The stocks and shares the British press is tipping – and recommending you avoid – this week.
Three to buy
Gulf Keystone
The Sunday Times
Kurdistan-based oil producer Gulf Keystone was a one-time market darling, but production targets were missed, shareholders jousted with the board and the company turned to the debt markets, borrowing $250m at a punitive 13%. Now the debt has been converted to equity, crushing the share price, but improving the balance sheet. Gulf Keystone can finally become the takeover target it was often rumoured to be. 3p
B&M European
The Daily Telegraph
Discount high-street retailer B&M is outgrowing M&S, Next and Poundland, which was snapped up last week by a South African conglomerate. B&M offers bargain-hunters “frying pans crammed next to flower pots underneath soap”. It has 500 shops, compared with 603 for Poundland, but revenue is rising quickly. B&M is a “proven force in recessionary times”, according to analysts at Peel Hunt. 256p
Topps Tiles
Investors Chronicle
Since the referendum, there are bargains to be had in the retail sector. High-street tiling chain Topps Tiles is one of them. Down by a third since Brexit, its shares are braced for a major slowdown at ten times earnings. But sales are up in the last three months and customers tend to be tied into lengthy DIY projects. Seventy-five percent of its costs are in sterling and trade buyers are increasingly turning to the firm. 100p
Three to sell
Marks & Spencer
The Mail on Sunday
Once the nation’s favourite retailer, M&S consistently fails to provide customers with what they actually want. Chief Executive Marc Bolland fell on his sword in January and the new boss, Steve Rowe, is yet to deliver a miracle. The shares have plummeted from their level of 540p a year ago and Brexit has done M&S no favours. It looks deeply “troubled”. 325p
Melrose
Shares
Melrose specialises in buying engineering groups and turning them around, but its latest deal looks risky. It has paid £1.7bn for Nortek, an American ventilation business. Nortek went bust in 2009 and its share price has halved in the last year as investors fret about US growth. Yet the price Melrose offered for the firm values it at an all-time high, leaving little room for error. 640p
Evraz
Investors Chronicle
With net debt of $5.4bn, steel group Evraz has one of the largest debt piles in the sector. The international capital markets are opening up to Russian companies once again, but Evraz’s borrowing looks set to jump to 3.8 times profit, threatening its flimsy dividend. Nor has the bumpy iron-ore price helped business. JP Morgan values the shares at just 98p. 155p
And the rest
| Buys | |
| Asos | The fashion retailer continues to surprise with rapid sales growth (Shares) £44.46 |
| AstraZeneca | Astra has had a tough year, but its pipeline is strong (Investors Chronicle) £44.72 |
| BAE Systems | The renewal of Trident guarantees future cash flows for BAE (Telegraph) £5.34 |
| Berkeley | The housebuilder’s chairman, Tony Pidgley, is upbeat, despite Brexit (Mail) £26.24 |
| British Land | After a brief panic, the commercial property market is stabilising (Times) £6.28 |
| Caretech | The social-care provider will avoid any fallout from Brexit (Shares) £2.38 |
| Capital Drilling | The mining contractor will benefit as gold and silver prices rise (Shares) 38p |
| Experian | The data firm is growing in health, fraud and analytics (Telegraph) £14.59 |
| Lloyds | Lloyds’ share price has been hit by Brexit, but the dividend looks bullish (Mail) 56p |
| NCC | Data thefts are driving customers to the cybersecurity firm (Investors Chr.) £2.99 |
| Persimmon | The UK is chronically short of houses and Persimmon has a 7% yield (Mail) £15.71 |
| Royal Dutch Shell | The oil giant has slashed costs and the 6%-plus dividend is safe (Barron’s) £21.20 |
| Shire | The disease specialist can trim costs after its latest merger (Telegraph) £49.75 |
Directors’ dealings
Duncan Tatton-Brown, the finance director at online supermarket Ocado, has dived into the stock. Ocado’s sales have rocketed from nothing ten years ago to £1.1bn, as it has pinched customers from supermarkets. It also has a software deal with Morrisons. But Ocado has never turned a profit and Morrisons recently signed a competing agreement with web giant Amazon, stoking fears that Amazon boss Jeff Bezos will chew up the grocery market. Tatton-Brown is betting Ocado will thrive, paying £225,000 for 100,000 shares.
A German view
Markets have been volatile in recent months, so investors should ensure they hold shares in solid companies with promising prospects, says Marion Schlegel in Der Aktionär. Swiss pharma giant Novartis fits the bill nicely. The ageing global population is a strong tailwind. The number of people over the age of 60 is set to rise by half a billion worldwide over the next 14 years, and globally, spending on health is expected to double to $15trn by 2025. Heart drug Serelaxin and breast cancer treatment LEE011 are standouts amid a strong pipeline, while Novartis looks especially well placed to prosper in the fast-growing market for “biosimilars”. Indeed, its version of Pfizer’s anti-inflammatory Enbrel is just as effective as the original. The stock yields 3.4%.