Share tips of the week – 16 December
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
Auction Technology Group
Auction Technology Group (LSE: ATG), an art and antiques specialist, helps auction houses and bidders to trade everything from “tractors and dining tables to... Rolex watches”. The group operates seven online platforms that assemble the wares of “2,300 auction houses”. While a weaker economy may hurt the antiques trade, the group’s industrial and commercial arm is counter-cyclical: tough times cause bidders to go shopping for bargain second-hand kit. The digitalisation trend has further to run. 760p
Bradda Head Lithium
The Mail on Sunday
Lithium is a vital component of the battery revolution, but “by 2030... experts expect demand to exceed 2.1 million tons per year, with supply languishing at 1.6 million tons”. Explorer Bradda Head Lithium (LSE: BHL) operates two sites in Arizona and another in Nevada in various stages of exploration and development. A small miner is always risky, but given strong political support in America for developing domestic lithium sources this could prove “more than just a bucking bronco stock”. 7p
The Sunday Times
FTSE 250 business Computacenter (LSE: CCC) is the “quiet IT guy” overshadowed by flashier tech players. It helps companies and the public sector with general IT maintenance, keeping cloud data centres and cybersecurity ticking over. The firm has notched up “17 straight years of earnings-per-share growth”, while sales jumped by 16% in the first half thanks to “savvy acquisitions” in the US. Yet the shares have been caught up in the tech sell-off regardless and trade on just 11 times earnings. That looks overdone given that Computacenter grew through the last financial crisis and operates in “resilient” market segments. 1,974p
Shares in Hotel Chocolat (LSE: HOTC), the seller of posh chocolates, have lost 75% of their value this year after international disappointments. Management is scaling down the US division to “purely wholesale”. The UK operation remains solid, with an active customer database of two million. A long recession may not spell trouble for luxury chocolate: employment remains solid, small treats replace big ones in hard times and “high-quality chocolate is nowadays rated almost as a health food”. For the risk-tolerant it may be time to open a small “starter position” in the shares. 147p
Inflation and the logistics crunch have sent shares in Nike (NYSE: NKE), the world’s biggest sportswear group down 30% from last year’s all-time peak. On 38 times forward earnings the shares might still look pricey, but that is “a massive discount” to 2020’s peak ratio of 80 times. Nike’s competitive advantages include a global brand and “sustained investments” in product innovation and digital platforms that give it significant pricing power, just the ticket in an era of inflation. The shares are “a great way to play trends towards health and fitness” and the wider “casualisation of fashion”. $112
Medium-sized engineer Renishaw (LSE: RSW) produces measuring systems that provide manufacturers “with precise data that enable them to improve their products”. It also creates “medical devices, which include a drug-delivery system that helps treat neurological conditions”. The shares have slipped as the economy has slowed, but the long-term outlook is auspicious thanks to “nearly 1,800 patents” and strong returns on equity. A robust balance sheet will help the firm ride out a volatile economy in the meantime. 3,782p
...and the rest
In July drugs giant GSK (LSE: GSK) demerged its consumer-healthcare business Haleon. That has freed the former to focus on new drug development: spending on research and development rose by 8% in the latest quarter. Meanwhile, Haleon has harnessed “high levels of consumer loyalty” to “offset inflationary pressures via price rises and efficiencies” while growing revenue and investing in e-commerce. Strong long-term prospects mean a “once good company” has turned into “two great ones”, so buy both (1,388p; 295p).
Rising interest rates have raised margins at niche lender Paragon Banking (LSE: PAG). The bank’s specialist focus on buy-to-let and commercial lending to smaller companies has yielded superior returns, with a 16% return on equity “at the top end of the sector”. Buy (471p).
The Mail on Sunday
Hollywood Bowl (LSE: BOWL) had a tough time during Covid-19, but the business may have turned the corner. The bowling operator should dodge the worst of inflation because “a significant proportion of electricity is generated from the group’s own solar panels” and “rental costs are under control”. With decent dividends in prospect, the shares are “a strong hold” (200p).
Hydrogen power play ITM Power (LSE: ITM) has shed over 80% of its value since early 2021 and is the fourth most-heavily shorted share on the market. A series of profit warnings and manufacturing issues have deflated enthusiasm among green-energy investors. The group is burning through cash and more profit warnings may materialise, so avoid (100p).