Share tips of the week – 21 January

Six shares to buy

BHP

The Daily Telegraph

Miner BHP plans to focus on growing demand for the raw materials that will be used in the electrification of the economy. It’s selling its oil assets and will concentrate on producing iron ore, needed to make steel for renewable energy assets, and copper and nickel, which are essential for electric vehicles. The company is in a strong financial position (net debt fell from £8.8bn to £3bn during the 2021 financial year), yet offers an attractive yield of 9.3%. “Now is the right time to buy… on a long-term view.” 2,379p.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

DWF

The Sunday Times

DWF is the only law firm listed on London’s main market. Last week “it finally returned to the price it listed at in 2019”. The stock had underperformed for months, but “there are now reasons to be hopeful” after a reorganisation. The company reported a 3.4% rise in net revenue for the six months to the end of October compared with the same time last year, and pre-tax profits are predicted to reach £38m this year. 125p.

Games Workshop

Investors’ Chronicle

Games Workshop owns Warhammer, an “extremely popular” miniature figures war game. Strong growth and “regular returns of surplus cash to shareholders” saw the group trading at “lofty multiples”, but profits suffered when supply-chain issues arose and the shares lost around 25% of their value last year. However, half-year results for the six months to 28 November 2021 suggest performance should recover when these issues ease. Royalties from its intellectual property more than doubled to £20.1m, and a number of major video games are set for release this year. The pandemic increased demand for gaming, and if these launches are successful royalties will increase again. “This dip is a good time to buy.” 9,728p.

ITV

Motley Fool

Analysts expect Britain’s biggest commercial broadcaster to record zero earnings growth in 2022, but the stock is still trading on a forward price-to-earnings ratio of 7.9 times, and it also has a “mighty” 5.2% dividend yield. Profit forecasts could be gradually upgraded as the year progresses, “leading to hefty share-price gains”. The advertising market has recovered strongly from the pandemic, while the company is investing in its production arm, ITV Studios, to turn it into a “global heavyweight”. 119.95p.

Kooth

The Mail on Sunday

Around 12 million people in the UK suffer from mental-health problems at any given time. Kooth, which provides online treatment through an entirely anonymous service with experienced counsellors, is working with the NHS (its number-one client) and other organisations to help. It was originally set up for young people, but has added adult mental-health services in recent years. Mental-health issues cost businesses over £40bn a year, “so there is a big incentive for companies to help workers feel better”. Brokers expect revenues of £16.7m for 2021, a 28% increase from the year before, and more gains this year. 319p.

Temple Bar Investment Trust

Shares

Investors have turned away from technology growth firms towards value stocks. This bodes well for Temple Bar, which specialises in this style of investing: unfashionable oil and gas companies Royal Dutch Shell and BP are among its biggest holdings. The trust is on track to pay at least 29p per share in dividends for the 2021 financial year – putting it on a yield of 3.3% – and this should grow in 2022. On a discount to net asset value of 7.9%, it’s a buy. 1,187p.

...and the rest

The Daily Telegraph

Supermarket chain Tesco is “a quiet horse that could make steady running” and turn into a “quality compounder”. The likelihood of an increase in the dividend and a share-buyback programme hasn’t been priced in. That presents a good opportunity to buy (292.4p).

Investors’ Chronicle

JD Sports Fashion expects profits for the year to come in ahead of expectations, thanks to an “upbeat end” to 2021. Sales for the 22 weeks to 1 January 2022 were 10% higher than the previous year. The firm credited fiscal stimulus measures and increased levels of consumer demand for boosting its performance relative to the first half of the year. Buy (195.95p).

The Mail on Sunday

Stelrad is the UK’s number one radiator group, selling six million radiators every year. Chief executive Trevor Harvey is determine to deliver growth, increase the company’s market share (now over 60%), produce related products and acquire smaller competitors. Further gains are likely, so buy (208p).

Shares

Odyssean Investment Trust has proposed a merger with rival Strategic Equity Capital. Talks are at an early stage, but the combination “would create a leading trust differentiated from the wider UK small-cap sector” and economies of scale to reduce charges for shareholders. Buy (168p). Cordiant Digital Infrastructure, which specialises in data centres, mobile communications, broadcast towers and fibre-optic networks, should pay a dividend of 4p per share in the coming year – ahead of what it forecast when it went public last February. “The experienced management team is delivering on promises.” Buy (108p).