Newspaper and magazine share tips

By This Is Money
Updated: 11:38 EDT, 26 November 2010

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

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FRIDAY

Investors Chronicle

Speedy Hire's shares spiked at 1319p before the financial crisis unfolded. Now trading at 27p, they have experienced a harsh fall. That's what happens when a company gets close to going bust, you might say. Yes, but Speedy is still the UK's market leader in renting building equipment and, after its first-half figures for 2010-11 were announced earlier this month, we think it's right to change our stance on the shares. For a long-term investor, with a least a five-year investment horizon, now looks like a good time to buy.

IS Pharma is another UK pharmaceuticals company that exists primarily to take advantage of niche products that attract little interest from large pharma firms, but which can generate profits from sales to comparatively few patients. The shares are rated at approaching 12 times underlying earnings for 2011-12 by broker Finncap. As long as IS Pharma can maintain its financial stability and find other products with growth rates similar to Variquel and Aloxi, then the earnings growth will quickly leave that rating looking paltry. Buy.

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The Daily Telegraph

Copper has one of the tightest supply situations of all metals – and this is likely to support its price for some time. That's why we recommended buying pure play Chilean copper producer Antofagasta last December. The tightness has caused copper prices to bounce over the past 12 months but we noew feel that the price now looking a bit full. Indeed, this was the reason that the rating on Antofagasta shares was reduced to a hold six weeks ago. The shares appear to be fully valued at present but prospects for copper on a supply-and-demand basis are very sound. Hold.

We recommended buying shares in Avocet Mining at the start of last month as a good way to play the high gold price. Avocet has gold assets in West Africa and South-East Asia. Its most important asset is the Inata mine in Burkina Faso. Avocet said that it was increasing its average forecast gold production at the mine to 165,000 ounces a year over a six-year mine life ending 2016. The company doesn't currently pay a dividend and it is likely to use its cash flow to invest in new projects. Buy.

The Times

If Keith Clarke, chief executive of consulting engineer WS Atkins, sounds unimpressed by yesterday's announcement of £8bn to be spent on upgrading Britain's railways, it is only because he appreciates from experience how long such huge projects take to come to market. In February 2009 it was one of the successful bidders to upgrade Britain's intercity trains. That work was kicked into touch before the election and is now part of the package yesterday. This year and next will be flat, the shares selling on about ten times earnings for both. A strong hold.

PayPoint fits neatly into Donald Rumsfeld's category of the “known unknowns”. This is a substantial business spun out of the BBC, BT and others in 1996 that provides terminals at the local convenience store for customers to pay utilities on credit card bills or top up their mobile phone. The retailers like it because it drives customers into their stores who might just pick up something else whilst there. The shares are on 10 times this year's earning. A gamble, undeniably – though rather less so than a lottery ticket. Buy.

The Independent

After the high excitement surrounding Ofwat's five-year price review, concluded last November, some semblance of normality is returning to the sector. Notwithstanding the imposition of a £1 real-terms cut for every customer of Pennon subsidiary South West Water's bills by 2015. Pennon Group's first-half results, published yesterday, still managed to beat analyst expectations. But, in the aftermath of the pricing debates, the sector is looking, dare we say it, boring. In January, we recommended Pennon investors take profits. It is not time to buy back in. Avoid.

Young & Co's Brewery bought a couple of pubs in the first half of the year, but investors are waiting for news of more significant acquisition. The management reiterated yesterday that it was looking to buy and the value of the stock will depend on the terms of whatever deal emerges. The outlook for the pub industry is not particularly rosy, however, with tax rises, job losses and the Government's austerity programme hitting customers' pockets. Young's is a sector star, so, while buying now is risky, we'd keep holding.

THURSDAY

The Independent

When we turned positive on Johnson Matthey in the summer, the platinum refiner's shares were trading at under 1,600p a piece. Given the gains seen over the last few months is it time to bank profits? The bull case certainly received a boost yesterday, when Johnson, which doubles as the world's largest supplier of catalytic converters, issued a storming set of results. Management also struck a confident note on outlook, with performance over the second half expected to be broadly in line with the first six months of the year. That said, Johnson will face tougher comparisons as auto sales over the 2nd half of 2009 were propped up by government incentive schemes. Moreover, Johnson still trades on undemanding metrics. Despite recent gains, the shares remain on multiples of under 15 times Deutsche Banks forecast earnings for next year. Keep BUYING.

We've been bearish on Sporting bet, the internet bookie which lost nearly a quarter of its value after chief executive Andrew McIver said it was not for sale, for some time. The sporting betting business itself is ticking along nicely (but try and get an account and you'd wonder how), but poker is being hammered by the likes of full tilt and Pokerstars which still operate in the US and have been battered by the recession. The risks are acquisition and regulation related. Sporting bet would like to buy or merge with rivals which could add new territories or enhance its mobile offering. At nine times 2011 forecast earnings, the shares are inexpensive. But the risks are too high. AVOID

The Times

The market seemed a little surprised at the strength of Johnson Matthey's halfway figures, which itself is a surprise. This is one of those world-beating British companies with huge technical expertise and a commanding position in growth markets that should be emerging well from the recession. Both its main divisions, environmental technologies and precious metals rebounded by 65% on sales up 25%. One route to growth, suggested by the most recent acquisition, would be to find further industrial applications for its existing process technology business, which falls within environmental technologies and makes refineries and other heavy plant more efficient. Until the long term outlook is clearer, the shares remain a strong HOLD.

For investors in Hampson Industries, take off has been a long time coming. A year ago the maker of tools and composite structures for the aeroplane industry agreed new terms with lenders on its £141 million debt, but this was not enough to head off a £59.5 million rights issue in February. Headline halfway pre tax profits to the end of September fell from 12.3 million to 1.3 million, aided by a £5.6 million swing on restructuring charges and other one offs. The halfway dividend is axed. As recently as June, along with last year's results, a “progressive” dividend policy was still being promised. New chief executive Norman Jordan, who has wide aerospace experience, has promised “fundamental” and “aggressive” action on efficiencies and sees further debt reduction as a priority, hence the axed dividend. The shares, on about 8 times this years earnings are effectively a punt on him delivering. A BUY for recovery, but not for the cautious.

The Telegraph

Yesterday's results from Compass showed that the catering giant's management is delivering on promises. The company said that the underlying operating margin would improve by 40 basis points, which it duly did. Compass is the world's largest catering group and provides in-house services for businesses including Virgin Media and the Barbican Centre, as well as catering for sporting events such as Wimbledon, and Cartier Polo. The company has also proved to be very defensive through the downturn and this was why the shares were initially recommended as a buy. However, Compass now appears to be looking for growth. There are plenty of outsourcing opportunities in the global food service business, but the group is building its exposure to associated support services, too. The shares remain a BUY for growth.

There was more good news yesterday from African focused oil group Afren after it said that it had completed its Okwok appraisal well in Nigeria. It said that the drilling had established that there was a minimum economic field size of 25m barrels of oil equivalent, confirming that the find is commercial. The group also has exploration assets in Cote d'Ivoire, Ghana, Congo Brazzaville and the island Sao Tome and Principe. Although, there is some risk with all explorers, the company's management has been delivering on its strategy. The shares remain a BUY for their increasing production and exploration upside, as the company has a significant drilling programme for 2011.

WEDNESDAY

The Daily Telegraph

European Goldfields appears to be in the final stages of becoming a major gold producer – should it receive the permits for its mines. The company recently issued its third-quarter results, in which it posted a pre-tax loss of £1.7m. However, these results are not a determinant of the group's future share-price performance. The shares were recommended in at 395p in March and they are up 124% compared with a flat FTSE100. The average price target of the 11 analysts with buy ratings on the shares that are covered by Bloomberg is £10.50 and the shares remain a speculative buy.

There are a number of companies that we have recommended that are sitting on a substantial cash pile. Outsourcing and construction group Kier Group is one of them. Of course, what the company does with the cash is key. Kier is looking for suitable acquisitions and yesterday revealed it has finalized the purchase of a small, but strategically significant company, Beco Limited. The shares have been very volatile since they were first recommended at 899p in March, but they are now up 41% since then compared with a FTSE 100 up 52%. Buy.

The Times

One of the most interesting evens in what will be a relatively dull interim reporting season for the water companies is Severn Trent's decision on future dividends. Severn Trent is will into the cost-cutting that will fund dividend growth, bringing in computerized systems that mean the loss of 275 jobs to save £10m a year, £5m in the current year. The shares have had a good run and, at today's level, the projected dividend payment represents a prospective yield of 4.8% This suggests there is better value elsewhere. Avoid.

Like an overdue ship that resolutely refuses to appear on the horizon, the recovery in marine engineer Hamworthy's markets is still out of view. This explains yesterday's 4% fall in the share price, despite some interims in line with expectations and the reassurance that the year will also match market forecasts. Operating profits fell by 37% to £6.4m for the six months to the end of September. But the shares have had a strong run this summer and are now, even after yesterday's fall, on about 20 times' this year's earnings. Avoid for now.

The Independent

Telcoms group, Kcom Group, disappointed analysts with its first-half results yesterday as the 8% fall in revenues to £195m missed expectations. Despite this, Kcom is a good news story as management has overhauled the stuttering company and offloaded some of the businesses that have performed less well – which is partly responsible for yesterday's drop in earnings. The interim dividend has more than doubled to 1.1p and the board has committed to 3.3p for the next year, up from 1.8p. The price of 7.9% times estimated full-year 2011 earnings looks undemanding. Buy.

Travis Perkins trades on multiples of 10 times forecast earnings for 2011, according to Panmure Gordon. Though cheap in itself, the valuation appears even more undemanding when considered in light of yesterday's update from BSS, the pluming and heating firm which Travis is in the process of buying for about £558m.The results suggest that BSS should drive further growth at Travis. Couple with the thin valuation multiples, we cannot recommend anything than making this a buy.

TUESDAY

The Independent

Tesco has already gobbled up Britain. Now it's looking to repeat the trick in Asia, and there's a good chance it will pull it off. They have unveiled some fancy looking targets for the Chinese operations (a plan to quadruple sales in five years). With profits from Asia soon expected to flow, the attractions of this stock soon become clear. Tesco shares trade on 13.3 times forecast full-year earnings against J Sainsbury on 14.7 and Wm Morrison on 12. The prospective yield of 3.4% compares to Sainsbury's 4.2% and Morrisons 3.6%. But Tesco's growth prospects eclipse these largely domestic plays. It deserves a bigger premium. Buy.

Back in May, we put a buy on Kier on the strength of a valuation that was starting to look attractive for the construction, house building and contracting group. The shares have improved by 16% since then and yesterday's acquisition news from the group demonstrates some of its attractions. Although relatively modest - with a maximum price tag just shy of £2.5m, plus another £487,000 in the form of a loan repayment – Kier's purchase of renewable energy group Beco is strategically important. At 10.5 times full-year earnings the valuation, for a construction group, it is no longer as cheap as it was. But we'd still hold the shares.

The Telegraph

Tesco is the only supermarket in the UK on which we have a buy rating. The reason is simple; it is the only one with an international strategy that could offer impressive growth over the longer term. The supermarket giant is currently hosting an investor and analyst trip to its operations in South Korea and China. Tesco's UK market share is about 30% and although its shares have underperformed rival Sainsbury's this year, we still regard it as the supermarket group to back because of its international profile. The shares were recommended as a buy in December 2008, at 329.75p, and they are up 28%. The FTSE 100 has risen 33% over the same period. Buy.

Interdealer broker ICAP has benefited from volatility in the markets prompted by the sovereign debt crisis sweeping through the eurozone. The company has heavily invested in its electronic trading platforms – and these now make up more than half of revenues. ICAP shares were first recommended as a buy at 326.6p on February 16 and they are up 42%, compared with the FTSE 100 up 8%. The shares are currently yielding 3.9% and investors who brought in on the initial recommendation would have locked a yield of 5.6%. Any fall in volatility is likely to have the opposite effect, although quantitative easing in the US is likely to have the opposite effect. A majority of City analysts that are monitored by Bloomberg are also neutral on the shares at this level. Hold.

The Times

Diploma is a distributor of highly specialist equipment to hospitals and operating theatres, industrial and construction machinery and to defence and aerospace - and these products require a high level of service, and in some cases, next day delivery. As a consequence, they earn margins in the mid-teens. But these qualities have not gone unrecognised. At the start of the year, you could pick up the shares for little more than 170p, but they have put on a quid since. They sell on more than 15 times this years earnings, but are a strong hold.

Shares in Mitie have fallen about 13% since the start of the year. In Mitie's core facilities management business, growth stood at 5%, but within asset management, revenue went sharply into reverse, down 18%. Within property management, underlying revenues fell by almost 6% because of the inevitably challenging conditions in the sector. Mitie wants to expand in the British public sector work by moving into new areas linked to the jobs it is already doing. So the company has bid for prisoner escort, training and rehabilitation work for the ministry of justice. The shares are on about ten times this years earnings. Given the uncertainties long term, about right for now. Hold.