Three to buy
Imperial Brands
Investors Chronicle
Cigarette sales continue to fall, but sector giant Imperial Brands is “adapting to a changing marketplace”. A key “next-generation-product” is the vaping brand Blu: the group thinks the overall vaping market could be worth $30bn by 2025, up from $8bn now. Imperial is also diversifying into cannabis with a stake in Oxford Cannabinoid Technologies. The dividend has increased since 1997 and the current forward yield of 8% “underestimates the resilience” of the business. 2,567p
Osirium
The Mail on Sunday
Cyber security attacks are rising “by the week”. For the thieves, “privileged account holders” – system administrators with access to hordes of information, not just their own – are the “Holy Grail”. Enter Osirium, which focuses on this segment of the market. Its activities include creating “exceptionally secure” passwords for privileged users. Blue-chip customers include several NHS trusts, while the company is now expanding abroad. First-half sales jumped by 78%; it should turn over £900,000 this year and £1.4m in 2019. 124p
Electrocomponents
The Sunday Telegraph
Known as the “Amazon of electronics”, the group offers around half a million industrial and electronic goods from 2,500 suppliers. Products range from socket screws to ethernet switches. Management has also “been ruthless in sharpening profit margins”. The firm’s first takeover in almost two decades bodes well: IESA manages repair and maintenance for 80 customers. The global sell-off has left the shares looking very reasonable. 594p
Three to sell
AO World
Investors Chronicle
The online electrical and white goods seller is struggling. The core UK business has been beset by shaky consumer confidence and slow online penetration of the electrical market: it is now 38%, compared with 30% in 2014. Further equity fundraising may be required to fund growth, diluting shareholders, while there doesn’t seem to be an overall strategy to help AO move from “a sales-growth story to a profit-growth story”. The stock’s valuation “looks too rich for our blood”. 136p
Sirius Minerals
Motley Fool UK
The group is attempting to build a giant potash mine in on the North Yorkshire Moors, but has been dogged by delays and worries over financing. Last month it announced that the cost of getting this “monster project” online had swollen by another $463m to $3.7bn because it has reassessed its blueprint for a 23-mile tunnel link to the coast. Keeping hold of the shares seems “a gamble too far”. 22p
Facebook
The Times
A “growing exodus of executives” is worrying. Almost all the founders of the start-ups Facebook has acquired, including Instagram, have left, prompted by Facebook’s decision no longer to treat these apps as separate entities. Absorbing these brands risks alienating younger users, who won’t want to be stuck on the same app as their parents. The overall user base is dwindling too. $154
…and the rest
Shares
Industrial-equipment rental group Ashtead is highly profitable, with an operating margin of 30% (three times the FTSE 100 average). The booming construction market in the US, along with “an impressive dividend track record”, makes it a buy (1,822p). Health and safety products maker Halma, whose offerings range from gas-detection systems to lift door safety sensors, “is an outstanding business to buy… for the long term” (1,254p).
The Times
Cybersecurity specialist Avast blocks two billion attacks on its customers every month. The more connected the world becomes, the more there will be to do (278p). An “extraordinary argument” has broken out between founder Julian Dunkerton and CEO Euan Sutherland at clothing retailer Superdry. Avoid (730p).
Investors Chronicle
“Green shoots” are appearing at advertising behemoth WPP. Overall global marketing spend is on the up and the group is building up its digital assets to exploit the most promising segment of the market (1,052p). Aim-listed Boku offers a mobile payments platform, where consumers can pay for things using their mobile number. The growth of the mobile phone market will give business a boost: almost six billion people will have a mobile by 2025, up from five billion in 2017 (140p).
The Daily Telegraph
US cruise operator Carnival is benefiting from ageing Western populations. The dividend yield is 3.3% (4,268p). Don’t be rattled by the profit warning from Zytronic, which designs touch screens. It boasts “skilled managers [and] a strong competitive position”(385p).
German view
Shares in Sweden’s independent oil explorer and producer Lundin Petroleum are a compelling long-term bet, according to Wirtschaftswoche. The business concentrates on finding and developing oil fields in Norway, where it has oil reserves worth 726 million barrels. The reserves should last for at least 24 years, a statistic very few other companies in the industry can match.
The same goes for operating costs, which are extremely low at under $4 a barrel. Next year, one of Europe’s biggest oil fields, Johan Sverdrup, in which Lundin holds a 22.6% stake, is due to start producing. It contains two billion barrels of black gold. Lundin’s daily output should double to 160,0000 barrels per day.
IPO watch
Yeti, which makes portable coolers and related outdoor products such as thermos bottles, is listing on the New York Stock Exchange this week. It wants to raise around $400m. The group’s sales have risen by an annualised average of 63% in the past five years, reaching $639m by the end of 2017.
A strong brand allows the group to charge high prices. The valuation may look attractive, but the company’s debt seems high and much of it will mature in 2021, according to a Seeking Alpha analysis. So it looks as though Yeti will be concentrating on paying it down over the next few years, making it harder to sustain the growth rate evident in recent years.