Share tips of the week – 20 August

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

Ocean Outdoor 

(The Mail on Sunday) Outdoor advertising “had limited appeal” in 2020: turnover at ad agency Ocean Outdoor fell by 28% to £86m. But the firm “used the year wisely, bedding down 2019 acquisitions, renegotiating contracts with landlords and investing in the future”. Demand is recovering quickly and profits of £14.5m are expected next year, with “substantial gains” pencilled in for the years to come. The firm specialises in digital advertising, one of the fastest-growing subsectors $8.38 

Serco 

(Investors’ Chronicle) The Covid-19 Test & Trace contract made up 17% of public-sector outsourcing group Serco’s revenues and led to a 31% increase in operating profit in the first half of 2021. Sales are expected to be lower in the second half of the year as Covid-19 “dissipates”, but the company believes “the goodwill it has built up will stand it in good stead”. The firm has a strong balance sheet, which offers protection. The company acquired US defence business Whitney, Bradley & Brown in February, which bodes well as the US defence budget is unlikely to be cut. 140p

London Stock Exchange Group 

(Shares Magazine) The stock has swooned since March; investors are fretting over the cost of integrating data provider Refinitiv, acquired for $27bn. But interim results bode well. Pre-tax profits almost doubled to £510m. The deal with Refinitiv “enhances exposure” to subscription- based revenues and secures the firm’s position in Asia and America. The group boasts “unique... market infrastructure and data assets”. 7,812p

Three to sell

Palantir 

(InvestorPlace) US software group Palantir “is a wonderful company”, but it is trading at an inflated price. The company does well when it comes to securing contracts with agencies of the US federal government, but growing its client base in the private sector “has been a work in progress”. The stock is on a forward price/earnings (p/e) ratio of 175. Even if it fell by 50%, its valuation would “more than [reflect] its growth prospects”. Avoid for now. $24.90 

Capita 

(Investors’ Chronicle) “Ever-shrinking outsourcer Capita enjoyed a reasonable half compare with its usual dreadful standards.” The company expects to “finally see sustainable free cash flow in 2022”. But for now, it is “bleeding cash” thanks partly to pension payments and restructuring costs. The firm disposed of £536m worth of assets in the first half, but the fire sale was due to the fast-approaching “wall of maturing short-term debt”. Like most other outsourcers, the firm’s assumptions on government spending “have been proved consistently wrong”, which has led to “troublesome and underperforming contracts”. Sell. 37p 

Randall & Quilter 

(The Daily Telegraph) It is not clear whether Aim-listed insurer Randall & Quilter qualifies for inheritance-tax (IHT) relief. The crux of the matter is the nature of the firm’s assets (“passively” held investments are not eligible for IHT relief, whereas “trading” assets needed to keep the company running are). R&Q insists its shares qualify, but HMRC may disagree. If you opted for R&Q for the IHT relief, sell and reinvest in another Aim stock. 170p

...and the rest

The Daily Telegraph 

Shares in Fastned, the Dutch operator of fast-charging electric car stations, have fallen by 40% since February. That is probably due to the “unwinding” of some “speculative money” that went into renewables; there is no sign of trouble at the company. Hold (€60). MaxCyte, the “futuristic” gene-therapy company, has long-term potential. Last month’s listing on the Nasdaq raised $202m for research and development. Hold (1,105p)

Mail on Sunday

Flooring group James Halstead marked almost half a century of unbroken growth last year, which reflects the group’s culture of “financial conservatism and product innovation”. It boasts schools, stations, offices, shops, homes and hospitals as customers, and “virtually every NHS trust uses its flooring”. The stock should keep repaying shareholders “handsomely”. Hold (550p). 

Investors’ Chronicle 

Zetefoams is a specialist in cellular-materials technology, or foam. The company is struggling with “significant supply-chain inflationary pressures”. But they were either brought on by the pandemic or exacerbated by it, so they should eventually dissipate. Hold (449p)

Shares Magazine 

Elective procedures are returning as Covid-19 ebbs. Demand for medical-equipment firm Boston Scientific’s products is picking up again. The group reported second-quarter profit and sales that surpassed expectations, and it has raised its full-year outlook. The stock has risen by 24% in 2021 and there should be further gains ahead. Buy ($43.81)

Recommended

What changes to the pensions charge cap mean for you
Pensions

What changes to the pensions charge cap mean for you

The government could raise the pensions charge cap – the amount you can be charged in your workplace's default pension fund. Saloni Sardana explains w…
27 Sep 2022
The best student bank accounts
Personal finance

The best student bank accounts

As we approach the start of an academic year, Ruth Jackson-Kirby rounds up what you should look for when choosing a student bank account and outlines …
27 Sep 2022
Earn 4.1% from the best savings accounts
Savings

Earn 4.1% from the best savings accounts

With inflation topping 10%, your savings won't keep pace with the rising cost of living. But you can at least slow the rate at which your money is los…
27 Sep 2022
The best offers for switching banks – earn up to £175
Personal finance

The best offers for switching banks – earn up to £175

You can earn up to £175 by switching your current account. Here are the best offers on the market today.
27 Sep 2022

Most Popular

Beating inflation takes more luck than skill – but are we about to get lucky?
Inflation

Beating inflation takes more luck than skill – but are we about to get lucky?

The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank…
26 Sep 2022
The pick of this year's best-performing investment trusts
Investment trusts

The pick of this year's best-performing investment trusts

Market conditions haven’t been easy, but these investment trusts have delivered strong growth, says David Stevenson.
23 Sep 2022
Share tips of the week – 23 September
Share tips

Share tips of the week – 23 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
23 Sep 2022