Share tips of the week – 25 November
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
Six to buy
Chilean copper miner Antofagasta remains “a good horse to pick for the energy transition”. Copper prices are likely to continue increasing owing to the metal’s key role in electric-vehicle production and renewable-energy systems. Antofagasta sits on “significant reserves and has already put billions into the future of its mines”. Though 2023 might be “leaner” due to higher costs and an increase in Chile’s mining tax, there is “value for the longer term”. 1,306p
The Sunday Times
Atome Energy is the “only pure-play green hydrogen and green ammonia producer listed in London”. It will soon receive equipment for a site near a hydroelectric dam in Paraguay, where it should start producing green hydrogen before the end of next year, meaning “revenues will start to trickle in”. Once the technology has “caught up to serve global transportation” the company will be “primed to boost production”. It raised £9m when it floated last December, which looks sufficient to cover current projects, and the board has “lined up an array of potential customers”. This risky stock offers “potentially significant rewards”. 90p
Hacking attacks on government agencies and major businesses are on the rise; hence digital defence budgets are too. Kape provides consumer cybersecurity solutions. It has expanded quickly through acquisitions. The company had been looking to raise between $100m and $200m of equity last month, but strong demand saw it muster $222.5m: investors have been impressed by compound annual revenue and adjusted Ebitda growth of 56% and 83% respectively since 2017. On a 2023 price/earnings (p/e) multiple of 6.4, the shares appear to offer “growth at an absolute bargain price”. 235p
The Mail on Sunday
Application-specific integrated circuits (ASICs) are bespoke chips for specific customers and products. The market for these chips is worth £230bn and growing at 20% per year. While Sondrel has sales of less than £20m pencilled in for 2022, it is “highly respected” and plans to hit £100m in the next three to five years. The firm counts Apple, Google, and Tesla among its clients and its products are used in cars, phones, data centres, virtual reality sets and industrial equipment. Demand is growing and Sondrel is now expanding into managing the production process too. 59p
Logistics is “synonymous with fierce competition, powerful customers and wafer-thin profit margins”, but Wincanton “is a little bit different”. It has worked hard to become essential to many British and Irish household names “eager to outsource their supply chains”. It has gained a growing and loyal customer base. The stock has been flat this year owing to labour shortages, inflation and economic uncertainty, but this diversified company is better equipped to handle a recession than your “run-of-the-mill goods haulier”. 363p
Tate & Lyle
Last year Tate & Lyle said it was shifting its focus to speciality food and beverages in faster-growing markets, including fortification ingredients and sweeteners that are “gaining traction among health-conscious consumers”. The new strategy is working: revenue from new products rose by 19% in the six months to 30 September. The company has not only been able to pass rising costs on to customers, but has also increased its operating margin – “clear evidence of its competitive advantage”. The group’s “solid financial position” also bodes well. 725p
...and the rest
Warehouse landlord Tritax Big Box’s assets will depreciate amid rising interest rates and the slowdown in online shopping. But the group is in the business of leasing warehouses for many years rather than buying and selling them, and leasing activity remains strong, which will see it through a downturn. The dividend yield, moreover, is a healthy 4.6%. Buy (154p).
UK equities have bounced back in the past month as the FTSE 100 has advanced by 7.6%, while the mid-cap index, the FTSE 250 has gained 17% since 12 October. Dr Martens, WHSmith, Halfords, Smiths News, DS Smith and UP Global Sourcing all look like good home investments. Buy (274p, 1,355p, 207p, 43p, 314p, 144p).
Spread-betting specialist CMC markets has been spending heavily on in its investment platform, which pushed up operating costs by 25% for the six months to the end of September. Costs are set to continue rising, but revenue growth is not guaranteed. Avoid (232p). The combined effects of the rising cost of living, inflation, and the high capital expenditure needed to fund its expansion spell bad news for Ocado. Avoid (644p).
Analysts expect profits at housebuilder Bellway to decline over the next three years, but the company has net cash on its balance sheet and the shares are on a 24% discount to net asset value. Buy (2,072p). Housebuilder Vistry, on the other hand, has a good strategy, but “the complexity of digesting an acquisition while managing a downturn” makes it one to sell (664p).