MoneyWeek’s comprehensive guide to this week’s share tips.
Three to buy
AB Dynamics
Investors Chronicle
This Wiltshire-based company designs and manufactures advanced testing equipment for the automotive industry. It recently secured its largest ever order from the the China Automotive Technology and Research Centre. The advent of electric and hybrid vehicles means its services have never been in more demand. 637.5p
Prudential
The Daily Telegraph
The Pru is a familiar brand to both consumers and investors, but the latter have been slow to grasp opportunities presented by its “seismic transformation”. It has shifted focus from selling insurance and annuities in Britain to the growing Asian market. Its long-term growth prospects in the east mean the company is undervalued. 1,852p
Telecom Plus
Shares
Trading as the Utility Warehouse, the firm is Britain’s biggest energy supplier outside of the big six. It also offers services such as home broadband. Government plans to cap standard variable tariffs (SVTs) will create a more level playing field between the FTSE 250 business and its bigger rivals. Telecom Plus shares should “prosper”. 1,211p
Three to sell
BT
The Times
Shares in the telecoms giant have fallen to four-year lows after a lacklustre batch of second-quarter earnings results. Some will see an opportunity for a contrarian buy, yet the embattled management still faces a “poisonous cocktail of problems”.With shareholders now querying the sustainability of BT’s 6% dividend yield, the problems are unlikely to be going away anytime soon. 253.5p
Inmarsat
The Sunday Times
Airlines “are tripping over themselves” to offer wi-fi on flights, yet this satellite telecoms firm is not flying high. Its share price has almost halved since its peak in late 2015 and it was ousted from the FTSE 100 last year. A global glut of cargo ships has depressed the firm’s traditional maritime communications business, while competition in the airline industry is driving down margins. 594.5p
WPP
Investors Chronicle
The influence of social media has made it easier for brands to target consumers without shelling out for advertising campaigns and WPP is losing out. Its share price is down 24% on the year as corporations cut back their spend and competitors slash prices. A 4.8% forward dividend yield may tempt some, but stagnant group revenues imply a difficult period ahead. 1,295p
And the rest
The Daily Telegraph
The Bank of England’s interest-rate rise is good news for online property platform operator ULS Technology (119p). A regulatory clampdown on motor finance and rising interest rates are likely to hit credit checker Experian (1,604p).
Investors Chronicle
Mobile payments specialist Bango is a high-risk buy, but a booming market and a high-profile partnership with Amazon give us cause for confidence (233p). Premier Asset Management has weathered referendum jitters better than its rivals to deliver 18 consecutive quarters of organic growth in funds under management (202p).
Shares
Consumer-goods giant Unilever is a quality pick for investors feeling skittish about the current path of the stock market (4,253p). Avesoro Resources has required patience, but the gold miner is now at a turning point with new acquisitions in the pipeline (1.98p). A recent trading update suggests that engineering services group Nexus Infrastructure is a profitable business with growth potential (197.5p).
The Times
Nafta renegotiations are weighing on agribusiness firm Tate & Lyle, but they leave scope for the shares to surprise on the upside (675.5p). The impending approval of a drug to treat opioid addiction is good news for specialty pharmaceuticals business Indivior (404.25p). Aim-listed energy supplier Flow Group looks like a risky bet in an unpredictable energy market (0.85p).
IPO watch
In early October, property firm M7 announced plans to raise around £300m from a new real-estate investment trust M7 Multi-Let Reit. The money will be injected into regional offices and warehouses. This week, the business, advised by Barclays and Akur Capital, extended its timetable by two weeks and lowered the fundraising target to £150m. Under its new timetable, the trust, with £119m in assets, will begin trading on the London Stock Exchange on 30 November.
The Reit structure means that it will not pay any corporation tax on profits from its rental income, passing it straight to investors. It is targeting a quarterly dividend yield of around 6.5%. M7 manages over 995 properties in Europe with a total valuation of €4.6bn.
A German view
Richemont is on a roll. The luxury-goods giant recently announced that operating earnings for the first half of the year to April 2018 would be 45% up on 2016. The sector’s recovery is one key factor: consumers are rediscovering their love of luxury, as jitters over China’s anti-corruption drive and terrorist attacks in Europe subside.
Meanwhile, Richemont had to buy back excess stock from retailers last year, spending that is now falling out of the annual comparison. And its longer-term prospects are favourable, as WirtschaftsWoche points out. It boasts 20 exclusive brands, notably Cartier jewellery and Montblanc pens. Almost half its annual sales of €11bn stem from Asia, where consumer purchasing power is growing fast, and its balance sheet is “sparkling”, with net cash worth €5.8bn.