Share tips of the week – 4 February
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
Three to buy
Facilities by ADF
The Mail on Sunday
The film and TV industry contributed nearly £12.5bn to the UK economy last year, up 24% in five years. Facilities by ADF both contributes to the “UK’s growing reputation” in the industry and benefits from it. It supplies the trucks and trailers used by actors, make-up artists, costume designers and technicians. It has become one of the top operators in the field, with its fleet of 500 vehicles expected to grow to 700 over the next two years. It works on 15 to 18 productions at a time, from Peaky Blinders (pictured) to Marvel’s Secret Invasion. Customers include Disney, the BBC and Amazon Prime. The company is “ideally placed to benefit as the UK cements its position in the entertainment industry”. 63p
Mitchells & Butlers
Mitchells & Butlers looks “well placed” to benefit from the return of after-work drinks – around 82% of the UK population lives within five miles of one of its venues. Sales were down 1.5% over the 15 weeks to 8 January 2022, but rose by 2.7% in the eight weeks before the latest round of virus restrictions. It has a sound balance sheet with £235m cash and £150m in undrawn credit. Inflation will “squeeze... spending”, but mass “abstinence looks unlikely”. 250p
Stationery and snack seller WHSmith has a “huge” opportunity in US airports, thanks to its acquisitions of headphones and electronics retailers InMotion and Marshall Retail. It has branched out into medicines thanks to a partnership with Well Pharmacy, the UK’s third-largest pharmacy chain, and also owns a “hidden gem” in fast-growing online gifting website Funky Pigeon, number two in the UK after Moonpig. If sold, it could net the company at least £200m. 1,686p
Two to sell
The Daily Telegraph
Online fashion retailer ASOS, now worth £2.3bn, has decided to switch over to the main market from Aim, which means it won’t be qualified for the “business relief” tax breaks that makes some Aim-quoted shares exempt from inheritance tax (IHT). Investors who sell their ASOS shares and reinvest into other qualifying stock “will be treated as if they had had one uninterrupted qualifying holding from the date of purchase of their ASOS shares”. For this to happen, however, they must sell before ASOS’s move to the main market becomes “unconditional”, which is likely to be next month. Those who hold ASOS for the IHT benefit should sell without delay. 2,255p
Materials group Croda has earned a reputation as one of Britain’s best businesses. It is a “champion of the unexciting”. It manufactures specialist goods such as lipids, an integral component of vaccines. However, it made a “strategic misstep” when it tried to expand into the electric-vehicle battery sector. Net profit has “hardly budged” over the last three years, yet its stock has risen consistently. The shares now trade on a forward price/earnings ratio of 45, which “suggests the market is expecting a lot from the enterprise. But there is no guarantee it will be able to meet these lofty expectations”. With market risks growing, avoiding “richly valued businesses” like this one might be wise. 7,864p
...and the rest
The Mail on Sunday
Publisher Bloomsbury is best known for the Harry Potter series, but its repertoire is vast. It has a fast-growing digital arm, but print sales remain “undiminished”. Trading for the year to 28 February will beat forecasts, due to strong growth in its consumer and academic units. The shares are a strong hold. “Bookworms could also pick up some stock, especially if there are wobbles in the price.” (367p).
Another 40GW of offshore wind-farm capacity will be built under the government’s Green Industrial Revolution Plan. This is “terrific” for renewable energy stock Greencoat UK Wind. It has a growing portfolio of on- and offshore wind farms; more investment could mean new opportunities for expansion as well as dividends to shareholders. It has its risks, “most notably the lack of pricing power” as energy prices are regulated. But it’s a risk worth taking. Buy (141p). However, AFC Energy is a renewable to avoid. It’s an expert in alkaline fuel-cell technology, which gives it a competitive edge. But it “doesn’t have any meaningful revenue”. Its £262m market value seems to be “driven by expectation”, which can “open the door to a lot of volatility”. Sell (33.97p).
Shares in construction group Henry Boot jumped to 300p after it released results last month. “Since then the markets have been clobbered.” However, all of Boot’s markets (industrial and logistics, residential and urban development) have seen strong trading. Demand
for logistics property and residential sites shows no sign
of abating. Buy (283p).
Commodity group Glencore is shifting its focus from fossil fuels to metals that will fuel the transition to low-carbon energy, including copper, cobalt, and nickel. Even if commodity prices fall, its improving financial position suggests it would not struggle. Buy (393.25p).