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
AstraZeneca
The Sunday Telegraph
It has been a tough decade at this pharmaceutical giant, with core earnings per share down by 32% as patents expire. Yet the shares have beaten the FTSE 100 during that time, as the City bets on management’s efforts to refresh the product pipeline and restore financial discipline. Latest half-year results show rising sales, suggesting the turnaround is succeeding. The stock is not cheap, but long-term global growth in demand for healthcare leaves it “on the cusp of a golden age”. 7,351p
Smith & Nephew
Shares
This medical devices group operates in three areas – orthopaedics, sports medicine and wound care. Half-year results showed encouraging growth in underlying revenue and operating margins. On 21.4 times forecast earnings the shares aren’t cheap, but with earnings in an “upgrade trend”, investors are likely to take a greater interest in the stock. The group owns competitive products in markets that look set to enjoy strong growth. There is also about $1.5bn of headroom on the balance sheet for acquisitions, which could boost future returns. 1,909p
TMT Investments
The Mail on Sunday
This Aim-listed group has interests in 25 unlisted tech businesses, of which the most notable is cab firm Bolt – formerly known as Taxify. It was founded in 2010 and has since made almost $40m by selling stakes in successful investments – this year it sold a $23m stake in software business Wrike, a huge return on the $1m invested in 2012. In all, TMT could prove “a rewarding punt for the adventurous investor”. $3.69
Three to sell
BT Group
Motley Fool UK
Shares in this telecoms giant have been “in a down trend for almost four years”. Recent first-quarter results provided no relief. Revenue, EBITDA and normalised free cash flow all continued to slide, while net debt creeps higher. A large pension deficit leaves the business ill-prepared for any slump. The near-8% dividend yield looks tempting, but the risk of further capital loss more than outweighs it. BT is cheap for “very good reasons”. 180p
IAG
Investors Chronicle
A planned pilots’ strike this month will do nothing to endear British Airways to passengers during the summer travel season. Parent company IAG was recently fined a record £183m by UK authorities for failing to protect customers’ data in the wake of a cyberattack last year. Plans to spend about £20bn on 200 Boeing 737 Max jets look like a hostage to fortune as the accident-prone aircraft remains grounded worldwide. Competition in Europe has squeezed operating margins and puts the dividend under pressure. Sell. 454p
Pendragon
The Sunday Times
These are “lean times on Britain’s forecourts”. Confusion over future fuel-tax policies and higher car-financing costs saw new car registrations drop 4.1% in July, the fifth successive monthly decline. The owner of Evans Halshaw and Stratstone has been focusing on used cars, but its Car Store operation has a glut of unsold stock and is expected to lose £25m this year. The threat of a disruptive Brexit, plus shaky consumer confidence, are big risks for the industry. The shares trade at their lowest level for seven years, but are still not cheap enough. Avoid. 11.25p
…and the rest
The Daily Telegraph
The JP Morgan European Smaller Companies trust offers exposure to an overlooked sector where valuations are reasonable (368p). Pawnbroker H&T is adding to its estate through acquisitions and is expanding into personal loans and foreign currency. It looks good value on a price/earnings ratio of 11 (325p). Document management expert Restore is in a “sweet spot” as consumers become more aware of data privacy issues and businesses face greater legal pressure to manage information responsibly (440p).
Investors Chronicle
The corporate training market is worth an estimated $365bn and its digital segment is growing fast – that spells huge opportunity for Learning Technologies (105p). Shares in electronic specialist XP Power are down 40% this year due to the US-China trade war, but with management shifting production from China to Vietnam we think this is a buying opportunity for patient investors (2,010p). The onward march of ecommerce and a shortage of city logistics space creates an auspicious outlook for Warehouse REIT(104p).
The Mail on Sunday
Favourable global travel trends have left investors in airport cafe owner SSP Group basking in special dividend pay outs and strong share-price growth. Shareholders sitting on large gains may wish to bank some of their profits, but they should “keep at least half as a long-term investment” (707p).
Shares
Baillie Gifford US Growth Trust taps into exceptional growth firms in America – it’s an “invest and forget” option for the long-term (142.5p). Shares in sausage-skin maker Devro have had a turbulent time, but look to have recently “regained some sizzle…keep the faith” (204p). Surprisingly positive second-quarter trading at Next suggests it could reward investors despite the high-street gloom (5,920p).
An American view
Radio station giant iHeartMedia (Nasdaq: IHRT) “is ready for its next chapter”, says Andrew Bary in Barron’s. The company came out of Chapter 11 bankruptcy in May, with its debt levels slashed from $16bn to $5.8bn. At around $13 a share, the group trades on a price/earnings ratio of less than eight, and the free cash-flow yield looks high on 20%.
With nearly 850 radio stations, iHeartMedia “reaches 90% of the adult population” in the US every month, “and it is well-positioned in the fast-growing and competitive digital streaming and podcasting businesses”. Hamed Khorsand, analyst with BWS Financial, reckons the stock could go as high as $30.
IPO Watch
Saudi Arabia’s state-owned oil giant Saudi Aramco reiterated this week that it still plans to go public. The statement came as it announced its first-half results, during its first ever earnings call with investors. In the six months to the end of June, Aramco made $46.9bn in profit. That was down from $53.2bn for the same period last year, due to a drop in oil prices over the intervening period.
The timing remains uncertain – earlier this year, Aramco had suggested it would consider listing before 2021, notes The Guardian. Khalid al-Dabbagh, a senior executive, said: “the timing… is a shareholder issue. They will announce it depending on their perception of the optimal conditions”.