Newspaper and magazine share tips

By Lee Boyce
Updated: 06:59 EDT, 19 November 2010

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

Round up: We round up the latest share tips from national newspapers and investment magazines

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FRIDAY

Investors Chronicle

Northumbrian Water's share price has been on a steady run since the start of the latest regulatory price regime for water suppliers, and it's up 55% since last November. But we think it's now ready to take a bath. True, Ofwat's price determination was less harsh than anticipated, but the Durham-based supplier's shares trade at a hefty 18% premium to the value of its regulated assets. If the UK's slow recovery gathers pace, that would favour shares in cyclicals over defensive stocks. That would not be good for shares in an overvalued water utility. Sell.

Lloyd's insurers haven't provided a happy hunting ground for corporate predators. The sector is littered with failed bid attempts – Novae's 2009 approach for Chaucer, for example. But that has changed. Omega Insurance's shares are looking enticing. Even after rising from August's 87p low point, they still trade below Numis's forecast for end-2010 NTA of 100p. Omega's investment book, focused on cash and high-quality bonds, generated a return of 1.4% in the first half. Investors should act now. Buy.

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Daily Telegraph

Shares in Cineworld, the UK's largest listed cinema operator, hit an all-time high on Monday. However, Tuesday saw the shares plunge almost 12% after investor Blackstone said it was going to sell its 20% stake in the group. We regard this as a buying opportunity. The company operates 78 cinemas with 801 screens, of which 33% are digital with 3D capability. The shares have shown considerable capital appreciation – rising 74% compared with FSTE 100 up 53% since the initial tip on March 15 last year, but remain a buy as both yield play and a growth story.

We have been convinced that Western Coal has been undervalued for some time – and that was the basis for its recommendation in June and on Wednesday this week. Within 24 hours of the second recommendation, a bid for the Canadian group emerged from US coal major Walter Energy. Investors who took the plunge and bought on Wednesday should be sitting on gains of about 45% in just one day. Even after the leap in share price yesterday, the shares are only trading on an earnings multiple of 14.5 times in the current year. The official stance is hold, but we think it would be wise for investors to take some money off the table now.

The Times

The trading statement from Dynacast, the die caster that provides about a fifth of total revenues at Melrose, might as well have had 'viewing by appointment appended underneath it, so closely did it resemble something in an estate agent's window. Indeed, Melrose's decision to seek a buyer for the business had apparently leaked a day earlier. Analysts were busy upgrading their forecasts yesterday, but the shares are on less than 11 times next year's earnings. Fans of the management strategy should buy.

Even National Grid admits that its accounting is at times impenetrable. With all respect to their undoubted financial nous, one wonders what its 1.1m private shareholders make of it. The Grid's first-half figures show operating profits from the division up 108% to £360m. There is unlikely to be any repetition of this summer's shock £3.2bn rights issue, but that event alone highlights the uncertainties ahead. Avoid.

The Independent

Derwent London, the office landlord, joined the chorus of commercial property companies signing the praises of London's buoyant market yesterday, following similar noises made by larger rivals such as British Land and Land Securities recently. Derwent London has the largest central London-focused real estate investment trust (Reit) with a portfolio valued at £2.15bn. There is a case for taking profits but we'd hold for now.

Close Brothers is and remains something of an oddball, a ragbag of different financial services businesses in one group which is really hard to compare to anything else. Yesterday the company released a solid enough looking trading statement for the first quarter, which in Close Brothers' case spans the three months to 31 October. The stock has had a good run and at 12 times full-year earnings isn't cheap, but we'd hold for the 5% prospective yield.

THURSDAY

Shares magazine

Two fund raisings in the past six weeks have given IS Pharma a £16.1m pot with which to pay down debt and fund future acquisitions. The company, whose products include drugs to treat nausea and bleeding dilated veins, has historically been misunderstood by analysts with less borrowing than its balance sheet suggests. IS Pharma's management team is looking to strengthen its range of products with acquisitions. They key criteria for any target are ease of integration and a gross profit margin in excess of 60%. Buy.

Positive data from a Phase II clinical study lifted Vectura by 6% to 68p in early morning trade. This news and upbeat half-year results published the same day are reason to keep buying shares. Two big pharmaceutical companies, Novartis and GlaxoSmithKline, have signed up to license several Vectura products. Half-year revenues increased by 15% to £26.3m and pre-tax losses were slashed from $4.5m to £0.6m. Cash and cash equivalents increased by £13.8m to £77.9m. Buy.

Daily Telegraph

Centrica has transformed itself over the past two years, as it implements its strategy of becoming a vertically integrated energy company. Yesterday's third-quarter update indicated that everything was on track and the company is delivering on its goals. Centrica, through its purchase of FTSE 250 oil and gas company Venture Production, has its oil and gas production and Centrica-owned British Gas continues to grow its market share. The shares were fist recommended on May 12 and they are now 17% ahead of the initial recommendation, compared with a FTSE 100 up 6%. Buy.

The most significant thing to take away from yesterday's trading update from marine services group James Fisher is that the trends seen at its half-year results have continued. Fisher's marine oil business, which transports crude, is still profitable and there was continued good progress at its marine services division. The shares trade on a December 2010 earnings multiple of 12.3 times, falling to 11.1 in 2011. The group's business is cyclical and should be re-rated as earnings improve through the cycle. Buy.

The Times

Morgan Crucible has come a long way since it was founded in 1856 as the Patent Plumbago Crucible Company, by eight brothers called Morgan who did, indeed, make crucibles. Today, after a difficult period or more as a diversified engineering group, it gets three fifths of its revenues from the manufacture of high-specification ceramics. Profits for the current year will be at the top end of market forecasts, putting the shares on 13 times' this year's earnings, falling to ten times for 2012. Further progress may be limited for now, they remain a strong hold, or a buy on weakness.

The recovery at Speedy Hire has been agonisingly slow. The plant firm business has slipped further into the red, with losses of £9.9m before amortization and exceptions in the six months ending September, more than twice the £4.8m loss for the same period last year. Debt is up almost £4m to £123m. However, it has raised about £77m from internal cashflow and the corner seems to have been turned. But at 26.25p, the shares are a very speculative punt.

The Independent

More than £1bn was wiped off the value of Rolls-Royce after a Qantas Airbus was forced into an emergency landing in the wake of the near disintegration of one of its Trent 900 engines. This was despite the company saying last week that the financial impack would be limited. The news from the company's array of other businesses has been positive. It still is not the cheapest of shares, but you expect to pay a premium for quality. There is still a risk of complications about those engines, but we would be willing to take it. Buy.

Ted Baker continues to impress, with sales up just more than 20% during the past quarter, according to the interim management statement the retailer released yesterday. The figure was artificially high, with a 76% increase, year on year, in less profitable wholesale sales. Retail sales were up almost 9% on the same quarter last year. There's an outside chance of surprise, with new stores in the Middle East and the Far East picking up pace. But for now, hold.

WEDNESDAY

Daily Telegraph

Friday's interim figures from Electrocomponents, the world's largest distributor of electronics and maintenance products, were so good that upgrades to consensus for the current year and next year are likely to be in the order of 10% or more. The key to future profit growth is its international profile and internet sales. The shares are trading on a March 2011 earnings multiple of 16 times, falling to 14.1 in 2012. The shares remain a buy for the income and growth prospects.

Coal is not very fashionable, but investors should not overlook the prospects for this valuable bulk commodity. Canadian group Western Coal, which has a secondary listing in London, was recommended because of its aggressive expansion plans. The group plans to triple production to 10m tonnes by 2013, having produced 3.2m tonnes in the year to March 2010. The London-listed shares were recommended at 316.5p on June 16 and they are up 43% compared with a market up 9%. Buy.

The Times

If Pete Redfern, the chief executive of Taylor Wimpey, claims he is looking forward to 2011, then he must be one of the few people in housebuilding who is. The company was saddled with £1.57bn of debt and in danger of breaching banking covenants. Yesterday the company announced a new £950m banking facility. Taylor Wimpey's share price seemingly marooned below 30p which makes little sense in terms of that potential NAV. Immediate progress could be limited, but buy and tuck away for the long term.

It must be a trend. On the day that Investec announces a clutch of high-profile analysts' hires, Collins Stewart, which operates in the same part of the jungle, sets out how many City professionals it has managed to attract since July. The biggest addition is a fully fledged mining team, most poached from Arbuthnot Securities. Collins Stewart has £88m in the bank and is on the way to pre-tax profits of £27m. Worth a punt on the management's record alone. Buy.

The Independent

Marius Kloppers must be annoyed. The chief executive of BHP Billiton tried to merge his company with Rio Tinto, but was stopped in his tracks by the global recession and the subsequent decline in metals prices. Now he has missed out on Potash Corp. So, should investors punish Mr Kloppers by offloading BHP's shares? The short answer is no. Given the strength of its balance sheet, BHP's stock is cheap. Buy.

JD Sport Fashion showed many of its rivals a clean pair of heels again yesterday, with like-for-like sales growth of 2.7% for the four weeks to 28 August. A large part of JD's success has come from the exclusive relationships it holds with brand giants such as Nike and Adidas. It should also be said that JD has been helped by the troubles of its rival JJB recently. We think it will remain one of the sector winners, so buy.

TUESDAY

Daily Telegraph

Meat-processing group, Cranswick, revealed their interim results yesterday. The results show that at a time of constrained household budgets, cheaper meats such as pork tend to be more popular. This trend has developed, boosted by the continued investment in the group's facilities and a concentration of keeping down costs. In the UK, the group's fresh pork operation has the capacity to accommodate about 29% of the initial processing of the UK pig herd. Cranswick was first recommended at 600p on January 25 last yea ant the shares are up 38%. With these excellent sets of figures, buy.

Mining is an inherently risky business. But, despite a fatal accident a month ago, there is still a case for investing Kenmare Resources shares. The company's main asset is its Moma titanium mine in Mozambique. It is regarded by many as a world class asset, located on the coast within its own port operation. Of the five City analysts monitored by Bloomberg, all have a buy rating on the shares, with an average target of 29.77p. The shares are up 39% since their recommendation on September 4, compared with the FTSE 100 up 4%. Buy.

The Times

Lonmin, once part of the old Lonrho empire and the world's third-largest producer of platinum, is back in profit, has completed its relocation to Johannesburg and is on the dividend list for the first time since 2008. Admittedly, no one will be buying the shares for the yield for a while. Lonmin's recovery to a $237m (£148m) underlying pre-tax profit, from a $111m loss, was almost entirely down to the price of platinum. Yesterday's 4% jump in share price puts Lonmin on about 18 times this year's earnings. Hold.

Robert Wiseman Dairies is a simple business, its board claims. It takes milk from farmers and sells it to supermarkets, 60% of the business, in return for a thin margin. Unfortunately, that margin is getting thinner; a price war initiated by Asda was followed by Tesco, Wiseman's biggest customer, sparking September's shock profit warning that knocked almost 30% off the shares. They have yet to recover and there was little in yesterday's interim figures that suggest that they could. The shares yield 5.5% going forward and trade on nine times this year's earnings – an attractive return, but no other reason to chase. Hold.

The Independent

Lonmin surpassed investors' hopes yesterday as platinum prices and the company's output recovered. The company's had its problems, and its debt levels are worrying some analysts. But the general view is that platinum prices, which have risen by 15% this year, have further to go as emerging markets lead the world's economic recovery. That should help underpin Lonmin's performance and the share price, which, though ahead of its June low, remains below levels seen at the beginning of this year. Hold.

Robert Wiseman has left a sour taste in investors' mouths ever since its September profits-warning, sparked by competition among grocers, badly squeezed profit margins. There was a bit of cream with yesterday's results, however. While the group's fear that the price war could knock £7m off profits in the second half was reiterated, it did sign a deal with Tesco to supply an extra 35m litres of milk. And, after a battering, the shares are starting to look cheap. They trade on 8.8 times forecast full-year earnings, while debt has been cut and the dividend held. Even if the economy takes another tumble, people will still but milk. Hold for now.