MoneyWeek’s comprehensive guide to this week’s best share tips from the rest of the UK’s financial press.
Three to buy
Ashtead
The Daily Telegraph
UK-based Ashtead generates 90% of group profits in the US, renting out industrial and construction equipment. US president-elect Donald Trump has stressed the importance of infrastructure investment, so Ashtead could find itself “in the right place at the right time” if an investment boom is in the offing. The dividend won’t excite income hunters, but Ashtead has an “excellent track record” of growth. 1,217p
HomeServe
The Mail on Sunday
HomeServe provides consumers with insurance cover and help with repairs for emergencies, such as burst water pipes and broken boilers that are not covered by standard home insurance policies. Leaking pipes in the home cost an estimated £17bn a year worldwide and HomeServe is well placed to profit. The UK business is growing steadily, and HomeServe bought its major competitor in the US in July. 595.5p
ITV
The Sunday Times
Investors are braced for bad news from ITV’s third-quarter update after a tough summer. Yet the gloom at ITV “has been somewhat overblown”. Viewers might be drifting away to Netflix, but ITV remains the only commercial channel able to pull in an audience of five million on a regular basis. The shares have been “pummelled” of late, so buy while they are cheap. 168p
Three to sell
Virgin Money
The Times
Shares in Virgin Money are up 50% in three months, recovering from the “panicky days” after the Brexit referendum. Virgin is “snaffling market share”, with third-quarter figures showing credit-card balances up by 41% in a year. Investors “lap up Virgin” in good times, but its summer plunge shows how quickly they can desert, and it still looks “vulnerable to Brexit stumbles”. 320p
Sage
Shares
Shares in the software firm have doubled in the last two years after the chief executive re-focused its sales strategy and pushed cloud-based products. But they now look expensive, on a price/earnings (p/e) ratio of over 20. With no growth in operating margins since 2014 and expectations of mediocre full-year results, there has not been enough “real progress” in the firm’s finances. 716.5p
JD Wetherspoon
Investors Chronicle
Shares in the pub chain enjoyed a “post-referendum party”, rising by a fifth since 24 June. But that rally has come to “a sobering end”, with shares falling 7% with a fall in like-for-like sales. The chairman says Brexit will not hurt the sector, but the shares could yet fall further. 830p
And the rest
| Buys | |
| B&M Retail | The discounter will profit from consumer belt-tightening if the economy slows (Telegraph) 235p |
| Clarkson | Enjoy the shipping broker’s dividend whilst you wait for global trade to pick up (Telegraph) 2,024p |
| Conviviality | Shares in the drinks wholesaler and retailer offer a generous yield (Times) 214p |
| GB Group | GB’s expertise in online identity verification puts it in a fast-growing sector (Telegraph) 237p |
| McColl’s | The retailer’s profits should “soar” once a deal to buy 298 Co-op stores is approved (MoS) 170p |
| Morses Club | The recently floated sub-prime lender is growing its loan book at a fair clip (IC) 120p |
| Next | Shares in the retailer have fallen too far and now offer a 6% yield. (Times) 4,979p |
| Ophir Energy | With the oil price stabilising, the energy explorer’s shares have little downside (IC) 75p |
| Plant Impact | The agrichemical supplier is making losses now but should come good (Shares) 50.2p |
| Regional Reit | Regional has invested outside London, where demand for office space remains solid (IC) 107.25p |
| RELX | The specialist publisher offers strong margins and a growing dividend. (Shares) 1,464p |
| Savannah Resources | The tiny copper miner is the AIM index’s “best-kept secret”. (Shares) 4p |
| Tate & Lyle | Shares are not cheap, but the specialty foods business should grow strongly (Times) 807p |
| TLA Worldwide | The sports marketing group looks cheap after brushing-off a takeover attempt (Shares) 39p |
| UDG Healthcare | The healthcare outsourcer’s recent acquisitions should boost earnings (IC) 654.5p |
Directors’ dealings
Consumer-staples giant Reckitt Benckiser reported weaker sales growth in the third quarter after a scandal in South Korea over deaths caused by its humidifier disinfectant. That’s not stopped one of its top executives loading up on the stock.
It looks like chief financial officer Adrian Hennah “is convinced… there’s a buying opportunity after ploughing more than £646,000” into Reckitt’s shares, says Investors Chronicle. Hennah recently bought almost 9,000 shares at £72.18, adding to a similar transaction he made 12 months ago. The purchase “suggests his confidence in the group’s ability to navigate future inflation more deftly than its rival Unilever”, which shot itself in the foot with its “Marmitegate” spat with Tesco, says Investors Chronicle.
An American view
Investors on the lookout for a “high-quality” business with few competitors should consider Allison Transmission, says David Englander in Barron’s. This “giant in the industry” sold 63% of the automatic transmissions used in medium and heavy-duty commercial lorries around the world last year. The complex technology required, along with safety concerns, keeps rivals out of the market. Sales have slid of late, but a recovery is on the cards. The decline in demand for oil drilling and mining vehicles appears to be bottoming out, while its new transmission for tractor-trailers could gain traction. Outside the US, vehicles tend to use manual transmissions, but Allison “has made inroads” with its product overseas too. A “highly regarded management team” bodes well for the long term.