Share tips of the week – 10 September
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
Five to buy
Marks & Spencer
(Shares) M&S has had plenty of “false dawns”, but is it now “finally regaining its mojo”? Management has raised full-year profit guidance after an unexpectedly strong start to its financial year. A joint venture with Ocado has “transformed the prospects” of the food business, with sales up by 10.8% on a year before during the 19 weeks to 14 August. The underperforming home and clothing division is also showing signs of life, especially in online sales. M&S may eventually “emulate omni-channel star” Next, which has successfully combined store and online sales. On a forward price/earnings (p/e) ratio of 11.2 for 2023, the shares trade at a discount to Next and offer “great value”. 179p
(The Sunday Telegraph) Once a £1bn business, this luxury clothing brand saw its value plunge to £100m last year because of poor strategic decisions and a workplace scandal. The firm failed to keep abreast of the shift of retail online. Then the pandemic forced the closure of shops and rendered its rather formal clothing unfashionable. Now a new management team is shaking things up by rejigging the store portfolio, selling their headquarters to raise cash and moving into digital sales. The return of large events and the enduring strength of the brand mean this looks an auspicious moment to buy. 154p
(The Sunday Times) This biotech firm is researching treatments for cancer and fibrosis. It listed on Aim in 2015 but “was almost wiped out” after Liverpool city council called in a loan. The shares plunged and the firm was forced to sell off its “star asset”, an inhibitor programme, to raise the cash. Since then it has staged an impressive turnaround, with two drugs in clinical development. Good progress on one treatment this month triggered a “milestone payment” from partner Jazz Pharmaceuticals. More payments are conditional on continued regulatory progress. The shares are speculative and thinly traded, but broker Panmure Gordon has an “ambitious” 135p price target. 59p
(The Mail on Sunday) This housebuilder has reported a solid pre-tax profit and strong demand but the shares tumbled regardless. Investors are twitchy about the upcoming end of the stamp-duty holiday, which they fear will sink the property market. Another concern is shortages of materials and labour, which management says have raised costs “between 4% and 5%”. Others were disappointed that Barratt has yet to turn “a huge cash pile” into a special dividend. Fears are overdone: the company is in good health and strong forward sales suggest that the property sector will remain robust. 711p
(The Motley Fool) Covid-19 has been cruel to this cinema chain. Over the past six months it has “crashed into penny-stock territory”. The shares are still down by more than 60% since mid-February 2020. The ongoing Delta wave in America, the world’s biggest film market, has delivered yet another dose of uncertainty. Blockbuster releases are being delayed once again. Still, audience numbers and spending have been heading in the right direction. A return to profit is a way off, but a pickup in sales will give the company “a better chance to start paying off its huge debts”. The pandemic situation is more likely to improve than deteriorate. At its “present dirt-cheap levels” this is a penny stock that could be worth a speculative punt. 66p
...and the rest
Oxford Instruments designs and manufactures “cutting-edge science tools”. On a 12-month price/earnings (p/e) ratio of 32 the shares are not cheap. But there is still upside thanks to a “strong order book, operating margins well on the road to 20%” and spare cash to fund acquisitions. Buy (2,695p).
Engineering consultancy Ricardo works on transmission components for the likes of McLaren, Aston Martin and Bugatti. Management is tapping into green opportunities through environmental and rail consulting. On just 12 times forward earnings, shares in this “reformed petrolhead” still “have miles in the tank” (382p).
Avoid ITV. The broadcaster has narrowly escaped relegation from the FTSE 100, but the writing is “on the wall” for traditional television as streaming platforms take eyeballs elsewhere. Management hopes to diversify revenue away from advertising and into platforms such as BritBox, but “deep-pocketed” competition will make that hard to achieve (115p).
The Daily Telegraph
Airlines IAG and easyJet are still suffering from pandemic restrictions but both have the cash they need to ride out further disappointments. There is huge pent-up demand for travel, so the stocks look well-placed to take flight when a recovery eventually comes. Buy (164p; 809p). The end of the stamp-duty holiday might weigh on the property sector, but housebuilder Taylor Wimpey will continue to profit from ultra-low interest rates and government subsidies for the housing market. Buy (181p).