Share tips of the week - 27 August
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
Six to buy
Jefferies Financial Group
Jefferies is not the first investment bank to come to mind when you think of Wall Street. But it’s a well-managed company, increasingly able to take on bigger and better-known rivals. It has a larger market share than Barclays and Credit Suisse and may benefit from European banks pulling back from US capital markets. Analysts expect the capital-markets environment to be “stronger for longer” and Jefferies looks poised to benefit from the trend. $35.39
Plastic-piping producer Genuit has seen increased earnings due to the residential housing boom. Profits were £183.8m in the first half of 2021, up 63.7% from 2020 and 17.8% from 2019. Rising input cost pressures are “the only fly in the ointment”, but the firm has been good at passing the inflation onto customers. It predicts demand for commercial work will stay below 2019 levels for the next two years, but remains bullish on its prospects, partly thanks to its HS2 contract. 686p
Disney’s earnings were better than expected for the first quarter and revenue stood at $17.02bn for the three months ending 3 July, a 45% increase year-on-year. Its streaming service, Disney+, now has 116 million paid subscribers, ahead of analysts’ expectations of 114.5 million. Covid-19 restrictions are lifting, which will allow for the reopening of its theme parks and resorts. These are highly profitable operations that also strengthen its connection with customers, cementing its position as “the world’s leading entertainment company”. $179.09
The Mail on Sunday
Firms spent £1.2trn looking for treatments for cancer, diabetes and heart disease between 2010 and 2020. Now, in light of the coronavirus pandemic, more attention is being directed towards infectious diseases. Poolbeg Pharma is developing a product aimed at severe cases of flu and similar diseases – potentially even Covid-19. Early-stage trials around its treatment have “genuine potential” and it has other products in the pipeline that it’s hoping to develop and monetise quickly and cheaply. A young biotech firm is not for the cautious, but it could “prove an exciting investment for the adventurous investor”. 9p
The Sunday Telegraph
Rolls-Royce had to spend “colossal sums” on its aircraft-engine business before any money was recouped. The firm “started from nothing… now it can take a breath and start to make a return”. It loses money when it sells an engine, but gradually makes it back through long-term service agreements. Revenue collapsed during the pandemic, but this will recover as long-haul travel picks up. Weak demand for new engines – aircraft makers have no plans to develop new planes – means it’s no longer throwing money at development. This will tilt the firm away from “loss-making supply and towards profitable maintenance”. Shares are 70% lower than they were two years ago, which presents an opportunity. 110.16p
The Sunday Times
Building-materials prices have rocketed due to supply-chain disruption and Brexit-related delays. Ibstock, a brick and concrete-materials maker, is “critical” to the construction market, but its shares have only gained 13% this year compared with the sector’s 23% rally. Rising freight and labour costs are a problem, but it was good at coping during the crisis by cutting overheads, which should help with higher profit margins “long after we’ve all stopped talking about Covid-19, Brexit and the HGV crisis”. 234.40p.
...and the rest
The Daily Telegraph
Semiconductor firm AMD has developed a cluster of smaller chips that work together to achieve what traditional microprocessors do on their own. This innovation is promising and could see it take a bigger share of the market. Buy ($107.56). Insurance firm Legal & General posted a 14% rise in operating profits. The firm is in the “business of long-term savings”, and so is well positioned to meet the emerging middle classes’ desire for “a more secure life”. Hold (262p)
Analysts expect a “hefty increase” in full-year cash profits at miner Hochschild. Buy (155p). Promotional merchandise firm 4imprint struggled during the pandemic, but it’s on the way to matching its 2019 trading levels. The interim dividend resumed at 15 cents per share. Hold (3,070p).
Gold has “lost a lot of its shine” lately, but Wheaton Precious Metals delivered “a modest beat to expectations”. The firm buys precious-metal production in projects where it’s a by-product to other metals, which allows it to secure deals at a discount. Revenue and cash flow hit record highs of $655m and $449m respectively, which boosted the second-quarter dividend to $0.15 per share, the fourth quarterly dividend increase in a row. Buy (£31.78).
The Mail on Sunday
Prospects for insurer Aviva seem brighter than they have in a while, with strong interim results and plans to return cash to investors. This year’s dividend is forecast to be 22.05p, rising to 25.36p in 2022. The chairman has been buying shares – “almost always a positive sign”. Buy (418.60p).