Share tips of the week – 24 June
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
Six to buy
Adidas trades at a discount to its main rival Nike, despite growing its annual net income faster for most of the past decade. Its strong brand identity could position it well in a recession. Prolonged lockdowns in China are hurting demand in Asia, but growth in the country “looks delayed rather than over”. Management has listened to investors and learnt from past mistakes, leaving it well positioned in the athleisure market. €169.68
The Mail on Sunday
Greenland has large reserves of metals and minerals. “The case for digging them out of the ground has taken on a new urgency”, as Russia’s invasion of Ukraine and China’s “growing antagonism towards the West” spur governments to think about supply chains. AEX’s Nalunaq gold mine should be in production by 2024 and it’s expanding its assets beyond gold. It’s an early-stage firm and comes with risks, but the shares could deliver significant rewards. 44p
The risk of recession in the US – Ashtead’s main market – has overshadowed bullish guidance for the tool-hire company. However, the return of live events and the restart of construction projects after the pandemic has fuelled demand for heavy equipment. Supply-chain disruptions also means clients are searching for larger fleets. If smaller rivals are squeezed, Ashtead could take more market share. Higher rental rates are helping to combat inflationary
pressures. Recession is a risk, but Ashtead is financially secure, and diversifying into speciality-tool rentals could “lessen the pain” from a drop off in new projects should demand decrease. 3,410p
The Sunday Times
Corporate restructuring firm Begbies Traynor has already benefited from business failures after the government’s pandemic support was removed. The UK’s “bleak economic prospects suggest a lot more winding-up work” will have to be done. Two-thirds of Begbies’ profits come from “business doom”, and insolvencies could soar as businesses struggle with the aftermaths of Brexit, the pandemic, soaring energy prices, and supply-chain issues. This is good news for Begbies, which has an “undemanding” valuation. It acquired three business-recovery firms over the last year, so it will be even better placed to cope with demand. 147.48p
The management of this instant-service equipment company is confident that it has the pricing power necessary to manage current challenges. The company operates, sells and services a range of vending machine equipment aimed at the consumer market, focusing on four areas: photo booths (the origins of its name), laundry, printing and food. It has long-standing relationships with major site owners and so its equipment is usually found in prime locations. Photo-Me is looking to grow its number of units in operation, and hopes to install 100 machines per month by 2023. 81.2p
The idea of “spending more on the armed forces to provide greater security” has become “widely accepted”. This bodes well for Chemring, which develops and manufactures countermeasures such as flares, as well as sensor technologies. A 4.1% increase in the US defence budget means demand for its products should rise, as the US makes up just over half of its sales. A “solid” performance over the first half of the year allowed it to reduce debt and acquisitions seem more likely after the integration of an artificial-intelligence specialist it bought last year. 314.5p
...and the rest
Investors began selling off Industrials Reit after a profit warning from Amazon, which raised concerns that the warehouse market had become too dependant on the e-commerce giant. However, the company deals in the smaller multi-let industrial units that have sources of growth beyond online shopping. Buy (175p).
The Mail on Sunday
Early stage mining group First Tin intends to help “bridge the gap between supply and demand” of the metal, which is essential for the transition to clean energy. The group expects to be a low-cost producer, so should move quickly into profitability. Buy (18p).
Shares in retailer Watches of Switzerland have dropped 48% year-to-date, as sceptics worry the company will struggle to keep momentum. This presents a “compelling entry point” into a high-quality company in a “resilient” sector with potential for growth. Buy (792.4p).
Shares in Hilton Food are trading “lower than their post-pandemic pit” as investors are anxious that squeezed consumers might spend less on meat products. But the company should be insulated from the worst. It has large-scale agreements with established retailers and has done a good job of diversifying its products and footprint. Buy (1,064p). Shares in buy-to-let lender Paragon Banking Group offer a “generous yield” and are trading at a lower premium to book value. Buy (481.2p). Premier Inn owner Whitbread is an obvious takeover target for a private-equity buyer, given its valuable portfolio of hotels in the UK and Germany and its low levels of debt. Buy (2,658p).