Three to buy
Accenture
(The Daily Telegraph) Accenture’s stock is one of the best ways to profit from “the fourth industrial revolution”, which will see major improvements in productivity thanks to the spread of digital technology. The company has become the leading consultant in this field. Its ability to retain staff, which it does partly by issuing new shares for employees as incentives, has allowed it to step ahead of its key rivals. It generates plenty of cash, which makes it a “relatively low-risk” play on digital technology. $341
Dunelm
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(Mail on Sunday) Home-furnishings group Dunelm “has had a good pandemic”. It launched a strong e-commerce operation before lockdown and quickly shifted to a click-and-collect service when shops were forced to close. Dunelm’s out-of-town retail parks allowed for social distancing when in-person shopping restarted. Full-year figures this week revealed how much lockdown “has brought out our inner interior designers”. Shops were closed for a third of the year but sales were up by 26% and profits by 44%. There is scope for further growth. 1,515p
Midwich
(Investors’ Chronicle) The cancellation of live music events thanks to Covid-19 has done audiovisual-products retailer Midwich no favours. But its two top markets are education and companies, both of which have thrived in the last 18 months. Hybrid working could present an opportunity as offices buy new equipment to accommodate home workers. Sales jumped by 21% in 2021. The audiovisual market should grow by an annual 7.2% for the next five years. 610p
Three to sell
Dechra Pharmaceuticals
(The Mail on Sunday) Dechra Pharmaceuticals, a veterinary-drugs business, has benefited from surging demand for pets in the pandemic. It posted strong double-digit operating profit and sales growth and an 18% increase in dividend in the year to 30 June. But the boom is subsiding. CEO Ian Page has noted a decline in the number of vet visits in the US, while rival Zoetis has also reported a slowdown. A valuation of 40 times forward earnings is thus difficult to justify. “No matter how much we love our pets, there is a limit to how much we are prepared to spend.” Time to sell. 4,974p
EnQuest
(Investors’ Chronicle) North Sea driller EnQuest’s “uninspiring” half-year update saw shares drop sharply after it revealed that daily net production had fallen by 30% . Output was hit by an “unplanned third-party outage”. The company has implemented measures that are expected to improve output gradually, but average daily group production is still set to disappoint. Daily production from its Kraken field also dropped by 30% thanks to natural decline. There “is little cheer for investors”. 23p
Oatly
(The Motley Fool) Oatly investors have had a “wild ride”. The stock of the distributor of oat-based milk, yogurt and frozen desserts is on the slide. Sales growth is rapid but shortseller Spruce Point Capital Management has cast doubt on some of the group’s financial metrics and its sustainability practices. Several class action lawsuits have emerged. Oat milk is also ultimately “a commodity that will only become more competitive over time”. $18
...and the rest
The Times
The likes of Featurespace have spotted an opportunity as consumers increasingly become targets for scams. The firm, which uses AI to target financial fraud, is working with banks and payment-processing firms across the world. It’s one of the most promising companies in “the sprawling portfolio” of IP Group, a FTSE 250 investor in intellectual property. It’s best known for its investment in DNA sequencing-technology group Oxford Nanopore. The firm has a long-term approach, backing business “from conception to commercialisation, meaning investors must be patient”. The company announced its first dividend this year”. Hold for now (147p).
The Daily Telegraph
Private-equity trust HgCapital has returned 97% since March 2019 thanks to its successful investments in software companies. The trusts’s premium to net asset value (NAV) is worth paying for. Hold (397p).
Investors’ Chronicle
Window maker Eurocell has benefited from the “home improvement boom” that began with the lockdowns last year. Sales rose by 80% year-on-year in the first half, and were 23% above 2019’s level. The shares have risen strongly but still have potential. Buy (286p). Demand for Luceco’s products is growing strongly, largely thanks to “discretionary spending” in the residential market. The company makes half its money from wiring accessories and the other from LED lightning and portable power products. Costs for copper and plastic, which are essential for its products, are up sharply, but Luceco is offsetting this through price increases. Buy (439p).
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UK-US trade deal announced: US cuts tariffs on UK car imports to 10%Keir Starmer and Donald Trump have announced a UK-US trade deal, but the US president has refused to lift baseline tariffs on most UK goods. What does it mean for the UK?
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How to use mid-caps to diversify from the USMedium sized companies are overlooked by investors but could offer an attractive ‘sweet spot’. We consider the case for mid-caps amid market volatility.
