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
Burberry
The Sunday Telegraph
Chief creative officer Riccardo Tisci’s new product line-up has proved a hit with customers and helped drive double-digit percentage sales growth during the first half of the financial year. A new emphasis on recycled materials – including fishing nets – is boosting Burberry’s environmental credentials, while its global footprint is increasingly orientated towards faster-growing markets such as China. A 24.9 price/earnings ratio is high, but the auspicious prospects justify a premium valuation. Expect the stock to become “even more fashionable among investors”. 2,120p
Learning Technologies Group
The Sunday Times
This Aim-listed corporate online trainer helps the likes of L’Oréal and the Royal Mail to improve staff skills. Management is now concentrating on moving into related markets, as shown by recent acquisitions of talent management and recruitment businesses in the US and UK. Many investors remain sceptical, yet the coming year “looks bright” – analysts forecast 38% sales growth and a 46% jump in profits. A dominant market position, plenty of scope for new acquisitions and a solid financial record suggest that there are plenty of reasons to be bullish. Buy. 122p
QinetiQ
Shares
This defence technology firm has emerged in recent years as an “integrated global defence and security business”. Overseas revenue has doubled in three years to account for 30% of the total. An average return on equity of 26.4% over the past five years and 14% operating margins demonstrate that this is a high-quality business. On 16.1 times earnings, the valuation is not demanding given the growth prospects. Buy. 353p
Three to sell
Alphabet
The Times
Google’s parent company generated a staggering $40.5bn in revenue in the third quarter alone and boasts more than $120bn in cash. Digital advertising is the group’s cash cow, but regulators in the US and Europe are now gearing up to take on the Google/Facebook advertising duopoly, which they also accuse of failing to prevent the spread of disinformation. Young upstarts such as Pinterest and TikTok are grabbing market share, while Amazon’s digital advertising operations cast a “menacing shadow”. $1,343
Purplebricks
Investors Chronicle
Cost control is improving at this online estate agent, but it still has a long way to go. Marketing and other operating costs continued to outpace revenue growth in the first half, driving Purplebricks to a £1.2m operating loss. It also expects to make a £10m-£14m loss as it winds down its overextended US and Australian operations. A 60% increase in marketing spending in Canada has yielded better results, but in the UK market share is stagnant while slowing housing transactions bode ill. Sell. 113p
Royal Dutch Shell
Motley Fool UK
A dimming global growth outlook has seen shares in this oil major fall 9% this year, but that doesn’t make it a buying opportunity. The International Energy Agency expects non-Opec supply to surge next year. Bargain hunters will like Shell’s ten times forward price-to-earnings ratio and 7% dividend yield, but the odds of “more serious share-price weakness in 2020” make the juicy yield “a risk too far”. 2,152.5p
…and the rest
The Daily Telegraph
The JP Morgan American Investment Trust’s balance of growth and value approaches makes it a “potential one-stop shop for your US exposure”. A 0.38% ongoing annual charge is one of the lowest around (467p).
Investors Chronicle
WH Smith has been pivoting towards the fast-growing travel sector for some time now and a $400m deal to buy US tourist retailer Marshall will only ease the route to more “high-quality growth”. The high-street operation also appears to be “stabilising” (2,388p). A protracted period of economic uncertainty has left many small businesses showing “signs of distress”. The construction sector is having a tough time, but shares in Morgan Sindall are up over a third this year and a post-election spending boost could bring further upside (1,446p).
Shares
Those looking for upside in Japan’s under-researched mid- and small-caps sector should take a look at Aberdeen Japan Investment Trust, which trades on an appealing 9.4% discount to net asset value (NAV) (630p). British consumer confidence could be due for a bounce and Tesco is in “pole position to benefit” (243.25p). Computacenter’s “three-pronged” strategy of selling equipment, software and outsourced IT solutions has yielded robust profit, cash flow and dividends over the last few years. Buy (1,652p).
The Times
Shares in aerospace and defence group Babcock are priced on just 8.3 times forecast earnings and yield 5.1%. That’s a bargain for a group whose healthy order book will keep it busy (598p).
A German view
Japan’s car and lorry parts manufacturer Bridgestone has a finger in several promising pies, says WirtschaftsWoche. Its main business is tyres, which account for around £25bn in annual sales. The market is growing by around 4%-5% a year as the number of vehicles worldwide rises. Tyres for electric vehicles, which tend to be heavier than conventional vehicles, is a promising new field. The fleet management division is doing well too. Chips embedded in tyres can gauge wear and tear and bolster profitability by reducing breakdowns; the recent takeover of satellite navigation group Tom Tom helps it keep track of fleets more easily. The stock is on just 11 times 2020 earnings and yields 3.7%.
IPO watch
Business-to-business software and payments company Bill.com has had a successful initial public offering (IPO), with shares priced at $22 soaring to $35 just hours after it began trading in New York, says Donna Fuscaldo in Forbes. Bill.com, which handles small businesses’ financial operations with an artificial intelligence-enabled platform, raised $216m, valuing the group at $1.6bn. The company lost $7.3m in the year to June, but investors are keen on the stock because the small companies’ payments market has been neglected by big players. “With paper cheques still a mainstay of small businesses” in the US, there is ample scope for payments firms to automate operations.