Newspaper and magazine share tips

By This Is Money
Updated: 05:48 EDT, 6 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.

THURSDAY

The Times

Long-suffering shareholders in FKI could spend hours running the numbers on yesterday's £500m approach from Melrose, its smaller rival. Melrose, so far, is the only declared bidder and with half its offer in stock it leaves FKI investors to judge whether Melrose's management can be relied upon to do better than the team it would replace. Shareholders of FKI, up 2½p to 75¼p, would do well to back their suitor. Hold.

Yesterday's full-year results from International Personal Finance (IPF) showed that it is faring fine since it was spun off from Provident Financial last July. Customer numbers are up 9%, net receivables ahead 19% and pre-tax profits up 26%. Perhaps most impressive is that strong growth has not been secured at the expense of credit quality: impairments as a percentage of revenue actually fell from 29% to 22%. Buy on weakness.

The Daily Telegraph

Over the year Carillion's average construction margin moved from 1.7% to 2.1%, and by increasing its Middle Eastern operation - where margins are as high as 6% - this could shift even further. Since the year end, Carillion has completed the acquisition of Alfred McAlpine, which will add not just to the profit and loss sheet, but also to the its pipeline of work. Existing investors should hold while new ones should look to buy in. Buy.

IMI managed to engineer itself into a powerful position yesterday, with shares in the FTSE 250 company shooting up 10%. Pre-tax profits rose 8% to £210.1m and a 9% rise in the final dividend to 12.7p lifted the total dividend by 8% to 20.2p. Following yesterday the shares are now yielding around 5%. However, the company has traditionally brought back around 5% of its shares each year, which will lend to support the stock. Buy.

Shares Magazine

Meggitt's poor performance should change after transforming acquisitions in the US. Aftermarket revenues account for 44% of Meggitt's sales are rising rapidly. This week's results showed organic sales growth of 11% and underlying profits growth of 13%. With a target price of 350p it could be nearer 400p once the re-rating takes place combined with more good earnings growth. Buy.

Gold, as priced by the afternoon London fix, is up nearly 10% this year already, and even hit an all time high of $953 in February. This along with surging food, fuel and commodity prices and further interest cuts in the USA has bolstered Streettracks Gold Trust's status as an inflation hedge. Buy.

Alternative investments

Don't miss our special report on the alternative investments making some people a packet...

• Investing in cars
• Investing in wine
• Investing in film posters
• Investing in comics
• Investing in coins
• READER SERVICE: Brochures for wine investing

WEDNESDAY

The Times

Admiral's company policy of returning surplus capital to shareholders means it has now notched up seven 'special' dividends – one every six months – since joining the stock market less than four years ago. Its shares slid nearly 16% as the company cautioned that motor insurance premium rates were rising slowly and that tougher competition would constrain profit growth this year at Confused.com, its price comparison website. Given its still-steep premium to the insurance sector, Admiral can be no more than a hold.

If there was any nervousness surrounding Meggitt's $1.8bn (£920m) purchase of K&F Industries it was soothed by yesterday's full-year results. Underlying profit growth was a buoyant 13%, with operating margins up a hefty 2.2 percentage points to 24.6%. Strong cash generation should see Meggitt's net debt of £815m fall by £60m a year, while none of the company's banking facilities will mature until late 2010. Buy.

The Daily Telegraph

Investors in Admiral Group were forced to adopt the brace position after the motor insurer's shares crashed 16% despite unveiling good full-year results, with pre-tax profits rising 24% to come in well ahead of expectations at £182.1m. The group's combined ratio - a measure of claims and costs as a percentage of premiums - improved to 85% from 87%. This figure would be respected by many in the insurance industry. Yesterday's tumble was a knee-jerk reaction though. Hold.

After last year's acquisition of K&F, Meggitt's wheels and brakes are installed on more than 30,000 aircraft and perform more than 15m take-offs and landings every year. With the remainder of operations geared towards the high-growth oil exploration business, Meggitt appears to find itself in an attractive space. That was borne out by yesterday's results, which saw sales up 31%, margins up 220 basis points to 24.6% and operating profits 45% higher, although at the pre-tax level earnings were hit by inventory accounting at K&F. With a forecast yield of 3.2%, the shares are worth tucking away. Hold.

TUESDAY

The Times

Taylor Nelson Sofres (TNS), the market research firm that analyses what we buy and why, found its purchasing decisions put under the spotlight yesterday. Yesterday's full-year figures showed that, while underlying revenues from the group as a whole increased 5.4 last year, those from North America rose just 2.4%, or a paltry 0.3%, in the second half. Apart from a strong market position, emerging market exposure and internet presence, spending on market research has proved more resilient than that on advertising in a downturn. Its shares are trading at nearly 11 times 2008 earnings and with a net debt of £354m it is hard to see what will drive the shares higher for now. Avoid.

For the first time since joining the stock market, 15 years ago, the Keller Group plans to buy back its own stock. Yesterday's full-year figures, pretax profits were up 27%, operating margins reached a record 11.2% and its dividend was raised 15%. American worries may continue to weigh on sentiment, but at 631½p, or 6.6 times current-year earnings, the shares remain inexpensive. Hold.

HSBC was the only one in the UK banking sector to see its shares rise, despite a record $17.2bn (£8.6bn) bad debt charge. The bank may still have $36.2bn of "higher risk" lending to work through, but that figure is slowly coming down. The bank is trading at a premium to rivals, on ten times 2008 earnings with a 6% yield, but in the current climate buyers had better beware. Avoid.

WSP, the international design and engineering consultancy, bucked the trend with a near 5% gain on the back of a remarkable set of results. The company posted a 42% rise in pre-tax profits to £37.4m on the back of revenues 29% higher at £539m. Trading on a forward-earnings multiple of a little over ten times, the shares look increasingly good value. Buy.