MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK’s financial pages.
Three to buy
Amazon
The Daily Telegraph
It is now received wisdom that Amazon is overvalued, yet it remains “misunderstood”. Investors focus too much on the low-margin retail business but moves into cloud computing and advertising are much more profitable, with the latter boasting estimated margins of 70%. As for e-commerce, just 10% of US and 17% of British retail sales are made online, leaving plenty of scope for continued growth for years to come. Buy. $1,632
AstraZeneca
Shares
Shares in this pharmaceutical giant have been “sluggish for a long time” but prospects are starting to brighten. Encouraging progress in AstraZeneca’s cancer portfolio has allayed concern over its drugs pipeline, while congressional gridlock in Washington is good news for a sector fearful of political and regulatory interference. The 2018 financial results look set to show a roughly 14.8% dip in pre-tax profit, but in the longer term, things are moving in the right direction. 6,200p
Glencore
The Mail on Sunday
This Swiss-based miner and commodity trader was hit hard by slowing Chinese demand for copper and other commodities in 2015. There has been a tepid recovery since then, but the shares are still languishing at a little over half the £5.30 at which they floated in 2011. A comfortably-covered dividend yield of 5% makes the stock a staple for pension funds, but there are other reasons to be optimistic. Metals prices are recovering, and with Brexit weighing on the FTSE it is a “good time to buy shares in a company with no exposure to the UK economy”. 297p
Three to sell
Mulberry
Investors Chronicle
A poor retail outlook is bad news for this luxury handbag maker. The collapse of House of Fraser forced Mulberry to take a £2.1m provision in the first half, while a new concession deal with John Lewis, another struggling store, doesn’t inspire confidence. International sales rose 13% in the first half but the firm’s push into Asia came “at least ten years behind schedule”. With more than 70% of income still generated in the UK we don’t expect margins to improve any time soon. 348p
Rio Tinto
Motley Fool UK
Sterling’s volatility should increase the appeal of commodity firms reporting earnings in US dollars. Yet this miner still looks too risky. The iron-ore market accounts for 60% of earnings, but forecasts of “chronic oversupply” in the medium term and US-China trade bickering bode ill. Even a “bulging” prospective dividend yield of 6% does not make up for the risks. 3,710p
Kingfisher
The Sunday Times
Véronique Laury, the “exuberant chief” of this DIY group, promised to boost Kingfisher’s annual profits by £500m in five years by turning it into the “Ikea of DIY”. Yet three years later, “profits have barely moved” and a “dizzying” rate of management turnover has hit the group’s B&Q and Screwfix brands. Analysts are questioning whether a one-size-fits-all approach can work across the very different markets of France, Britain and Poland. Add in declining British interest in DIY and investors should “stay on the sidelines”. 242.8p
…and the rest
The Daily Telegraph
Primark-owner Associated British Foods is expanding in America and Europe and boasts an enviable balance sheet. “So much for the online shopping revolution”. Buy. (2,448p). A solid trading update from property group Derwent London is a reminder that a sector hammered by Brexit worries offers value. Hold (3,034p).
Investors Chronicle
London’s gleaming commercial towers may be glamorous, but Real Estate Investors knows that office space in the Midlands offers superior returns – there is also a very attractive 7.5% forward dividend yield (54.5p). Promotional products marketer 4Imprint is very cash-generative and making steady progress towards a $1bn sales target by 2022 (1,920p). Positive half-year results suggest a turnaround is under way at engineer Renold (38p).
Shares
A growing inflationary threat makes National Grid’s inflation-protected dividend, forecast to yield 5.5% this year, even more attractive (856.5p). Negative sentiment towards the travel sector has hit shares in On The Beach but the online holiday retailer is better placed than its peers to weather a downturn (446.5p).
The Times
Listed private equity group 3i’s Continent-focused assets make it “the ultimate hedge against a chaotic Brexit” and the shares offer relatively good value at the current price (789.75p). BBA Aviation, provider of airport services to private and business jets, is performing well in North America, and its aircraft parts supply business has “oodles of potential” (235.4p).
A German view
Shares in ING, the Netherlands’ biggest financial services group, have been depressed by a €775m fine for its role in a money-laundering scandal. But it is now about to draw a line under the affair, says WirtschaftsWoche. That implies a record profit of €5bn next year, up from €4.5bn this year. And there are other reasons to be bullish. ING derives two-thirds of its income from private clients, so is better protected from the impact of volatile markets than many of its peers. It is among the sector leaders when it comes to trimming costs by digitalising its operations. Its capital reserves are higher than most of its peers, and thanks to the recent sell-off the stock yields an impressive 6%.
IPO watch
Uranium Trading Corp, a new investment fund that will target the uranium market, is planning to float in New York later this month. It intends to raise $50m, with shares priced around $10, The market value will be approximately $54m. The launch looks well-timed. As MoneyWeek noted last July, the market is gradually recovering. Production cuts, reductions in miners’ inventories and a gradual rise in demand for the nuclear fuel has driven the spot price up by 40% over the past year. Still, the CEO of Cameco, a major Canadian producer, told Mining Weekly that the upswing is not yet strong enough to encourage miners to restart idle capacity or consider more exploration.