Share tips of the week - 12 August

Lloyds Bank’s latest results were boosted by an increase in the first-half dividend, upgraded profit guidance for the year and “very modest” loan losses.

(Image credit: © Getty)

By MoneyWeek

published 12 August 2022

Three to buy

Unite

The Daily Telegraph

Property offers protection from inflation. Unite, a real-estate investment trust that owns student accommodation, differs from other commercialproperty funds because its contracts are often only a year long. The short-term leases mean the trust can bolster income rapidly by charging next year’s tenants higher rents. Demand for student accommodation is increasing fast. The only drawback is the 21% premium to net asset value, but the shares are volatile. Buy on the next dip. 1,148p

Halma

The Mail on Sunday

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Halma owns 43 companies in the safety, environment and healthcare sectors. It provides them with funding to invest in research and development. The group reported turnover of more than £1.5bn and profits of £316m in the year to March 2022, and a 7% rise in the dividend was declared. The shares have slipped by 30% this year due to the gloomy market backdrop – a slide that seems overdone. 206p

Sureserve

The Sunday Times

Sureserve does “dull but important work” in the energy sector. It services gas and electricity supplies in social housing and installs smart meters. It also has “tentacles in construction work”. Sureserve’s order book rose by 50% to £512m in the six months to March from the year before, and 95% of 2022’s expected revenues are already covered by orders. It has long-term relationships with local authorities, which gives it “valuable visibility” over future revenues. A 12% slide in the share price this year constitutes a buying opportunity. 86p

Two to sell

Motorpoint

Investors’ Chronicle

Car dealers had a tough pandemic: most of them “wouldn’t have survived without government assistance”. However, last year the top-20 dealerships reported an increase in profits to £746m from £105m the year before, thanks to the boom in second-hand cars. Motorpoint benefited from this trend; it focuses on selling cars that are up to four years old through bricks-andmortar shops and its online portals. It has ambitious growth plans and wants to invest in expansion in order to “get its message across about its competitive pricing”. However, it has been building up its inventory, which could fuel investors’ concern over falling used-car prices; these have dropped in seven of the past nine months and are 29% below their September high. Nor does a weaker economic backdrop bode well for car sellers. Time to sell. 195p

NatWest

Motley Fool

“The pull of big near-term dividends” is not enough to make NatWest worth investing in. The darkening economic outlook could cause a sharp correction in the stock, which seems especially vulnerable owing to the “impressive gains” it made last month, when the bank raised its full-year forecasts after “strong growth in lending and deposits” in its first six months. However, the costof-living crisis is worsening and inflation shows little sign of declining, with the Bank of England predicting a rise to 13% by the end of the year. This raises the prospect of a “tsunami of bad loans”. The Insolvency Service reported 28,946 personal insolvencies in the second quarter, a 7% increase year-on-year. It’s best to steer clear. 255p

...and the rest

Investors’ Chronicle

Telematic data provider Quartix Technologies tracks cars and vans, which helps fleets optimise their vehicle use and insurers price premiums accurately. However, given “the prospect of automated vehicles emerging in the mid-to-long term, there is no guarantee” that the company’s customer base will endure. Sell (333p). Aston Martin won’t become an “investable prospect” until it manages to become cash-flow positive. Sell (468p).

The Daily Telegraph

Lloyds Bank’s latest results were boosted by an increase in the first-half dividend, upgraded profit guidance for the year and “very modest” loan losses. The stock is on a 17% discount to book value and offers a 5% yield. The wider economic outlook is discouraging but this is priced in, making now a good time to buy (45p).

“Marmite-toMagnum” maker Unilever’s customers are loyal to the brand, enabling it to counter inflation through price increases; it has already hiked prices by 9.8% in the six months to June. Activist investor Nelson Pelts has joined the board and may push for a break-up, which could “offer a long-term catalyst for the share price”. Buy (3,979p).

The Times

Software company Sage’s share price “does not reflect the benefits” that could come from its shift to a softwaresubscription service. Buy (738p). Morgan Advanced Materials makes ceramic and carbon materials used in industries from aerospace to renewable energy and healthcare. Sustained demand from these sectors means this year’s trading figures are expected to be at the top of the forecast range. The stock looks cheap despite its positive prospects. Buy (299p).

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