MoneyWeek’s comprehensive guide to this week’s share tips from the rest of the UK’s financial press.
Three to buy
JD Sports Fashion
Investors Chronicle
Consumer spending is coming under pressure, but JD Sports is well placed to cope. It has adopted a “sensible” approach to inflationary pressures, balancing renegotiations with suppliers against price rises that shoppers will still be willing to pay. At 19 times forecast earnings for 2018, “the shares don’t scream value”, but a strong market position makes it a buy. 453.5p
Royal Bank of Scotland
The Sunday Telegraph
RBS is still paying for the “sins of the past”, not least a potential $15bn fine in the US for a mis-selling scandal. Yet the bank has been gaining market share and increasing profit. Risks remain, including a worsening outlook for the UK economy, but the data continue to surprise on the upside, while the shares trade on an “undemanding ten times forward earnings”. 251p
Symphony International
The Daily Telegraph
This Asia-focused fund owns a diverse collection of assets, including a network of hotels and restaurants. Its net asset value is some 32% higher than the current price, but a new dividend policy and aggressive share buybacks have been launched to try to reduce that discount. Investors who buy in now should profit if the gap closes. $0.821
Three to sell
Mitie
The Sunday Times
Before chief executive Phil Bentley took over in November, Mitie had become an “outsourcing hydra”, doing everything from cutting grass for councils to running immigration detention centres, with questions raised about its accounting policies. Bentley has drawn a line under those problems, but his strategy may struggle to gain traction amid slumping profits. Avoid. 246.8p
Ocado
Shares
Investors in the online retailer have had their patience rewarded by news of a deal with an overseas retailer. However, instead of a big player, its partner is a “European regional retailer” that wants to remain anonymous. More deals may come, but there would need to be a lot of them to justify the fact that Ocado trades on more than 217 times its forecast earnings for the coming year. 304.67p
St Modwen Properties
The Times
Investors reacted well to a strategy day at the property investor and developer, sending the shares up 6%. The firm has “enviable positions” in regeneration and residential housebuilding, but is struggling to sell a £500m plot of land in London amid doubts about the luxury market. And the shares are not as cheap as they were. Those bearish about the economy should sell. 353p
And the rest
Investors Chronicle
Financial services group Close Brothers is one of the most solid challenger banks (1,612p). Colombia-focused oil driller Amerisur is reaping the rewards of its investments (24p). Retailer Shoe Zone is cheap on 11 times earnings (181p).
The Mail on Sunday
Consumer giants Unilever, Reckitt and Diageo will not let you down in uncertain times (4,328p; 7,954p; 2,326p). Chronic housing shortages make Bovis Homes a buy (922p). Low-cost retailer B&M European Value Retail should gain from more consumer belt-tightening (357p).
Shares
Premium lifestyle brand Joules is up 62.4% since December and there’s more to come (301p). Growth-focused investors should take a punt on online fashion retailer MySale (110p). Gold miner Avesoro Resources has fixed its balance sheet but the market is yet to cotton on (2.7p). A dividend boost at India-based power supplier OPG Power could take the 2019 income yield to 7.1% (40.5p). Trinidad-focused oil company Trinity Exploration & Production has been one of Aim’s top performers (13.5p).
The Times
Shares in Auto Trader have raced ahead in a company with “hefty market power” (418.5p). Spread-betting business CMC Markets looks like a bargain on a three- to five-year view (134p). Equipment rental firm Vp looks “inexpensive, competent and conservatively positioned” (881p). But sell Joules – the firm’s flip-flops “look better value than the shares” (301p).
An American view
“I visit a lot of stores,” Meryl Witmer of Eagle Capital Partners told Barron’s Roundtable, and one of the few retail chains with “robust customer traffic” these days is Dollar Tree. It sells everything from helium balloons and reading glasses to plates and greeting cards for $1 or less, offering “phenomenal” value. In fact, at a time when many traditional retailers are doomed, Dollar Tree is so cheap it can survive Amazon. It caters to all income levels and cultures. The group is digesting Family Dollar, a rival it bought two years ago. The Family Dollar shops aren’t doing as well as the group’s own, but the management’s “acumen” should gradually put that right. The firm is a “huge cash generator” and Witmer sees scope for earnings per share to climb from about $4.30 this year to $5 in 2019.
IPO watch
i3 Energy is an independent oil and gas company with operations in the North Sea. It has a 100% interest in the Liberator licence area, which it acquired from Dana Petroleum in December last year. The Liberator area contains 51 million barrels of oil equivalent, and i3 hopes it will be producing 7,300 barrels a day by the first quarter of 2018. The company was formed in 2014 and earlier this year raised $7.6m of private capital. It now hopes to raise $50m by placing new ordinary shares on Aim, which it says will “fully fund the company to first oil”. It then intends to grow the business by buying late-stage development assets that offer “disproportionate opportunity”. It will focus on already-proven discoveries located close to existing infrastructure.