MoneyWeek’s comprehensive guide to this week’s share tips from the rest of the UK’s financial press.
Three to buy
Craneware
The Daily Telegraph
This Aim-listed company sells software to American hospitals that helps them to monitor their costs. It’s a profitable niche because once hospitals are signed up they are unlikely to switch their systems over to something else. Such long-term relationships are of huge value to investors and mean excellent returns on capital. 1,227.5p
Croda
The Sunday Times
Croda makes chemicals for everything from household cleaning products to cosmetics and its expertise means that it can earn high margins. Most of its business is overseas, so the shares have rocketed as sterling has slid. The company isn’t cheap, but a wave of consolidation in the industry makes it a likely takeover target. 3,564p
RPS Group
The Mail on Sunday
This infrastructure consultancy group has advised on everything from the HS2 rail project in the UK to the strengthening of Sydney Harbour Bridge in Australia. A dramatic downturn in the oil and gas sector has hurt profits, but the group is well placed to profit from long-term trends such as investment in renewable energy. 246.5p
Three to sell
RPC Group
Shares
Shares in the plastic packaging group have fallen as scepticism grows about the wisdom of its “aggressive” acquisitions in recent years. Investors may be tempted to hold on to the shares until things improve, but RPC looks vulnerable to “bear raiders” – people who write negative reports about a company to profit from share-price falls. Cut
your losses. 861p
Pets at Home
Investors Chronicle
Pets at Home used to be a stockmarket darling, but there are worrying trends afoot at the pet supplies retailer. Like-for-like sales growth registered a weak 0.1% increase in the third quarter. The firm faces growing competition from supermarkets and online specialists such as Zooplus, which is driving margins down across the industry. 182p
Wolseley
The Times
The heating and plumbing products distributor now derives 68% of its revenues from the US market. It looks likely to focus its investment efforts in America after a 6.7% rise in second-quarter operating profits there, contrasting with more challenging conditions in the UK. The shares have risen strongly since the EU referendum result, as the strong dollar boosts profits in sterling terms. Future growth is priced in. It’s time to take profits. 5,130p
And the rest
The Daily Telegraph
Next announced rotten results, but has
a good management team and a potential yield of 8% (4,320p). A shake-up of the Indian tax system could spell opportunity for India Capital Growth Fund (86.5p).
Investors Chronicle
Improving commodity prices make the miner Kenmare Resources a risky buy (320p). Softcat is one of the UK’s biggest IT infrastructure firms and there is more growth to come (391.5p). Recruiters have had a torrid time since the referendum, but Empresaria’s international profile has helped it to buck the trend (124p).
Shares
The scandal over extremist content on YouTube should help traditional advertising groups such as ITV (209p) and WPP (1,678p). Oil explorer Caspian Sunrise sounds like a “garishly coloured cocktail”, but could be an exciting pick (9.5p). Vietnam Opportunity Fund offers adventurous investors exposure to a cheap Asian market (282p). Years of careful investment at semiconductor specialist IQE should pay off (59.25p). Nutrition specialist Science in Sport is growing its online operation and expanding into new markets (85p).
The Times
Sofa seller DFS is cheap and should weather any consumer slowdown (250p). Infrastructure fund INPP offers income and growth (156.25p). Alliance Pharma has a strong pipeline (47.25p). Aerospace group Cobham has been through two rights issues in a year, but the balance sheet is now fixed (128.75p).
A German view
Dutch giant Philips, one of the Netherlands’ most famous companies, used to be a jack of all trades but a master of none. Its products ranged from video recorders and X-ray machines to light bulbs and telephones. However, the 126-year-old multinational is sharpening its focus. It has hived off the entertainment and lighting businesses to concentrate on health care, aiming to cover everything from healthy eating to diagnostic tests and appliances. The strategy is starting to pay off, as Wirtschaftswoche points out. Some 60% of sales now stem from products in which the group is first or second in the world. The demographic outlook and the scope for further digitalisation in health care bode well. The firm expects margins to climb and sales to rise by 4%-6% a year over the next three years. The stock yields 2.7%.
IPO watch
Aim-listed healthcare firm OptiBiotix has spun off its skincare division, SkinBioTherapeutics, in an initial public offering that raised £4.5m this week. SkinBioTherapeutics develops methods of using the skin’s microbiome – the bacteria and micro-organisms that live on the skin – to treat problems such as eczema, sensitive skin, and infections caused by bacteria such as Staphylococcus aureus in surgery and other medical procedures. The proceeds of the IPO will be used to fund the development of SkinBioTherapeutics’ technology. The firm intends to take potential treatments through proof-of-concept trials and then to seek partners for further development. It hopes to have its first treatment ready for commercial use next year.