Share tips of the week – 5 August

Three to buy

Hays

Shares

Recruitment firm Hays repeatedly delivers double-digit increases in income from fees, pays out growing dividends and invests heavily in future growth. The firm offers recruitment services across 20 sectors in over 30 countries and expects to generate around £1.25bn in net fees this year. This is only a third of the net fees generated by international rivals, but Hays has outlined an “aggressive” five-year growth plan to help it deliver results while navigating “macroeconomic uncertainties”. 124p

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Unilever

The Mail on Sunday

Unilever “told a tale of price inflation” when it reported results last week, but assured consumers sales remained strong. The company is a “global tangle” of over 400 well-known brands. In the first half the volume of sales declined by 1.6%, but their value rose by 8% and analysts raised their profit guidance for the full year. Unilever has already pushed prices up by 11% and “how much its customers will bear” remains to be seen. But the shares are on a 20% discount to peers and the company has a loyal customer base that is willing to stick with it.

4,000p

Zoetis

The Daily Telegraph

Zoetis, which provides drugs and treatments for animals, offers protection against both inflation and recession. Pet owners “are often said to be prepared to go hungry” rather than let their animals suffer. Zoetis has few rivals, makes excellent margins and returns on capital, and focuses on research and development. It should continue to deliver double-digit earnings growth, making it a long-term buy. $176

Two to sell

Ocado

Investors’ Chronicle

Supermarkets are all struggling with the cost-of-living crisis as consumers tighten their belts and online grocer Ocado is no exception. Sales for the six months to the end of May were down 8% to £1.1bn from the same period the year before. The number of customers rose by 12%, but the average spend per basket was down 13% to £120. Costs are rising too – distribution costs and administrative expenses were up 16% – so losses have mounted. The shares have more than halved in the last year and there are “no obvious catalysts” for a comeback. Ocado has also paid out £11m in legal costs due to ongoing litigation with AutoStore, which accused it of patent infringement. Sell. 784p

Meta Platforms

The Times

A marked slowdown in sales growth erased a quarter of Facebook-owner Meta Platforms’ market value in February. Its latest set of figures “show why a further derating” is likely. Meta produced its first- ever revenue decline in the three months to the end of June, a 1% year-on-year fall. It is battling rising competition, data-privacy changes, regulatory threats and the expense of financing its “loosely defined bet on virtual reality”. Revenue for the third quarter is expected to reach between $26bn and $28.5bn, less than the second quarter’s $28.8bn. Advertising sales could be at risk if the “dramatic slowdown” in new users makes companies question whether Facebook and Instagram “are the best places to allocate marketing dollars”. Operating expenses are also rising and trimming the bill is “unlikely to insulate Meta from a decline in profits this year”. Avoid. $159

...and the rest

Investors’ Chronicle

Floor-covering designer and manufacturer Victoria’s positive full-year sales results were overshadowed by rising losses owing to higher financing costs. Debt also remains “stubbornly high”. Sell (401p). Media company Reach is sensibly transitioning to digital media to “keep up with consumer habits”, but rising costs, changes to regulations governing cookies and a “possible advertising slump suggest the next 12 months will be an uphill struggle”. Sell (89p).

The Daily Telegraph

The “operating environment” of defence contractors such as QinetiQ is set to improve “significantly” in the near future due to China’s “growing military assertiveness” and heightened geopolitical risks brought on by Russia’s invasion of Ukraine. The group has global growth opportunities and a healthy balance sheet. Buy (381p). Insurer Beazley has strong momentum and analysts expect pre-tax profits to more than double next year. Buy (537p).

The Sunday Times

Pawnbroker H&T is benefiting from the “rush” to gold as a protection against inflation, although the “soaring” demand for pledge lending (whereby borrowers hand over valuables in exchange for short-term loans) is providing the key boost to the company’s bottom line. “It’s grim but true: growing poverty is good news for H&T.” Buy (406p).

The Times

Lloyds Banking Group’s latest profit upgrades make the shares look very good value. Buy (45p). Student landlord Unite’s shares look too expensive given its struggle with rising interest rates and cost inflation. Avoid (1,150p). DIY chain Wickes’ profit warning demonstrates that home-improvement products are losing popularity now that lockdown is over and the cost of living is rising. Avoid the stock (1