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
Gear4music
Shares
This York-based firm is the largest UK-based online musical instruments seller. It profits from the e-commerce trend, but also operates physical showrooms, enabling it to showcase products and build local brand loyalty. A moment of share-price weakness as the group emerges from an intensive phase of investment provides an ideal buying opportunity. Profits should take off next year as Gear4music becomes a “bigger and more effective retailer”. One analyst sees scope for the shares to rise by almost 50%. 672p
Xeros Technology
The Mail on Sunday
The average washing machine uses 70 litres of water per cycle, a problem at a time of growing concern about droughts. This Leeds University spin-off has developed a way to reduce water usage by 80% using XOrbs, small polymer beads that remove dirt from laundry. Top hotels have started to use the beads to cut their water bills and detergent use, while the firm has just signed a licensing deal with major Chinese manufacturer Sea-Lion. Adventurous, long-term investors should back this technology pioneer. 69p
Icade
The Daily Telegraph
If Britain makes a full-blooded break from the EU, this French real-estate investor will happily welcome financial firms into new accommodation in Paris. It boasts office buildings in La Défense, France’s answer to Canary Wharf, a “superlative, irreplaceable asset”. A 6% dividend yield is appealing, but a bigger attraction is the opportunity to inject some “capital preservation ballast” into your portfolio in the event of a messy Brexit. €84.10
Three to sell
Reach
Investors Chronicle
Reach is the new name adopted by Trinity Mirror following its takeover of the Daily Express and Daily Star titles in June from Northern & Shell. A politically diverse stable – including the pro-Labour Daily Mirror and the hard-right Daily Express, which will want to retain editorial independence – will not make lowering staff costs any easier. Some may be tempted by a “stupendously low” forward price/earnings (p/e) ratio of two, but this is a “value trap”. It is a “moribund business” with a “massive” pension deficit. Avoid. 72p
RPC
The Times
Sparks could be set to fly at this plastic-packaging producer as shareholders fret that the group has been buying growth through acquisitions. The past two and a half years have brought six transactions totalling £1.17bn, yet underlying growth is a disappointing 2%. Who is to blame? Chairman Jamie Pike has taken the unusual step of pointing the finger at investors for getting in the way of expansion plans. “Something’s not quite right.” 747.5p
Severn Trent
The Times
A day of reckoning is coming for the UK’s ten regulated regional water monopolies as media on both left and right ask “why their chief executives are paid more than £2m a year to deliver a basic public service”. There are also questions over whether they should even stay in the private sector. Severn Trent’s shares have slumped and its generous dividend policy looks ill placed to weather the political and regulatory forces massing against the sector. 1,883.5p
…and the rest
The Daily Telegraph
Sirius Minerals will begin to produce polyhalite from its North Yorkshire mine in the coming years – a speculative buy at a good price (33.75p).
Investors Chronicle
There is gathering momentum behind Speedy Hire’s recovery (61p). A capital-light, geographically diverse business model justifies petrol forecourt retailer Applegreen’s premium rating (527p). The failure of Toys “R” Us has hit toy supplier Character, but the dividend is attractive and trading is recovering (519p).
The Mail on Sunday
Labour’s renationalisation talk makes this an uncertain time for investors in water firms, but shareholders should stick with Severn Trent for the attractive dividend yield (1,900p).
Shares
Touch-screen engineer Zytronic offers a rare value opportunity, while its “bullet-proof
balance sheet” limits downside (442.5p). DP Eurasia , which operates Domino’s Pizza in Turkey and Russia, has been hit by the sliding Turkish lira, but the business is strong (168.75p). Shares in theme-parks software supplier Accesso Technology have shot up, but the firm merits its rating (2,640p). Gamma Communications remains “an outstanding growth story” (790p).
The Times
Many CEOs would kill to have Netflix’s problems, but a valuation of 100 times projected earnings makes it a sell ($379.5). Emerging-markets-focused Standard Chartered offers less value than its peers (676.75p). Catering group SSP offers growth and, potentially, a special dividend (678.5p).
An American view
Royal Caribbean Cruises’s shares have fallen around 13% this year, but the decline is overdone, says Lawrence Strauss in Barron’s. Bears worry that capacity growth will outstrip demand and bookings could suffer after last year’s hurricanes. However, Royal Caribbean has seen strong demand for cruises. This year it launched a huge new ship, the Symphony of the Seas, with about 5,500 beds. Ageing baby-boomers with money and time should underpin double-digit earnings growth prospects over the next few years. It has also moved into the luxury cruise sector, a rapidly growing segment of the market, by paying $1bn for 67% of Silversea Cruises. Royal Caribbean trades at 11.7 times earnings.
IPO watch
Event-planning firm Eventbrite is planning to go public later this year, reports The Wall Street Journal. The San Francisco-based company allows users to set up and promote local events; it now notifies people about activities ranging from sporting events and music festivals to conferences. Since its inception in 2006, the firm’s platform has processed at least $8bn in gross ticket sales. Only in 2017 Eventbrite processed more than three million tickets per week, according to Forbes. Part of the firm’s growth has come through takeovers. Last year it snapped up ticketing company Ticketfly. Eventbrite has raised more than $350m in capital and by 2014 had reached a valuation of $1bn.