Three to buy
Dairy Crest
Investors Chronicle
This British dairy company produces 500 million litres of milk and 50,000 tonnes of cheddar in Britain every year. Cathedral City is its top label. Strong brands help protect margins when times are tough. Rising milk and cream prices over the past two years have proved a headwind, but Dairy Crest remains focused on long-term growth, investing in new facilities in order to tap into the rapidly growing market for infant milk. 457p
Sabre Insurance Group
The Mail on Sunday
Sabre floated on the stockmarket last December, and should deliver both steady growth and generous dividends over the coming years. It offers policies that other companies steer clear of, such as insurance for expensive cars and young drivers. In the absence of competition it can afford to charge high prices. The shares yield an impressive 5.6%. 262p
Vodafone
The Sunday Times
If Vodafone had called to sell shares at the start of the year, the advice would have been – “hang up”. Back then, the telecoms giant was under pressure, after having to splash out in auctions for the right to use the airwaves. It also considered buying cable assets in Europe, which added to fears over its ability to sustain dividend growth. As a result, the shares have fallen by more than 35% since January. But the pendulum “has swung too far”. Analysts at Citigroup argue there is no imminent risk to the dividend. The CEO is confident Vodafone will be able to hit its €17bn free cash-flow target over the next three years. What’s more, “Vodafone is trading at a discount to its European peers, whereas traditionally it has enjoyed a premium.” 153p
Three to sell
Domino’s Pizza
Money Observer
The fast food industry is becoming more competitive with the rise of online platforms, such as Deliveroo, which have grown fast. What’s more, the government is trying to tackle obesity. Domino’s Pizza plans to expand into Europe, but Keith Ashworth-Lord, manager of the CFP SDL UK Buffettology fund, has doubts about this strategy and recently sold his stake in the company. Ashworth-Lord first invested in the group in 2001, long before his current fund was launched. “No single red flag made me sell, but there were a lot of amber flags,” he says. 264p
Mitie
Investors Chronicle
Mitie’s management appears to be betting on the security business as a critical part of its recovery strategy. The group will buy Vision Security Group (VSG) for £14m, adding “considerable heft” to Mitie’s security operations. However, market dominance “is far from certain”. VSG also made a pre-tax loss of £2.7m in its latest financial year. “We want to see some progress on integrating and improving profitability at VSG.” 238p
ConvaTec
Shares
Shares in wound-care specialist ConvaTec have plummeted 35% after the company cut its growth forecast. It has also announced the immediate retirement of its CEO. This was the second profit warning in a year for the group, which was kicked out of the FTSE 100 index last year. Goldman Sachs analyst Veronika Dubajova is “bearish”, while UBS sees scant hope of “meaningful improvement” in profits in the next two years. 158p
…and the rest
The Times
In an age of online gaming, a company selling board games can still do well. Games Workshop (GAW) manufactures fantasy miniatures. Fans collect armies, paint them and gather to play games. Sales rose 39% to £219m in the year to June but concerns over future growth make the group a hold for now (3,260p).
Investors Chronicle
Buying the Express and Star newspapers earlier this year bolstered sales at Reach (RCH), the publisher of the Mirror, by a third, “but underlying numbers are woeful” (72p).
Shares
Few businesses might seem less appealing than catching rats and cleaning loos, but few others have Rentokil (RTO)’s high operating margins “or are world leaders in their field”. The stock isn’t cheap but it’s “a keeper” (305p). Shares in Aim-listed Accesso Technology (ACSO) have slipped by a fifth in the general market turmoil. But this ticketing and queue management software group has a bright future (2,500p).
The Daily Telegraph
Fears of a Jeremy Corbyn-led Labour government’s plans for utilities have driven down National Grid (NG)’s share price to bargain levels. It yields a juicy 6% (790p). Hang on to support services group Serco (SRP). Debt is down and profits are climbing (98p).
The Mail on Sunday
Fishing is one of Britain’s most popular hobbies. There are more than 900,000 anglers and many of them buy their gear from Angling Direct (ANG), the largest retailer in the field. It is a “pioneer in the online fishing tackle world” – half its sales are made on the web. The company has just reported “upbeat half-year figures” and investors should be fishing for a profit” (99p).
An American view
Wall Street seems to think that “beer is boring,” says Vito J. Racanelli in Barron’s. But investors’ “strong dislike” of the world’s biggest brewer, Anheuser-Busch InBev, could offer “patient, income-oriented investors” a valuable opportunity. Over the past two years, beer volumes in North America have generally been flat, with the exception of craft and premium beers. But AB InBev has been strengthening its presence in emerging markets, where beer is “still growing fast”. Budweiser continues to do well in such markets and is the leading beer in Brazil, while Corona Extra is the top seller in China in the premium category. The company is also cutting costs and yields more than 5%.
IPO watch
A simple blood test could help to detect cancer cells. That’s the premise of the “buzzy” start-up Guardant Health, which has gone public in New York. According to MarketWatch, the initial public offering of 12.5 million shares saw each share priced at $19, above the expected range of between $15 and $17 per share. The group was thus valued at $1.6bn. Founded in 2012, the California-based Guardant sells liquid biopsy tests that “map” out genomic development for advanced cancer tumours, helping match patients with the right treatment. One of its lead products, the Guardant360, has been used more than 70,000 times since it first appeared in 2014.