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
Grafton Group
The Times
This supplier of building materials often plays second fiddle to larger rival Travis Perkins. Yet impressive first-half results, which showed pre-tax profit up by 18%, have earned it some rare attention. UK earnings are still growing despite a worsening outlook, while operations in Ireland and the low countries provide diversification. The financial management is disciplined and the shares should prove reasonably resilient: even if the property market is flat people still employ builders to develop their own homes. 794.5p
Live Nation
The Sunday Telegraph
A rock star about to embark on a world tour faces plenty of logistical challenges. That is where Live Nation comes in, providing a “one-stop-shop” for venues, advertising and even ticketing through its website Ticketmaster. It organised some of the world’s highest-grossing music events last year and it either owns or controls access to the major concert venues, shielding it from competition. With ever more people heading to festivals, this “strongly profitable” business should go from strength to strength. $49.48
Yu Group
Shares
This energy supplier has only been operating at full speed for two years, but has already proved “an outstanding growth opportunity”. Yu is one of several independent operators disrupting the business energy market through competitive pricing and better service. Revenue increased threefold last year and customer numbers jumped 70% to 7,361. The firm is now throwing off cash, supporting a fast-growing dividend. 897.5p
Three to sell
Debenhams
Investors Chronicle
Incoming Debenhams finance chief Rachel Osborne faces a difficult task. The retailer has issued three profit warnings so far this year, leaving Osborne to decide whether, and how, to cut the dividend. Preserving capital is probably wise – Debenhams needs the cash to tempt in new customers with new lines – but will disappoint the market. Don’t be tempted by the shares – on just six times forward earnings, they are “cheap for a reason”. 13.5p
DP Eurasia
Investors Chronicle
DP Eurasia owns the franchise to operate Domino’s Pizza in Russia and Turkey. The latter market accounts for some three-quarters of sales and is so important that the group reports earnings in Turkish lira. In the long term, the group’s prospects appear solid, given both Russia and Turkey’s long-term potential, but the Turkish currency crisis should see the City take a more circumspect view of a firm operating in two markets that are currently “volatile and economically pressed”. 90p
Metro Bank
The Sunday Times
When Metro Bank was founded in 2010 it proclaimed a “revolution”, including branches open seven days a week. Yet with a forward price-to-earnings ratio of 225 (compared with HSBC’s 14), its £2.8bn market capitalisation looks vulnerable. The bank has a habit of “going cap in hand to investors for cash” and it announced another £300m share placing last month. Founder Vernon Hill says that Metro resembles Apple more than it does its banking peers – but consistently downgraded profitability targets tell a different story. 2,876p
…and the rest
The Daily Telegraph
Arena Events Group is the leading global provider of temporary infrastructure for sporting events such as Wimbledon – an excellent operator in an industry with high barriers to entry (68.5p).
Investors Chronicle
Energy group Drax’s embrace of a low-carbon, biomass-led future supports a healthy and growing dividend (379p). Amino Technologies helps cable companies offer “internet protocol television”, a growing trend as operators scramble to deal with the challenge of Netflix (184p).
Shares
Veterinary services group CVS looks like a “prime takeover candidate” (926.5p). Online car marketplace Auto Trader has launched a joint venture in vehicle wholesale that should enhance earnings (456.5p). Security services company G4S has been having a “torrid time”, but business unit disposals could raise cash (251p). RPI-linked dividend growth makes National Grid a source of “inflation-proof income” (822.6p). A planned demerger at insurer Prudential could enhance shareholder value (1,720p).
The Times
Deutsche Post, SAP and Total all offer exposure to a eurozone economy in good health (€31.4; €103.5; €54.22). Those concerned about a no-deal Brexit should consider buying British American Tobacco, Imperial Brands, Diageo and Burberry (4,094p; 2,919p; 2,750p; 2,238p). Investors still hoping to ride the US bull market should look at internationally diversified businesses such as Nike and Visa, though neither is going cheap ($82.17; $140.94).
An American view
While its peers are expanding into television networks or taking over rivals, Verizon is just sticking to its knitting, says Jack Hough in Barron’s. And the basic telecoms business is a “pretty good” one. In second-quarter results reported in July, its revenue and earnings grew, including gains in the wireless business, which allayed fears of “an endless price war” in that market. Verizon’s broadband business, Fios, grew sales modestly last year. Big telecom also “seems to have a leg-up on bringing 5G service” to homes and mobile phones. Since last November, Verizon’s shares have returned 20%, but there could more to come. They offer a 4.3% dividend yield.
IPO watch
Russia’s biggest petrochemical company, Sibur, is considering an initial public offering (IPO) on the Moscow market worth about $2bn-$2.5bn, which would be the country’s largest IPO for more than a decade, reports the Financial Times. The listing, which will be decided on next month, would value the company at more than $20bn. The discussions reportedly involve floating 10%-15% of Sibur, with a majority of the shares being sold by its largest shareholder, gas tycoon Leonid Mikhelson. The news comes despite a difficult summer for Russia’s financial markets, hampered by worsening relations with the US, domestic tax proposals and general emerging-market turbulence.