Three to buy
Auto Trader
The Sunday Times
Sales of new cars are slowing, and analysts fear knock-on effects for Auto Trader’s used-car operation. Yet “even if new car sales fall, used cars still need to be sold” and the firm’s website dominates the market. The shares are expensive on 30 times last year’s predicted earnings, but 65% margins look “almost too good to be true” and falling car sales won’t stall its progress. 434.75p
CityFibre Infrastructure
Shares
This fibre-network builder should benefit from the drive to bring superfast broadband to cities such as Sheffield and Bristol. Significant acquisitions in 2016 saw revenue more than double to £15.4m. With the regulator, Ofcom, demanding more competition and major mobile operators vying for fibre network access, the shares are a good way to cash in on the growth of “gigabit cities”. 66.5p
Lloyds Banking Group
The Mail on Sunday
Lloyds has put the bad old days behind it to become a “solid, back-to-basics bank, focused on UK retail and business customers”. The government sold its remaining stake last month and “the end is in sight” for the payment protection insurance imbroglio. Growth is solid enough to put the shares on a 6.4% yield. 69.25p
Three to sell
Berendsen
The Daily Telegraph
The Telegraph tipped this laundry services business last month at 797p, and the shares have since climbed more than a third following a hostile bid from French rival Elis. Further upside seems unlikely in the short term after such a big leap and Berendsen now looks fully valued. There is also the risk that the shares could fall back if the bid fails. Investors would do well to take profits now. 1,082p
IAG
The Times
Shares in British Airways’ owner have proved remarkably resilient despite the IT disaster that left passengers stranded. The market seems to accept the explanation that this was a one-off, but previous outages at big banks led to hundreds of millions in costs to fix broken systems. If the bill increases it is a “racing certainty” that the dividend yield will slip. Avoid for now. 603.5p
Wentworth Resources
Investors Chronicle
First-quarter results show that production at Mnazi bay – the east African driller’s main gas asset in Tanzania – is going to plan. However, Wentworth’s business partner, state oil company TDPC, is struggling to meet its financial obligations. Cash flow is under strain. Add in heightened political risk as the Tanzanian government gets tough with foreign firms, and it is a sell. 22p
And the rest
The Daily Telegraph
Shares in Southern Rail owner Go-Ahead are no higher than they were in January 2014; a 5.6% prospective dividend yield looks cheap (1,813p). Caledonia Investments has grown its dividend every year for the last 50 years, yet the trust trades at an 18% discount to assets (2,881p). Water utility Severn Trent’s expectations-beating results suggest its shares have further to go (2,534p).
Investors Chronicle
Water giant Pennon offers growing dividends (933p). The market is yet to take note of the improving outlook at specialist engineer TP Group (6.5p). easyHotel looks primed for the summer high season (94.5p). Wealth manager Brooks Macdonald should benefit from pensions freedom changes (2,481p).
Shares
BlackRock Emerging Europe Trust offers high long-term return potential (334p). Forthcoming full-year results at life sciences group Abzena should suggest it may turn a profit sooner than expected (38.75p). European floor-coverings distributor Headlam continues to outperform its peers (630p).
The Times
Online gaming software firm Gan is ploughing a potentially lucrative furrow in the US (26p). Security firm G4S has put its scandals behind it (325p). Retailer J Sainsbury’s £1.4bn purchase of Argos is paying off (279.25p). Investment trust Pigit has had a “stinker of a year”, but looks cheap (407p). There is a solid case for student accommodation provider Watkin Jones (182.25p).
A German view
Bijou Brigitte is one of the German stockmarket’s most generous and reliable dividend payers. The Hamburg-based group, which makes jewellery and accessories for men, women and children, hasn’t missed a payment in 20 years and yields almost 5%. The company is debt-free and the outlook is encouraging, which suggests that investors can count on a decent yield in the next few years too, says Wirtschaftswoche.
Bijou Brigitte has over 1,000 shops in 23 countries, mostly in Europe, where the economy is strengthening. Consumer spending is expected to increase by 1.5% in Germany this year, while store renovations in Spain and Italy are also helping. A recovery in the eurozone also implies a stronger euro, which will lower purchasing costs – much of the merchandise is acquired in US dollars.
IPO watch
Touchstone Exploration is a Canadian oil and gas exploration and production company. As well as projects in western Canada it is one of the largest onshore oil producers in Trinidad & Tobago, where it produces around 1,300 barrels a day. The company has almost eight million barrels of proven reserves, giving it a reserve life of 15 years, and low production costs of C$7.35 per barrel. It has C$13m in cash, and generated C$6.1m in cash from operations in 2016.
The company is already listed in Toronto and hopes to raise £1.45m on London’s Aim by placing 20 million shares at 7.25p. Reasons for listing include better liquidity and improved ability to access funding from international markets. The shares are expected to begin trading on 26 June.