MoneyWeek’s comprehensive guide to this week’s share tips from the financial papers.
Three to buy
Diageo
The Sunday Times
Diageo, the drinks business behind Guinness and Johnnie Walker, is the world’s largest spirits producer. Growth has stalled in recent years, but the US is its biggest market, so Diageo is being boosted by a slump in the pound. Analysts expect sales to race 8% higher. The shares are not cheap, but with a 3% dividend yield, Diageo’s a “good bet”. 2,107p
Equiniti
The Mail on Sunday
Equiniti traces its roots back to 1836, as the government’s paymaster to the armed forces. Some 180 years on, the army is still a customer, and so are half the firms in the FTSE 100. Its shares fell after the referendum, but the chief executive, Guy Wakeley, is growing the business, profits and the dividend. It’s a “long-term buy”. 171p
Greencore
Investors Chronicle
Greencore, the food producer that specialises in soups and quiches, has won a new contract with M&S. Its US business is lagging, but has grown key relationships with Starbucks and 7-Eleven, a vast chain of convenience stores. Capital spending has risen and Greencore’s shares have dropped, making them an “attractive” buy. 316p
Three to sell
Land Securities
The Daily Telegraph
Shares in Land Securities, which owns the Walkie Talkie tower in London, have recovered since a “catastrophic” 32% drop on the day of the EU referendum result. But we are entering a period of low growth for the property sector. Sentiment is negative, prices are cooling off and office space in London is in low demand, as firms mull moving out of the capital. 1,098p
Lloyds
Shares
Bank earnings are also set to be clobbered by the referendum result, as lower economic growth forecasts and falling house prices lead to a rise in bad loans. Another potential risk for lenders is fresh downward pressure by the Bank of England on interest rates. Lloyds could be one of the hardest hit, as it is heavily exposed to UK business loans and mortgages. 149p
Royal Mail
Shares
Royal Mail looks increasingly vulnerable to an economic slowdown in the UK. Any drop in GDP will lower letter and parcel volumes and a 1% drop in sales translates into a massive 17% drop in profit, according to stockbroker Davy. The group’s half-year results will be unveiled in November and investors can only hope for no nasty surprises. 506p
And the rest
| Buys | |
| Allergy Therapeutics | Get exposure to the fast-growing immunotherapy market (Investors Chronicle) 20p |
| Alliance Pharma | Revenue is due to double and the shares are “hugely undervalued” (Inv. Chr.) 48p |
| Amerisur | The Colombian oil producer is about to complete a key pipeline (Shares) 26p |
| British Land | London property is attractive for investors after sterling’s decline (Times) 919p |
| Clinigen | Net debt is falling at the promising pharma firm (Inv. Chr.) 520p |
| Close Bros | Loans are growing and the shares are cheap on ten times earnings (Times) 1,232p |
| Faroe Petroleum | Faroe is cheaply buying up oil reserves in the North Sea (Inv. Chr.) 52p |
| IQE | The microchip maker is surging as profits race ahead (Inv. Chr.), 22p |
| McBride | The toothpaste and detergent maker delivers sparkling returns (Shares) 150p |
| Rathbone’s | Brexit hit the shares, but Rathbone’s is a top-quality asset manager (Inv. Chr.) 316p |
| Tate & Lyle | The ingredients group is profiting as sterling falls (Mail) 701p |
| Vodafone | Earnings are strong and the telecoms giant is a takeover target (Times) 235p |
Director’s dealings
Elisabeth Murdoch, the daughter of press baron Rupert Murdoch, joined the board of high-heel maker Jimmy Choo last year after it was criticised for having an all-male board. Now she is stepping into the stock, buying 31,000 shares for £34,000. Jimmy Choo’s products remain a favourite on the red carpet, but the shares have dropped this year as investors have fretted over its exposure to slowing spending in Japan and China. But the company has remained bullish, saying it can “capture the fashion zeitgeist”.
An American view
Health insurer Cigna is in good shape, says Robin Goldwyn Blumenthal in Barron’s. The company, which last year generated 80% of its $38bn in annual sales from administering corporate health plans, has exceeded earnings expectations for the past nine quarters, and is targeting annual profit growth of more than 10% a year over the long term. It sees plenty of scope for growth in the US Medicare health insurance market and its international business, which insures Americans abroad. The balance sheet is strong, with net debt worth just 4% of overall capital, and the stock is reasonably valued. If rival Anthem is blocked from taking over Cigna by regulators, as seems very likely, it will have even more money for acquisitions and share buybacks thanks to the agreed break-up fee.