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
Zotefoams
The Mail on Sunday
This Croydon-based business uses advanced polymers to produce specialist foams that are “exceptionally light, resilient and environmentally friendly”. The firm provides everything from cushioning in Nike trainers and museum-storage padding to sealants used in plane and car production. It has customers in more than 50 countries and 85% of sales are generated outside the UK. A dip in the share price in recent months represents a good entry point into a rapidly-growing business. 592p
Alfa Financial
The Times
Strong revenue growth suggests that this software group is on the mend after a “truly dreadful year”. Alfa Financial makes software for the asset-finance industry, mainly banks giving out commercial loans, but also car manufacturers selling on credit. Revenues have been unpredictable, but new clients are in the pipeline and the available market is worth $3bn-$4bn a year. More speculatively inclined investors could be rewarded if the latest share-price rally has legs. 160p
IMI
The Sunday Telegraph
Shares in this flow-control valves maker have shed a third of their value since the start of last year owing to a weaker oil price and a gloomier global economic outlook. The company has sought more work in the water and naval sectors, while sales in the rail and life-science markets are growing strongly. Diversification is all very well, but a more bullish oil outlook would prove the real game-changer. However, at the current depressed valuation “the shares are worth buying in anticipation of better times ahead”. 1,008p
Three to sell
C&C
Shares
This Irish brewer’s recent performance has been encouraging, but Shares thinks harder times lie ahead. The group behind Bulmers and Magners says that annual earnings-per-share growth for the year to the end of February will be around 20%. The numbers have been boosted by good performances at distributor Matthew Clark and wine business Bibendum, which C&C acquired last year from the collapsed Conviviality. Yet with tough comparatives to beat in the future, stronger competition and industry-wide cost inflation, investors should take profits on a recent share-price rally. €3.19
Debenhams
Investors Chronicle
A campaign by Mike Ashley’s Sports Direct to gain control does not improve the outlook for Debenhams. Sports Direct, which already holds a near-30% stake in the struggling department store, has called for the removal of all but one of the board members and for Ashley to be appointed chief executive in return for a £150m loan. That may alleviate a funding crisis, but doesn’t tackle the problem of too many stores and a crushing rent burden. With administration still a possibility, investors should steer clear. 3.00p
Tesco
Motley Fool UK
Tesco’s shares have lost 25% of their value in five years, but some are tipping a recovery. The shares are not expensive on a forward price/earnings (p/e) ratio of 13.6, but a “challenging landscape” suggests they don’t offer much value either. Data from research firm Kantar Worldpanel shows discounters Aldi and Lidl are continuing to increase market share. The pressure on the traditional supermarkets won’t let up any time soon. Avoid. 229.5p
…and the rest
The Daily Telegraph
Foreign-currency specialist FairFX has seen sales rise from £8m in 2015 to £25.5m last year, but Brexit pessimism means that this rapid growth comes at an attractive price (97.5p). Falling sales at its US higher-education arm highlight the structural threat to educational publisher Pearson – avoid (821p).
Investors Chronicle
Pharmaceutical giant GlaxoSmithKline has confirmed its commitment to an 80p-per-share dividend, while a recent spate of dealmaking could make this an auspicious time to buy in (1,516p). Fuller, Smith & Turner’s £250m sale of its beer and brewing business looks a good deal and frees up resources to grow the premium pub estate (1,070p). Urban logistics is a bright spot in a gloomy real-estate market, so buy warehouse owner Tritax Big Box (142.5p).
Shares
Brave investors should buy into the early stages of a recovery at advertising giant WPP and enjoy a 7% dividend while they wait for a restructuring to deliver cost savings (854p). A 19% jump in revenue at promotional-products business 4imprint leaves it on course to hit a $1bn annual turnover target by 2022 – keep buying the shares (2,190p).
The Times
There could be upside at housebuilder Galliford Try if the group decides to bail out of its construction operation to focus on houses and regeneration (772p). Tool-hire business Ashtead offers investors a play on US economic growth and is well diversified across the construction, events and disaster-relief sectors (1,891.5p).
An American view
There are around 1.4 billion meetings between patients and doctors every year in America, and all but around ten million are face to face, says Nicholas Jasinski in Barron’s. Roughly 400 million – 500 million of these meetings could take place virtually. Enter Teladoc, the leader in “telehealth”. For $45 per visit, the firm provides its customers with 24-hour doctors’ appointments through voice or video chat. Health-care providers and employers pay a monthly fee as they see the service as a money and time saver; patients are also catching on. The company is still in the red, but membership has doubled in three years and overall sales are set to grow by 20%-30% a year over the long term.
IPO watch
Ride-hailing giant Uber is to launch its initial public offering (IPO) in April, say Carl O’Donnell and Heather Somerville on Reuters. The lossmaking group was recently valued at $76bn in the private market, but is expected to seek a valuation of $120bn when it floats. Sales last year hit $11.3bn, but losses totalled $3.3bn. Uber has a presence in 70 countries and also consists of food-delivery, bike and scooter rental and lorry-sharing divisions, as well as a self-driving car unit. The IPO will follow that of smaller rival Lyft, which could prove counterproductive. “There is only so much capital investors will put into ride-sharing” firms, says Renaissance Capital’s Kathleen Smith.