Share tips of the week – 3 September

Six to buy

Poly 

(Barron’s) Poly, which makes conference-room paraphernalia and office headsets, reckons there are about 50 million conference rooms around the world, but only 10% are equipped for videoconferencing. Some commuters are gradually returning to the office, but there is expected to be an increase in hybrid meetings, mixing in person and virtual participants. This presents a huge opportunity. The shares are “down to bargain-basement levels” after the fallout from an “ill-fated” merger three years ago. But the firm is recovering. It reported sales of $431m, up 21% from a year ago, for the first quarter ending in July. Video-product sales surged by 94% year-on-year and voice equipment was up by 34%. $32 

Pepsi 

(The Daily Telegraph) Warren Buffett has said he will never sell a single share in Coca-Cola. But Pepsi “offers investors the better opportunity”. The business case for it is stronger because it sells a greater variety of products than Coca-Cola’s beverage-focused business. Pepsi boasts 23 brands that generate annual sales of more than $1bn. It is also tweaking its products “so that they move along with the times” (by switching to low-sugar versions, for instance) and seeking new markets beyond its US base. There is a threat as governments attempt to tackle obesity, but Pepsi has “dials it can twiddle” in response. $156 

Marshalls 

(Investors’ Chronicle) Patio and paving-slab supplier Marshalls generates just under a third of its top line from households. Sales to DIYers in the first half of the year were up by 17% from 2019. Demand is so strong that the order book has climbed to 21.4 weeks; 12 weeks would normally be considered healthy. The company has successfully passed on rising costs to its customers (container rates for shipping sandstone from India have risen tenfold). This “well-managed business” is also alleviating a shortage of HGV drivers by training new ones. Investors should buy in now. 798p

Fulham Shore 

(The Sunday Times) Fulham Shore is planning to expand after the pandemic. The owner of Franco Manca has a list of 150 sites where it hopes to “plant a pizza restaurant” or one of its Mediterranean dining spots, The Real Greek. The restaurants are doing better than they were in 2019, while takeaway and delivery orders have held up post-lockdown. The company was hit hard by coronavirus. But rent deals will cut its opening costs by around £100,000. Further growth could come from overseas: the company has hired a team to run its international operations and wants to acquire new, younger brands. 18p

Mitie 

(The Mail on Sunday) Outsourcing group Mitie has had a “mixed time” during the crisis. The company benefited from the need for employees to work at Covid-19 testing and vaccination centres, but it lost out on several of its office contracts. In June 2020 it diluted shareholders’ capital with a rights issue to raise money to see it out of the pandemic and to acquire Interserve’s “collapsed” facilities-management business. The acquisition is “bedding in well” and the company now seems to be on a “firmer footing”. 74p 

J Sainsbury 

(Shares) The supermarket’s investment in online operations paid off when it posted robust sales over Christmas. Argos, its non-food business, also “put in a strong showing” after converting in-store shoppers into online buyers during the pandemic. The group has outperformed rivals and its share of the UK grocery market has jumped from 14.8% to 15.2% in a year. Strong recent sales prompted it to upgrade its full-year earnings forecast, which could translate into an increased dividend. The stock seems to have further to go. 332p

...and the rest

The Daily Telegraph 

Real Estate Credit Investments lends money to owners or developers of different types of property. The scarcity of lenders in its chosen markets translates into higher yields without proportionately higher risk. It has paid a quarterly dividend since 2017. BioPharma Credit is a similar business lending to drug companies. It has never suffered a default despite the high rates it can demand on its loans, and offers a stable dividend. Buy both stocks at 156p and $0.98 respectively. 

Investors’ Chronicle 

Antofagasta had a “scorcher of a first half” thanks to the rising price of copper. Profit more than doubled year-on-year to £1.75bn. The half-year dividend is well ahead of both last year and 2019. The miner has cut guidance owing to a drought in Chile, which might reduce production. But it remains a buy for now (1,396p). 

The Mail on Sunday 

BATM’s two divisions – networking and cyber, and biomedical solutions – places the company “neatly at the heart of two major preoccupations of our current age”: defences against disease and defences against computer hacking. BATM did well throughout the pandemic, providing ventilators and then Covid-19 test kits. It is rolling out new diagnostic kits that test for several respiratory viruses, and a rapid test for tuberculosis. Its networking and cyber division numbers look gloomier, with revenues down slightly year-on-year, but it has promising products in its pipeline. Buy (93p). 

Shares 

JD Sports Fashion has cashed in on the “athleisure” boom among “youthful gym-goers and fashion savvy consumers”. It is set to deliver increased pre-tax profits of £550m this year, and should continue to do well as teenagers “look to refresh their personal style post-pandemic”. Buy (967p).