Share tips of the week – 24 September

Five to buy

JD Sports Fashion

(Investors’ Chronicle) JD Sports Fashion has benefited from the US government’s stimulus package: the American business produced over half of the group’s pre-tax profit of £439.5m in the first six months of 2021. That’s a sevenfold increase from the same period last year and 177% higher than in 2019. The group has completed a string of successful acquisitions across the US, Poland, Spain and Britain, which have helped drive growth. Its core UK and Ireland business did well despite new lockdowns; when shops were closed in the spring it made 90% of the sales it generated in the same period in 2019 from online sales. The firm remains cautious, forgoing an interim dividend in case of further lockdowns, but a larger full-year dividend is in prospect should positive trading continue. 1,151p

Darktrace

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(The Daily Telegraph) Around 15% of cybersecurity company Darktrace’s shares are owned by Mike Lynch, “a man accused of a multibillion dollar fraud”. But there is no sign of dubious practice at Darktrace. Since it listed in April the stock has tripled. The company faces stiff competition from American rivals. But it stands out because its software analyses users instead of devices, providing customers with a “map”, or visualisation, of their networks that makes it easier to spot anomalies. The firm has plenty of potential, and taking “a small punt” on it at this stage could pay off. 728p

Artisanal Spirits Company

(The Mail on Sunday) The Scotch Malt Whisky Society was founded in 1983 by Edinburgh’s Pip Hills and 12 of his friends, so that they could buy and enjoy casks of whisky. It now boasts 29,000 members and listed on Aim in June as the Artisanal Spirits Company. Members pay around £65 a year and most buy at least seven bottles averaging £75 each. First half figures for 2021 revealed sales of £7.9m, a 20% year-on-year rise. Analysts expect revenues of £17.5m for 2021 and £21m next year. The group is expected to be profitable from next year and the whisky market is booming. The shares have dipped recently, but given the firm’s solid prospects, they should recover. 83p

CVC

(The Sunday Times) Pets have become a big business following the pandemic. Complex procedures and “posh pet food” have become widely available, driving rapid growth among insurers, pet shops and veterinary practices. CVS Group is an Aim-listed owner of vet surgeries. It recently acquired a majority stake in vet chain Medivet for £1bn and will continue to concentrate on acquisitions. Like-for-like sales for the 12 months to June jumped by 17.4%. For now, at least, pet owners are spending large sums on their animals while taking out insurance for them, too. The coming months will reveal whether the pet trend begins to slow, but if CVS continues to perform, it is one to buy. 2,490p

Chemring

(Shares) Defence group Chemring says its order book has grown, “providing visibility” for the remainder of the year and fuelling confidence that it will meet analysts’ expectations for the year to 31 October. The order book was valued at £464m in August, up from £450m at the end of April. The company’s cybersecurity subsidiary, Roke, should keep flourishing as the sector expands: further double-digit growth is expected. Orders for 2022 are building too. The stock’s quality and “ongoing resilience” make it a buy. 328p

...and the rest

The Daily Telegraph

B&Q owner Kingfisher’s like-for-like sales were 5% higher year-on-year in June, compared with a 2% rise for the overall market. The group has an “above average” chance of maintaining its edge over rivals. Lockdown was a huge boost for home improvement and the pandemic introduced many people to “the joys of DIY”. Hold (371p).

Shares

Recent acquisitions by refuse-specialist Biffa have cemented its lead in waste-recycling. It has recovered from the crisis more rapidly than expected: revenue for the first five months of the year to 31 August was 12% higher than in the same period of 2019. Earnings forecasts for 2022 and 2023 have risen strongly recently. Buy (385p).

Investors’ Chronicle

Higher demand from private patients boosted operating profits at Spire Healthcare Group, Britain’s second-biggest private provider, to £46.2m in the six months to 30 June 2021; the previous year it made a loss. Demand should remain robust. Hold (236p).

The Mail on Sunday

Palm oil “is a controversial commodity” but Indonesia-based MP Evans prides itself on sustainable production, proper treatment of workers and supporting local communities. The company looks after investors too: it has maintained or increased its dividend every year for the last 25 years. The firm has announced a 588% increase in half-year profits to £30m and a doubling of the interim dividend to 10p. It has also pledged to increase the annual dividend by 36% to 30p. Existing shareholders should hold, and new investors “could dip their toes in”(788p).

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