Newspaper and magazine share tips

By This Is Money
Updated: 05:16 EDT, 7 May 2008

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

FRIDAY

Investors Chronicle

Concerns about a global slowdown have led to steep falls in share prices of engineering companies, including heat treatment and testing specialist Bodycote. Despite exposure to a weak dollar, Bodycote still has the capacity to make acquisitions in growth markets and is supported by strong oil and gas markets. With growing revenue from materials-testing the shares are worth buying. Buy.

It's been a tough year for the US housing market and the news just seems to be getting grimmer. Despite Rightmove being one of the major market players and recent success of new products it is still vulnerable to the poor UK housing market. Rightmove's share price has fallen 20% from its 12-month high and investors must question if it may be tough to raise market share further with competition from other websites looking fierce. Sell.

The Times

The resemblance between the current £600m software house and the Micro Focus of two years ago is drastically different. Yesterday's better than expected first-half figures show a rise of between 6% and 8% although the organic revenue growth figures were tarnished with a 6% fall in shares. Bearing in mind the perception that Micro Focus is vulnerable to a slowdown in IT spending and that it draws 10% of its sales from financial services and 42% from North America makes this one to avoid.

Despite yesterday's third-quarter figures revealing that Premier Farnell's sales grew in every territory – with the exception of the UK – and its pre-tax profits have come up the top end of the forecast range, the Times still thinks this is one electronic components distributor investors should avoid. Investors are left to wonder if Harriet Green, chief executive of Farnell, can stave off the effects of any downward lurch in the wider electronics sector. Avoid.

The Daily Telegraph

Premier Farnell's future looked promising when Questor last visited. Yesterday's third-quarter update showed a 10% improvement in profits to £17.1m, while operating margins grew 40 basis points to 11.7%. Farnell's shares trade on a multiple of about 11 times current year earnings. Despite this, Farnell's own yield of 6.4% is not unattractive and shows that the new management is over-delievering on its promises. Buy.

Numis seems to have escaped the impact of the credit crunch so far, with pre-tax profits up by 9% to £39m and revenues up 19% at £86m. The company has a good track record and a sufficiently healthy balance sheet to withstand any slump. The shares are trading on about eight times next year's earnings, which looks good value considering the quality of the broker. Numis is strong enough to weather the storm. Hold.

THURSDAY

The Times

Stagecoach announced an additional £71m investment in its fleet yesterday, but that wasn't the only good news as its UK bus division emerged yesterday's first-half results with a 3.9% rise in volumes and like-for-like revenue growth of 8% helping profits up 54% to £52.5m. Stagecoach sits at a premium to its sector, and yields less than 2%. Hold.

While every other FTSE 100 bank has felt the crush of the credit crunch, Standard Chartered has proved invulnerable, its shares soared yesterday to £18.93. Standard is an attractive investment for those seeking a blue-chip London-listed play on high-growth emerging markets but there are also stumbling blocks for a company whose operations span so many exotic economies. Standard trades on 19 times 2007 expected earnings and yields little more than 2%. Take profits.

The Daily Telegraph

Standard Chartered are sitting in a position of strength, according to Questor. Some 24% of its balance sheet is liquid and its loan-to-deposit ratio is 90% suggesting a security that is highly desirable in these markets. Its capital position is strong, with the year-end tier-one ratio expected to be about 9%. Generally banks are best avoided now, although this one offers only a paltry 2.3% yield, it's one of the best places to be in the sector. Buy.

Unlike a whole swathe of companies reporting in the past month DS Smith, the packaging and office supplies company, has not noticed the impact of weakening consumer confidence, yet. About 60% of its UK packaging business is making boxes for fast moving consumer good, such as food, toiletries and light bulbs so even in if there was a downturn consumers still need to eat, bathe and see in the dark. Although the shares look cheap at just nine times next year's earnings and the stock yields a generous 4.2% the future still looks uncertain. Hold.

Shares magazine

The manufacturer of military respirators and hoods, Avon Rubber, has leading technology and a strong market position. It probably means Avon's days as an independent company are numbered and a nice takeover premium is on the cards. Buy.

J Sainsbury has been the subject of two failed bids but the share price plunge after last month's withdrawal of a Qatari-backed offer is a buying opportunity. It is well placed to capitalise upon food price inflation and is a good defensive holding in these volatile times. Buy

The Times

It seemed unlikely that JD Sports would be able to raise it profits forecasts two weeks after England failed to qualify for Euro 2008, but with a cumulative like-for-like sales growth of 11.8% over the 44 weeks to December 1, the John David Group may be able to shake previous comparisons with fellow retailers JJB Sports and Sports Direct International. Despite a 1% dip in the shares yesterday – which have fallen by a third since June – and reservations from institutional investors as 57% of the stock is held by Pentland, the owner of Lacoste and Speedo Brands, JD still remains at eight times this year's earnings and something worth holding.

Despite once being known as an overly acquisitive software house with a habit of overstating revenues and missing forecasts, The Innovation Group (TIG) is now a focused international business that is performing to plan. Revenues and pre-tax profits in the year to September 30 were up 39% and 23%, respectively. With the insurance outsourcing sector growing by 14% a year, TIG, at 13 times current-year forecasts, looks cheap.Buy.

The Daily Telegraph

Tesco yesterday announced total sales growth for the past three months of nearly 12% and like-for-like sales up more than 4% (excluding fuel). At a time when consumers are supposed to be tightening their belts, Tesco seems to be retaining a solid grip on their wallets. While expansion to the US has sounded the death knell for many a UK retailer it seems if anyone can do it Tesco's can. strong>Buy.

Caretech provides residential care for adults with a range of disabilities, from severe physical handicaps to disorders on the autism spectrum. It believes it can grow by 10% a year on an organic basis only - the company currently houses more than 1,000 people - adding 184 beds through acquisition plus another 106 organically last year, and maintaining occupancy rates above 90%. On an earnings multiple of 36 times this year's earning, falling to 23 times next year, the stock is not cheap. But it is a more specialist operator than its rivals and its performance since last year's IPO should give investors confidence. Buy.

TUESDAY

The Independent

Losing a high profile contract to IBM of administering the congestion charge now seems like a drop in the ocean compared to the amount of new business that Capita has won this year. The company will administer seven million mature life and pension contracts run by Prudential, worth around £772m, over the next 15 years. While Capital clearly has a lot going for it, its earnings are highly visible and reliable, it sounds almost too good to be true. Its shares are far from cheap – trading on more than 24 times Citigroup's forecast 2008 earnings – and it can't seem to shake the reputation of losing out to IBM. It seems sensible to err on the side of caution and reduce exposure to highly rated growth stocks.

Colt Telecom has been at the centre of a great deal of excitement over the past few days as reports suggested that AT&T was in talks with Fidelity Partners, which owns 65% of the UK company. While there is little doubt Fidelity would be more than happy to sell out of Colt, especially at the 300p level quoted in speculation, there has been significant consolidation in the UK alt-net sector over the past few years. If AT&T were interested it would be a confusing choice when the credit crunch is looming the shadows and the US dollar is in the doldrums. Investors should take what is on offer now and sell.

The Times

Aberdeen Asset Management delivered record full-year results with a note of caution yesterday. Even though assets under management were up 30% to £95.3bn and it revealed net new funds of £8.7bn on the year, the full extent of the credit crunch has not yet been felt. Aberdeen shares were down 18% last month signalling that the stock market had already started to price in a tougher 2008. Aberdeen sits at 12 times current-year earnings, cheaper than Henderson or F&C, and yields 4%. But shares cannot help but suffer should financial markets endure more turmoil, this alone gives reason to avoid them for now.

Solar electricity generation specialist, PV Crystalox, is valued at £500m and continues to trade well. Its shares sit at a discount to June's 130p issue price and a new factory in Germany will also give the company its own source of silicon from 2009. At 120p, or 13 times 2008 forecasts, a discount to its peers, the shares are worth buying on weakness.

The Daily Telegraph

Losing the contract to IBM could have been a big set back for a company but Capital are keen to emphasise they are secure without it, according to Questor. The announcement of £1.89bn-worth of contract wins this year is up on £1.37bn a year ago and they trade on 27 times this year's forecast earnings, falling to 24 times 2008's, which looks like a full valuation. Investors should be in no hurry to sell yet – the company should outperform the market next year. Hold

Aberdeen Asset Management reassured analysts by announcing that assets under management have broken through the £100bn barrier in the past two months. The market, however is less enthusiastic. The credit crunch continues to impact upon fund management share prices (except for Schroders) which remain at the mercy of market volatility. Hold.

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