On The Beach
Shares
Suggesting investors buy shares in holidays group On The Beach in the midst of all the travel chaos “might sound mad”. But the business is “fundamentally sound” and its long-term prospects look solid. The stock is trading at its lowest valuation in seven years and demand is rising: UK holidaymakers will spend around £7.3bn on package holidays this year, and that will jump to £9bn by 2026. The shares are at 129p, but analysts believe they could jump to between 400p and 500p within 12 to 18 months, making now the time to buy. 129p
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Rio Tinto
The Sunday Telegraph
Volatile markets provide an opportunity to buy companies such as miner Rio Tinto. Over the last year the stock has dropped by 18%, but the company’s solid balance sheet and net cash of £1.3bn will shield it from rising interest rates. The company has an “exceptionally wide” safety margin to fall back on if a turbulent economy hits short-term profits, and over the long term it will benefit from rising demand for iron ore, copper and lithium, all of which are essential for the transition to renewable energy. 4,835p
Serabi Gold
The Mail on Sunday
Gold “comes into its own” during economic uncertainty, so now is a good time for gold investors and gold miners. Serabi Gold’s mine in Brazil struggled after it opened 20 years ago, but was turned around by “geologist turned mining company doctor” Mike Hodgson. Serabi is developing another two sites, one of which could yield large amounts of copper. That could lead to lucrative deals with big miners keen on the red metal. 39p
Two to sell
Domino’s Pizza
The Times
Until recently franchisees “had Domino’s in a headlock”. They were dragging their feet on opening stores while insisting on higher marketing and technology expenditure and better profit-share terms. The company reached a “breakthrough agreement” at the end of last year and is now opening 45 new stores. Nonetheless, the outlook is inauspicious. The firm’s offerings are good value, but lower-income households are grappling with a significant squeeze on budgets. While promotions might lure customers and bolster overall orders, franchisees already dealing with higher costs, including higher delivery-drivers’ salaries and energy bills, may not be inclined to pursue this strategy. It seems investors are already pricing in an uphill struggle. The stock is close to an eight-year low and on a lower rating than in March 2020. Despite a yield of 3.5%, it may not move higher anytime soon. Avoid. $401
Inland Homes
Investors’ Chronicle
Management at southeast England-focused housebuilder and developer Inland Homes has maintained full-year profit expectations despite a first-half loss of £8.2m on revenue of £80m. First-half results were hit by £10.9m of pre-tax losses on housebuilding. The board has put cost-control measures in place to bolster returns, but the company is now facing cost -inflation pressures and supply- chain problems. Its operational performance “has been far from plain sailing” since the Covid-19 market slump and the share price has yet to recover. Land-buying activity could also slow if the economic backdrop in Britain worsens, so a return to profit could take time. Sell. 39p
...and the rest
Investors’ Chronicle
Eli Lilly’s shares look expensive, but the company stands out in the pharmaceutical sector. It is not facing any imminent patent expiries, its pipeline is focused on high-growth areas and its growth rate is eclipsing the sector’s average. Buy ($325). Melrose Industries’ takeover of GKN has proved tumultuous, but most of the risky operational challenges have now been addressed. The company, which specialises in automotive and aeronautical engineering, has repaid a large chunk of its debt too. Buy (153p).
The Mail on Sunday
Brazil is the fourth-largest consumer of fertiliser in the world, yet it only produces 4% of the fertiliser it needs. Harvest Minerals’ Brazilian site is producing pure organic fertiliser and selling directly to farmers. The future looks bright: it has brought in new business and should benefit from “Russia-induced turmoil”. Sales and profits should both rise at a steady pace. Brave investors could “take a punt” at current levels. Buy (13p).
The Sunday Times
The Restaurant Group, owner of Wagamama and Frankie & Benny’s, is due to struggle from rising costs, but its shares “look a bargain”. Investors might have lost their appetite, but the company’s meals out “for the masses look set to be our new little luxuries”. Buy (44p).
The Times
JD Sport’s “stellar” outperformance against the FTSE 100 over the last five years has “sharply reversed” and the shares are now the cheapest they’ve ever been. Given the company’s optimistic outlook and its growth opportunities, now is the time to buy (123p).
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