Share tips of the week – 18 February

Three to buy

Dunelm

Investors’ Chronicle

Homeware retailer Dunelm thrived in the pandemic and the boom has continued. The firm’s market share has grown thanks to the collapse of “indebted high-street rivals” such as Debenhams, and it has “far outstripped the overall market”. Management is now expecting pre-tax profits for the full year to be nearly a third higher than they were in 2021. The challenge for the coming year will be how it deals with inflationary pressures and a slowdown in consumer growth due to increasing costs of living, but “as a retailer with a focus on value” it could continue to benefit. 1,285p 

Pets at Home

Shares 

Shares in the UK’s leading pet equipment and veterinary services group have dropped 13% from late December, “which means they look even better value than before”. Pets At Home published positive results for the 12 weeks to the end of December: like-for-like revenues were up 9% from 2020 and 28% from 2019 “as pet-loving Brits continued to indulge their furry friends”. Christmas saw higher sales of premium products. Forecast pre-tax profit for the 12 months to the end of March has been raised from £132m to at least £140m. 407p

Syncona

The Sunday Times

Life sciences investor Syncona focuses on early-stage science, including gene therapies to fight eye cancer and blindness and cell therapies to treat immune system diseases. In the last quarter, net asset value rose 16% to 199p per share, so the shares are on a 5% discount compared with its usual 20% premium. “Look beyond the existing value of its holdings” and towards the possible returns if its early-stage bets “become blockbuster cures”. 187p

Three to sell

JD Sports 

The Daily Telegraph 

High inflation could “create increasingly challenging trading conditions” for this sportswear chain. “A rapidly rising price level is likely to put severe pressure on discretionary incomes”, which could make consumers put off the purchase of non-essential clothing. Booming sales have also been funded by “vast stimulus measures”, which will soon come to an end. Supply disruption might also make trading conditions difficult. The company has a solid financial position and a strong multichannel presence, but the investment case is becoming “increasingly difficult to make”. Bank profits now. 179.05p 

Moonpig 

The Times 

Despite a recent sell-off, online greetings-card and gift retailer Moonpig still trades at a “plump” 26 times forwards earnings. The firm upgraded revenue guidance to the top end of its range for the year, but that still falls “substantially below” last years’ sales now that physical stores have reopened. Earnings aren’t expected to recover to 2020 levels even by 2024. It’s “solidly profitable… but the best of its gains look like they’re behind it”. 276.2p

Shell

Investors’ Chronicle 

Oil major Shell “roared back to profitability” in the fourth quarter of its fiscal year and upped its quarterly dividend payouts by 4% to $0.25 a share thanks to booming oil and gas prices. The oil industry is still struggling to keep up with demand due to lack of investment in exploration and production in recent years. Shell looks very appealing in the short term, but the question of where it will go after this “sugar rush” remains. Sell. 1,955p

...and the rest

Mail on Sunday

Pod Point has installed over 90,000 electric vehicle chargers across the UK. Most are set up in individual homes, but they’re increasingly being installed in car parks, shopping centres and petrol stations. It’s “on the right side of the government’s green agenda” and scope for growth is vast. This young business is “not without risk”, but the shares are worth a punt (203p).

Shares

Virgin Wines’ shares dropped after a “mild” profit warning. Profit and sales for the year to June 2022 are set to be “slightly below” consensus estimates, but brokers still expect an improvement for the next three years. “The share-price fall looks overdone.” Buy (153.5p). 

The Daily Telegraph 

Sentiment towards pub operator Fuller, Smith & Turner soured after it revealed a dip in business last month due to Covid-19. But this is “surely no surprise”, and the stock continues to offer “long-term value to contrarian investors” as profits recover. Challenges remain, but the business “still has every chance of raising a cheer”. Buy (662p). i3 Energy has been buoyed by strong production from its Canadian and North Sea oil fields. It has committed to monthly dividend payments and The targeted payout for 2022 equates to just over 1p a share, a yield of 6.4%. Buy (18.8p). 

Investors’ Chronicle 

The “reduced need for fervent coronavirus-related cleanliness” was clear in PZ Cusson’s half-year results; the Carex hand wash manufacturer announced a 16% fall in hygiene revenue. However, the company still saw increased profits as beauty products grew by a fifth. On 13 times forecast earnings and with sales in Africa improving, it’s a speculative buy (195p).