Newspaper and magazine share tips

By This Is Money
Updated: 06:22 EDT, 5 March 2008

Each week we round up share tips from national newspapers and investment magazines. For the Mail on Sunday's top stock picks, see the Midas column.

FRIDAY

The Times

In the space of six days British American Tobacco has snapped up two of its rivals, Turkey's Tekel and Denmark's Skandinavisk, for a combined £3bn. Tekel takes BAT's market share in Turkey from 7% to 36% and it gives BAT a platform through which to sell its more expensive brands, such as Kent and Pall Mall. Its full-year figures, also released yesterday, show BAT continues to perform to plan. Earnings were up 11% and the dividend raised by 18%. However, its defensiveness still makes it one of the best corners of the stock market in which to remain. Hold.

Shares in BBA Aviation have dropped by a third since the demerger of the old BBA Group little more than a year ago. They retreated again yesterday, a further 5%, as BBA admitted to a fall in fuel volumes in North America in the first seven weeks of this year. Even if its weakness is short-lived, there are other concerns. Modest free cashflow means BBA's £375m debt burden will be slow to fall and its other activities, engine repair and other aftermarket services, lack scale. Sell.

The Daily Telegraph

RBS's full-year figures were better than expected, with strong trading in UK commercial banking, retail, wealth and Ulster making up for credit market problems and £274m of insurance claims from last year's floods. The tone is positive, but RBS shares are particularly volatile. Another market blow-up, a monoline failure for example, will hammer the stock and reignite fears. Avoid.

The dip in GKN's share price yesterday was curious. Profits in all divisions beat analysts' expectations and there is little to suggest it cannot maintain the momentum. The purchase of Airbus's wing-making factory near Bristol could prove to be a significant revenue earner. For a company that has consistently delivered, the shares, trading on 9 times, hardly reflect past performance - and future potential. Buy

Investors Chronicle

Experian's share price has bounced since its low in mid-January, helped by an investors' seminar aimed at highlighting the growth opportunities still available to the group. Last month, Experian announced that it may sell its PriceGrabber online price comparison site, which could help reduce the group's high debt levels. The problems in the credit market present a major obstacle and its shares, at 16 times underlying earnings for 2007-08, do not seem to price in the risks that tougher trading represents. Sell.

Appearances can be deceiving. Pre-tax profits at Rexam dipped 3% to £260m as higher aluminum prices soared last year, shaving £65m from profits. However, the maker of beverage cans and plastic packaging is growing fast in a developing market and demand is exceeding capacity in western Europe. This combined with Rexam's potential to generate high-quality profits from plastic packaging, especially in pharmaceuticals, makes this share a buy.

THURSDAY

The Times

Yesterday's full-year results from Royal & SunAlliance not only marked the abandonment of its unwieldy name to the acronym of RSA but represented an important milestone in the internalisation of the company. Revenues and written premiums from RSA's overseas operations exceeded those from the UK for the first time. It means that at 142.3p, or less than eight times 2008 earnings, RSA is a low-risk, well-managed insurer with scope for more overseas growth. Hold.

Reed Elsevier decision last week to pull out of magazines in favour of acquisitions in professional online information, is exactly the strategy pursued for most of this decade by Wilmington, the small-cap publisher and professional training group. Yesterday's first-half figures show revenues were up 13%, earnings per share ahead by 14% and the dividend was raised 15%. At 202¼p, or 13 times annualised holdings, the shares are worth holding.

The Daily Mail Logica's new boss, Andy Green, can no longer doubt the scale of the task he faces at the IT company after a lacklustre 2% rise in core profits to £207.6m in 2007. Logica is hardly the only technology stock to have seen its share price all but halve over the past year, as corporate budgets come under pressure. It might be worth waiting for the results of Green's strategic review in May before taking the plunge. Hold.

The Daily Telegraph

HBOS shares dropped 6.8% yesterday as result of fears surrounding an unexpected £7bn of exposure to US mortgages and concerns that bad debts are on their way up in UK housing. However, HBOS has diversified a little - moving deeper into Australia - and it has a strong insurance and investments business. Even on 5.6 times earnings with an 8.3% yield it is best avoided for now.

Like other construction groups, Kier's share price has suffered from the onslaught of the credit crunch and fears of a housing slump. Its housing division has seen a 20% drop in orders compared to last. Full-year profits are expected to be around £88m. The strong results helped push up Kier's share price almost 7%, valuing it around £550m. Kier's diversification remains an advantage and it has less exposure to overbuild of flats than rivals. Buy.

Shares Magazine

Merrill Lynch Latin American Investment Trust was one of the six investments recommended on the cover of Shares magazine last week. It is one of the best ways to jump onboard the South American, particularly Brazilian, economic growth train. Since the start of 2003 Merrill Lynch Latin American's share price has soared 817%. Buy.

After a promising start to 2007, when merger and acquisition activity prompted a flurry of interest, the media sector did badly yet again. Publishing giant Reed Elsevier already has a consistent tract record, it generated roughly 10% compound adjusted EPS growth during the 2001-2003 economic downturn. A new £100m cost cutting programme should quell further doubts about the seriousness of its management's intent to drive the business onwards and upwards. Buy.

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WEDNESDAY

The Times

It has never come to light which of the three non-executive directors of Ashmore Group pulled out of a planned share sale last autumn at the eleventh hour. Yesterday's first-half results revealed pre-tax profits were up 68% to £101m, or 8% ahead of forecasts, helped by a 54% surge in management fees to £86m. Ashmore is also well placed to benefit from turbulence in Western financial markets. Ashmore may trade at a premium to the likes of Schroders, but that rating appears to be deserved, given forecast earnings growth of 40% this year and 20% next. Tuck away for the long term.

When Hanover, the activist investor, sold the bulk of its stake in Elementis early last year, the City appeared to lose interest in the chemicals group as well. With Hanover gone and the restructuring complete, shareholders found the prospect of steady organic growth less exciting and Elementis's shares have fallen by a third since October. Avoid.

The Daily Telegraph

Despite a slowdown in the City of London, where there has been a freeze on hiring for nearly six months, Hays reported a rise of 11% in total net fee income for the first half of its financial year. Despite yesterday's solid interims, the shares fell on concerns that its strong performance, particularly overseas where it has seen over 40% growth in 14 of its 26 countries, cannot be sustained. However, Hays remains a good long-term proposition - the shares are cheap, trading on 9.2 times full-year 2008 earnings in June - but it's too soon to start buying again in earnest. Hold.

Lloyd's insurer Beazley has weathered the recent turbulent market rather well. Despite its exposure to the weak dollar, yesterday's record full-year results showed pre-tax profits surged some 60% to £138.5m, resulting in a special dividend of 4p. While Beazley is one of the larger quoted insurers, with a market value of around £630m and therefore harder to take over, the relentless M&A activity in this sector shows these businesses are viewed as desirable and profitable. Hold on.

TUESDAY

The Times

Despite the twin threat of a high street slowdown and rampant food-price inflation, Associated British Foods were able to issue a bullish trading statement that claimed its Primark and Allied Bakeries businesses are actually gaining momentum. However concerns still remain firmly in the minds of investors as a higher interest bill is expected this year as a result of higher capital expenditure. On a price/earnings ratio of 15, shares in AB Foods are not cheap, but they remain a better bet than many FTSE 100 peers, given the current market volatility. Hold.

Despite the twin threat of a high street slowdown and rampant food-price inflation, Associated British Foods were able to issue a bullish trading statement that claimed its Primark and Allied Bakeries businesses are actually gaining momentum. However concerns still remain firmly in the minds of investors as a higher interest bill is expected this year as a result of higher capital expenditure. On a price/earnings ratio of 15, shares in AB Foods are not cheap, but they remain a better bet than many FTSE 100 peers, given the current market volatility.Hold.

Ultra Electronics, the battlespace information technology group, has used the defence sector boom of recent years to diversify and it now has a strong position in the civil sector. However, budget cuts in the defence sector are looming and it seems likely that major equipment projects will be delayed, the tightening of belts is nothing new and many companies – including Ultra Electronics – have put in place coping strategies. Ultra said yesterday that revenues grew 10% last year to £413m and profits rose 11% to £63m. A strong base and good prospects for 2008 should make Ultra an easy buy for investors. Hold.

The Daily Telegraph

The threat of recession is looming over every company but none more so than recruitment firms. If no jobs are being created then headhunters have nothing to place but retain their large fixed cost. It is little wonder that shares in Robert Walter have tumbled almost two-thirds in the past year. The shares now trade on 6.5 times 2008 earnings and while they may seem cheap, considering the 20 times earnings the shares tend to trade on in good times, a recession could see earnings forecasts slashed. Sell.

Hammerson posted a 3% net rise in asset value to £15.45 a share, while other property companies have written off billions of pounds from their portfolios. Much of this was due to Hammerson's £2bn French office and shopping portfolio where capital values grew 16.5%. However, chief executive John Richards has warned that the UK market will fall another 10% this year. While general property gloom persists, there could be better times to buy the stock this year. Hold.