three to buy

Shaftesbury

(The Daily Telegraph) There is likely to be a gradual shift back to old shopping and working practices as restrictions ease. That is not reflected in Shaftesbury’s share price.

The real-estate investment trust has a concentrated portfolio of high-quality office, retail and leisure properties in London’s West End. It has been “ravaged” by the pandemic, but the company reported in May that footfall and demand were increasing. The trend could persist and accelerate. Consumer confidence is rising and savings built during lockdown could boost demand. Improving returns should mean “significant long-term rewards” for investors. 599p

BAE Systems

(Investors’ Chronicle) Defence contractor BAE Systems reported a 20% increase in underlying profits at its half-year results. Shareholders in the firm also benefited from a 5% rise in the dividend, which was facilitated by the £250m sale of two of its sites. The firm has managed to come out of the pandemic “relatively unscathed” as defence budgets have held up amid “worsening geopolitical tensions across the globe”. The order book looks healthy. 561p

Tatton Asset Management

(The Mail on Sunday) Tatton Asset Management is “neatly placed” to benefit from the ongoing increase in people seeking independent financial advisers. Tatton helps them create investment portfolios
that suit their customers’ needs. The group’s above-average returns and “decent service” have helped it expand consistently in recent years. With several deals in the pipeline, it hopes to grow assets under management to £15bn over the next three years. 495p

Three to sell

Abrdn

(The Daily Telegraph) Abrdn, formerly Standard Life Aberdeen, is a “relatively high-yielding” stock. At 4.9% it yields 2% more than the average FTSE 100 stock. But this is largely due to the “disappointing share-price performance”. The payout was cut by 22% last year and a rise is unlikely any time soon. The asset manager’s wider prospects could also be hurt by a continuation of the trend away from actively-managed funds and towards passive funds that track a benchmark. Avoid. 299p

Foxtons

(Investors’ Chronicle) Estate agent Foxtons makes an operating margin of 6.5%, which pales in comparison to rival Rightmove’s 76%.  Generating profits at Foxtons “takes... a lot of hard work” and only pays off “when a house is sold”, whereas Rightmove makes money from listings regardless of their status. The firm has done well “to claw itself back from the brink on several occasions”, but it looks unappealing owing to its high operating costs. Sell. 55p

Aurora Cannabis

(The Motley Fool) Once the most-held stock on online-investing app Robinhood, Aurora Cannabis is now one to avoid. The firm had 15 production facilities and was expected to produce over 600,000 kilos annually. But it can’t seem to deliver. Results for the quarter to 31 March 2021 were “abysmal”. Cannabis sales dropped 21% from the same period the year before; sales of recreational marijuana dropped by 53%. A loss like that is “tough to sweep under the rug” even with the pandemic. Profitability is still a long way away. In the first nine months of the year to the end of June the firm lost C$232.3m, only 18% lower than the previous year’s deficit. C$9.29

...and the rest

The Daily Telegraph

Videogame publisher tinyBuild has “not so far delivered the goods”. The shares have slid by 4% since April, but demand looks robust and the firm has several releases scheduled for the end of the year. Hold (245p).

Shares

Shares in Convatec, the medical-products company, dropped by 13% after the firm warned of a 0.5% decline in its operating margins owing to inflation and other costs. But these “short-term headwinds” should prove temporary. Sales growth has been consistently above guidance. This is a buying opportunity (226p). Nestlé’s shares have “had a bit of a wobble” after the company reported a small dip in its operating margin owing to higher raw-materials costs. But this “world-class business” should ride out inflation. Buy (SFr114.70).

Investors’ Chronicle

Bus operator National Express has benefited from US children’s return to schools, but it has had trouble finding potential drivers owing to “enhanced [US] unemployment benefits”. Its UK and Spanish services are still recovering, and there is new competition in Britain from Europe’sFlixBus. Hold for now (260p). Covid-19 “may be moving into the back window, but [America’s] opioid epidemic is here to stay”. That bodes
well for opioid-addiction treatment drugs provider Indivior, as the US is its biggest market. Buy (154p).