Share tips of the week – 8 July

Three to buy

Berkeley Group

The Telegraph

Investors and experts expect a housing-market bust after explosive price growth of 22% over the past two years. As a result, shares in London-focused Berkeley Group, which delivers 10% of London’s new private and affordable homes, have fallen by 22% since January. But the “severe imbalance” between supply and demand remains, and will only widen as the population grows. Even if house prices do fall, Berkeley “is in an excellent position to survive” with net cash of £269m. It is a consistent performer and plans to return an annual £282m to investors through dividends over the next three financial years. Those who can stomach near-term volatility should buy now to reap high future returns. 3,743p

Subscribe to 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

Forterra

The Times

Brickmaker Forterra benefited from the protracted shortage of brick production capacity following the 2008 financial crisis. This has insulated it from today’s economic crunch, allowing it to pass on price increases to offset inflation. These should also be enough to return margins to pre-pandemic records; this year’s earnings should easily eclipse their 2019 level. A downturn in house prices is a risk to brick demand, but the supply squeeze provides protection. 262p

Inchcape

The Mail on Sunday

Car dealership group Inchcape says profits should reach £370m this year, “considerably higher” than the £300m initially predicted, thanks to record sales. The company operates just over 100 dealerships in the UK but most of its money is made overseas. It offers an easy and cost-effective way for consumers to buy cars, and it has developed good relationships with carmakers. It has also invested in its website. The next step is to acquire smaller distributors and expand into used cars. 691p

Three to sell

Liontrust Asset Management

The Times

Shares in Liontrust Asset Management have fallen by over 50% since January. While many other firms face a slide in profits, “previously high expectations mean investors have singled out the manager for punishment”. Over the 18 months to the end of December assets under management had nearly doubled to £37.2bn, but economic disruptions owing to the war in Ukraine caused assets to shrink for the first time in two years during the first quarter of 2022. Outflows of £432m compared with net inflows of £1bn the year before, along with a market slump, caused further pain. The group also promotes itself as a specialist in environmental, social, and governance (ESG) strategies, which have been overshadowed as energy and mining groups have soared. A “beefy” dividend is a consolation, but the next two years will be arduous. Avoid. 890p

Naked Wines

Investors’ Chronicle

Investors in Naked Wines were left “reaching for the nearest bottle of vino” after the online wine retailer’s latest results. It returned to profit and sales rose by 5% in the year to April 2022. But the market was spooked by the company’s outlook: the sales forecast for this year has been reduced and the group’s key performance indicators were “less-than-impressive”. The forecast five-year return on investing in acquiring customers slipped and investment in new customers fell by nearly a fifth to £41m, which won’t help stoke demand. A build-up of inventory and a new credit facility add to risks. Sell. 171p

...and the rest

Investors’ Chronicle

Gold is a classic inflation hedge and ongoing economic uncertainty could continue to push its price up. The Invesco Physical Gold ETC provides a “simple and cheap way” to gain gold exposure (144p).

Shares

“There’s merit in seeking out less obvious bargains”, and AVI Global Trust, which invests in family-controlled funds and Japanese stocks set to benefit from improved corporate governance, “looks an excellent vehicle for doing so”. Buy (180p). Record provides foreign-exchange hedging services for institutional investors. It has an ambitious growth plan, which if achieved would mean current analysts’ forecasts are “far too low”. Buy (74p).

The Sunday Times

Spire Healthcare owns 39 UK private hospitals, which have benefited from record waiting lists at NHS facilities. It is also capitalising on more outsourcing by the NHS, which began using its services in the pandemic. The shares appear to have further to run. Buy (235p).

The Times

Industrial group Essentra’s shares have fallen by 50% in five years. Management is focusing on the higher-growth components business and ditching the packaging division. “Further disposals would

make the shares look too cheap.” Buy (248p).

The Daily Telegraph

Airlines IAG and easyJet “continue to face the problems endemic to their sector”. But external challenges are likely to be temporary and this turbulence may prove a good entry point for investors. Both airlines also have the resources to ride out further losses. Buy (116p, 403p).