Three to buy
Cheniere Energy
Shares
Cheniere Energy buys natural gas in the US – where prices are lower – and exports it as liquefied natural gas (LNG). As the invasion of Ukraine pressures European powers to “wean themselves off Russian gas”, which accounted for 41.9% of gas imports into the bloc in 2019, Cheniere offers a strong alternative source. The firm has raised its 2022 earnings forecast by 20% to $7.5bn (£5.7bn) and is looking to expand its fuel terminal capacity. Shares in the company aren’t cheap, on 13.6 times earnings and a dividend yield of a little over 1%. But Cheniere occupies a leading position in its market and has strong growth prospects, so it’s a buy. $135.98
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Domino’s Pizza
The Telegraph
Pizza-delivery firm Domino’s is one of Britain’s most-shorted stocks at the moment, but its shares are set for a comeback. Investors fear that the cost-of-living squeeze will hurt profitability. However, while costs are likely to rise as high inflation persists, its “vertically integrated” business model should be a competitive advantage. A price/earnings (p/e) ratio of 18 isn’t cheap but Domino’s has a strong brand with loyal customers. It plans to open 45 new stores each year for three years and invest £20m into digital operations to improve its delivery service. 394.70p
Keyword Studios
The Sunday Times
Video gaming was once reserved for teenagers, but lockdown accelerated its popularity and revenues in the sector are expected to exceed £61bn this year. Keyword doesn’t publish its own games – it tests and polishes the products of other studios, and is the world’s largest gaming translator for character dialogue. It has bought almost 60 firms since listing in 2013 and now has 70 studios in 23 countries. Growth forecasts are strong and net cash should eclipse £132m this year. 2,088.55p
Two to sell
Coca-Cola HBC
Shares
Coca-Cola HBC is a bottling partner of the soft drinks giant Coca-Cola. It has seen its share price slump in recent weeks due to a worsening outlook for earnings. Coca-Cola HBC is highly exposed to Russia and Ukraine, which together accounted for 36.2% of the group’s emerging markets sales volumes in 2021. Recent results were strong and the dividend payout target was raised to 40%-50%. However, the conflict in Ukraine has significantly weakened consumer confidence across Eastern Europe, there are scant sales predicted in Ukraine itself, and the collapsing Russian rouble is looking to damage overall earnings. Large institutional investors are likely to begin selling their positions in the firm, which will put further pressure on the shares. 1,600p
WPP
Investors’ Chronicle
This advertising giant has made a strong recovery from the pandemic. Organic revenue rose 12.1% last year and is now ahead of where it was in 2019. WPP posted a pre-tax profit of £951m, up from a pre-tax loss of £2.8bn in 2020 – although the latter was the result of a £2.82bn impairment it took to reflect concerns about the impact of the pandemic. That turned out to be unduly pessimistic: digital revenue soared as people stayed at home. But the outlook is darkening as global uncertainty returns. Energy costs are certain to rise and last year’s rapid growth in advertising spending will not be repeated. “If WPP thought it needed to take an impairment in 2020, it must be considering another in 2022.” Get out before it does. 998p
...and the rest
Investors’ Chronicle
Embracer Games is a “highly acquisitive Swedish gaming business” with 216 games in development. Net sales were up 135% year on year in the third quarter to December and operating profits grew by 70%. A p/e of 10.5 times forecast earnings for 2023 is not demanding. Buy (SEK74.29).
Interactive Investor
Bank of Ireland has posted its biggest profit since 2008, helped by cost cutting and a healthy housing market. Buy(€5.42).
The Mail on Sunday
Engineering contractor Babcock makes nuclear submarines and decommissions nuclear power stations. It should benefit from renewed interest in nuclear energy and higher defence spending. Buy (317p). Defence firm Chemring has struggled amid an investigation into money-laundering allegations and a probe into a lethal chemical explosion. However, renewed enthusiasm for defence stocks is causing investors to take a fresh look. Buy on any weakness (309.5p).
Shares
Food and drink wholesale firm Kitwave has strong growth prospects in a fragmented grocery and food-service market. Buy (153p). Safety and testing company Marlowe is going from strength to strength. A recent £135m acquisition positions it as a major player in occupational health. Analysts expect 19% annual earnings growth. Buy (830p). Warren Buffett’s Berkshire Hathaway is performing well. It has attractive defensive qualities and is well-diversified. Buy ($319).
The Telegraph
Stockbroker Hargreaves Lansdown saw profits fall 20% last year due to rising costs, but the amount of money held with it grew 17%. A new investment programme should boost asset growth, cut costs and grow margins. Buy (1,049.5p).
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