Three to buy
Made Tech
Made Tech helps the public sector update its digital technology. Its lucrative contracts with the likes of NHS Digital bode well. The company has been challenged by wage inflation and the need for “costly contract staff” to meet its £38.2m order backlog, but it has managed far better than the market predicted. Revenue jumped by 120% for the year to 31 May 2022 and sales bookings rose by 115% to £51.1m. There appears to be “substantial scope” for a share-price re-rating. 35p
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National Express
The Sunday Times
Demand for cheaper alternatives to rail and plane travel is good news for bus and coach operator National Express. While the company is struggling with inflationary pressures as well as rising wage and fuel costs, two thirds of its revenues come from signed contracts with annual inflation adjustments built in. The company also has a new business pipeline of £2.1bn in annual revenues over the next 18 months, up from £1.5bn last October. The shares look reasonably valued and there is a chance the company will be subject to a takeover. 170p.
Volex
The Mail on Sunday
Power-cable and electrical-kit maker Volex provides equipment for everything from electric cars to ventilators. Customers “prefer to remain anonymous but are thought to include Tesla, Amazon, and Siemens as well as... government defence contractors”. CEO Nat Rothschild has made a “deliberate push” into higher-value areas, which has facilitated the resumption of dividend payments. 263p
Three to sell
Fever-Tree
Investors’ Chronicle
Premium-mixer producer Fever-Tree became the largest company on Aim in 2019 just five years after listing. However both its immediate and longer-term outlooks “seem increasingly cloudy”. The company has turned into one that “consistently over-promises”.
Labour shortages in the US, higher sea-freight costs and the restricted availability and increased cost of glass have led to repeated reductions in gross-margin targets, while July’s profit warning has hardly helped matters. The stock has fallen by nearly 70% from its peak but it is still trading at a significant premium to its sector. Sell. 905p
Lookers
The Telegraph
Avoid car retailers as interest rates rise; around 90% of new cars are bought on credit. The cost-of-living crisis also means people will postpone or forgo changing cars. All of this makes Lookers very vulnerable. Nearly half of its used car sales are to customers who pay with a loan. What’s more, “online disrupters” are digitalising the process of buying a car and major car brands are seeking to exclude dealers from new car sales. Sell. 80p
Tesla
The Times
Tesla will have to scale up its production volumes quickly if it hopes to justify its “beefy profit multiple”. It hopes to produce 20 million cars a year by 2030 and is planning to deliver 1.5 million from its four factories this year, which would require “consistently excellent execution”, according to CEO Elon Musk: no mean feat when supply chains are unreliable. Competition in the electric-vehicle sector is also intensifying. Avoid. $270
..and the rest
Investors’ Chronicle
Building contractor Costain’s shares have slumped as problem contracts have resulted in repeated losses. But “the tide finally looks to be turning”. The company reported a first-half pre-tax profit of £11.2m, 42% higher than the year before. The stock is unlikely to fall much further and the company could taken over. Buy (41p).
Shares
Impact Healthcare Reit’s diversified portfolio of residential and nursing care homes amount to a “resilient... business to ride out the current uncertainty”. Demand for care homes is growing but capacity is limited, which has increased fees. Its leases are also inflation-linked. Buy (119p).
The Telegraph
Tyler Technologies is a leading provider of software to the public sector in the US. The company has created a niche for itself and has a customer retention rate of nearly 100%, making it “all but impossible” for rivals to muscle in on its business. It should be a profitable growth story over the years ahead. Buy ($374). Oil services and equipment and engineering expert Hunting’s latest trading update revealed that orders have doubled since December. It has also returned to profitability and increased its interim dividend. The stock remains good value. Buy (277p).
The Times
Private- equity investor 3i Group is trading at a rare 14% discount to net asset value (NAV), the lowest discount in its sector. However over the last ten years 3i has generated a 750% share price return, higher than any rival. Buy the dip (1,150p). Life-insurance consolidator Chesnara is set to raise its dividend for an 18th consecutive year, implying a yield of 7.6% for this year. Buy (323p).
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