Sunday newspaper share tips
Each week, we round up the main share tips from the Sunday newspapers. For the Mail on Sunday's stock picks read the Midas archive.
The Sunday Telegraph
Full year profits were up at AIM-listed Stagecoach Theatre Arts after two years of restructuring.
Most of the group's 669 theatre schools, which cater for 40,000 part-time students, are run on a franchise basis.
Management believe there is considerable scope for growth in the UK, and longer term in Germany and the US despite a worsening economic situation thanks to parents being more likely to give up their own pleasures than those of their children.
There is little liquidity in the shares, but they look good value and come with a dividend attached. Shares are rated a buy.
Drilling services firm Plexus announced a contract with oil giant Shell. It will see Shell pay £750,000 deal for the firm's wellhead technology in the Egyptian eastern Mediterranean.
It is the second deal with Shell for Plexus, which counts the likes of BHP Billiton, BP and ConocoPhillips among its clients, and shows the company is capable of branching out into other regions.
Plexus makes drilling safer, cheaper and more efficient and its main task is to ensure it can expand into new markets.
So far, this seems to be working and the latest contract win was another example.
The company is worth just £51m and trades on a forward earnings multiple of 10 times. That is a discount to the rest of the sector, which the company should close as it grows.
There is a chance to get in at an attractive valuation, so they are rated a buy.
The Financial Times
The rise in the value of the dollar against the euro and the retreating price of oil and gold are not encouraging managers of US equity funds to be much more optimistic about the state of the US stock market.
The dollar this week reached a six-month highagainst the euro, rising to $1.471 per euro. And a barrel of crude oil has dropped in price to less than $115, offering another economic benefit to Americans who consume 21m barrels of oil a day. But fund managers and financial advisers remain sceptical about the strength of US equities, despite the growing consensus that the American economy is not deteriorating as quickly as others across the globe.
However, US equities are not performing poorly when compared with emerging markets and Europe. Since the start of the year, the S&P 500 has fallen 12.43%, while the FTSE 250 is down 19.5%, the Nikkei 225, is down 13.8%, and the FTSE Euro 300 is down 20.1%, following reports that economic activity in the Eurozone has contracted.
And some private and institutional investors have begun to move money into the US from riskier markets, on the view that the country will likely be the first to rebound from recession.
But mixed earnings figures and pessimistic reports on unemployment and the US housing market are prompting most fund managers to remain cautious.
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'All is not rosy in the garden in the US,' protests Cormac Weldon, head of US equities at Threadneedle. 'The US economy is not past the worst. We're not at the start of a bull market.'
Fund managers claim they are not in a position to take bets on particular sectors as many are still in a state of disarray. The most robust appear to be healthcare and technology companies. But the performance of US retailers is still suffering as Americans have yet to return to stores in droves. Also, US exporters, which have profited from a weak dollar, are now expected to suffer a slowdown in business as their competitive pricing advantage is eroded.
As it is difficult to favour a top-down approach, managers are following in the footsteps of the value investor Warren Buffett and focusing on careful stock selection.
'My primary focus really is to find good businesses at fair prices and just hold onto them,' says Sebastian Radcliffe, manager of Jupiter's North American Income Fund. 'As Buffet says, if you can buy a great business at a fair price, it puts you one step ahead of the herd.'
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A company Radcliffe likes is Medtronic, a Minnesota-based maker of heart pacemakers, defribrillators and stents, which is unlikely to face much competition as it has more expertise and better distribution than rivals. It is trading at 18 times next year's earnings.
'You might have a company which at some point comes out with a better widget, but it would be hard to take on the likes of Medtronics,' says Radcliffe.
Monsanto, the St. Louis-based agricultural biotech company which was the first to offer genetically modified soya beans, is another pick.
Threadneedle's Weldon, meanwhile, favours Direct TV, the satellite television company for its balance sheet, and Vistaprint, which prints business cards and other promotional materials for small businesses.
'The advantage Vistaprint has is that its pricing is thirty to forty per cent lower than its competition thanks to its technology and scale.' Weldon is still somewhat awestruck by the rise of Apple, which is trading at 34 times next year's earnings, in spite of its share price reaching $178.
And although fund managers are unwilling to call the bottom of the US equity market, the consensus view of traders is that a stronger dollar would only bolster the strength of the American economy, as it would encourage foreign investors to buy US equities and curb inflation further. They currently expect the US dollar to rise higher against the euro and sterling – which this week cost just $1.85.
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