Newspaper and magazine share tips

By THIS IS MONEY
Updated: 11:44 EDT, 8 August 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.

Profit warning: Rentokil has experienced poor trading for a number of years

FRIDAY

The Telegraph

Barclays shareholders have 'endured a lot' says chief exec John Varley, with shares plunging from near 800p in early 2007 to 250p last month. But now, shares are looking good. Revenues at the bank are growing, once you strip out the writedowns, and divisions such as foreign exchange, commodities and interest rates are resilient, which should be rewarded in a downturn. Barclays has earned investors' faith. Buy.

RSA (formerly Royal & Sun Alliance) has pushed its profit higher at a time when the broader sector is struggling, with an emerging markets strategy and a conservative approach to investment. But with investments accounting for the lion's share of profit, RSA is still vulnerable. Should the slowdown reach foreign markets, premiums could suffer. There is no compelling argument for buying in now. Hold.

Hotel group Millennium & Copthorne has suffered recent share price declines. However, with a new chief executive in place, profits are up 8% in the second-quarter. These will be driven further by squeezing costs and selling off hotels. Pub sector share prices have rebounded in recent days and hotel groups should follow but this will be a few months down the line. Avoid for now.

The Times

Yesterday Friends Provident took the pain of a 20% slide in first-half operating profits. It is paring short-term growth in favour of a turnaround that should produce higher margins and fatter profits upon completion in 2010. Shares in Friends have slid 53% since last July, when it unveiled an ill-fated tie-up with Resolution, the closed life firm. There are cheaper FTSE 100 life insurers with fewer problems. Avoid.

Medical devices maker Smith & Nephew has suffered accusations of 'unethical' sales practices this year, and has forecast an annual hit of $100m. But underlying sales are up 8% and earnings per share up a healthy 13%, with all four of S&N's divisions trading well. But with the defensive traits that underlie its growth still intact, there is reason to stay on board. Hold.

Investors' Chronicle

Drugs giant AstraZeneca's sales are up 3% and an impressive 22% year-on-year sales growth for anti-cholesterol treatment Crestor. The company is working hard to keep costs down and the group is on track to deliver two-thirds of it's planned $1.4bn annual savings by the end of this year. AstraZeneca boosts strong overall sales performance, relatively secure earnings and long-term potential. Buy.

With poor trading for a number of years, it's no surprise Rentokil will announce the fourth profit warning in a year. The deteriorating economy is taking its toll on the group's pest control and plantcare businesses, and CityLink parcel delivery service. A turnaround does not look to be in the offing and the rating for Rentokil is far too high. Sell.

South Africa may remain Old Mutual's biggest market, but difficulties outside its home turf have undermined the FTSE 100 life insurer. However, yesterday's first-half adjusted operating profits of £773m were in line with consensus forecasts in the face of weak European stock markets. The shares are best avoided ahead of evidence the US is getting no worse. Avoid.

Shares in Spring Group, the IT recruitment specialist, rose more than 9% yesterday. A strong overseas presence has taken Spring's nonUK revenues from near-zero to a quarter of the total, which is useful protection against domestic weakness. However, the risk that a weakening permanent market puts 2009 forecasts under threat counsels caution for now. Avoid.

The Daily Telegraph

Liberty International is one of the most solid property companies in the UK. While occupancy rates of 98.7% remained high, recurring profit of £57m was down on the £69m reported at the end of 2007. No doubt there will come a time to invest in Liberty again, but it probably won't be until early 2009. Until then, avoid.

Yesterday Morgan Crucible announced a 9% leap in profits before tax, even given a higher-than-expected restructuring charge. The company's diversity, both in terms of the sectors it serves and its geographical spread, makes it look well placed to ride out a downturn. The shares are now trading on 8.5 times Numis' forecast earnings per share for 2009 - an 18% discount to the sector - and yielding 4.1% on the same basis. Buy.

The shares look cheap, according to the Daily Telegraph

Any retail chain connected with home decoration or DIY is usually the first to notice a downturn, and so it has proved this time around. Carpetright, yesterday reported that first-quarter like-for-like sales at its UK stores fell by a whopping 15.4%. However, Questor thinks that shares in Carpetright are worth buying for the long term. On just 10 times this year's earnings, and yielding 8.7% the shares look cheap. Buy.

Oil and gas exploration is booming, while new infrastructure projects in power and water across the world have ensured little let-up in demand for Rotork's products. Revenues were up 27% to £144m, while pre-tax profits rose 24% to £33.3m. While undoubtedly a sound business, the upside for the shares from these levels seems limited and investors looking for growth would do better to look elsewhere. Avoid.

The Times

Standard Chartered yesterday announced pretax profits were up by a better than expected 31%, structured credit writedowns were in line with forecasts and nonperforming loans have actually fallen year-on-year, to be down 7%. Shares in the bank rose by more than 8%. However, even though, at £15.42, the premium to the sector has sharply narrowed, to ten times 2008 earnings, there will be better times to buy. Avoid.

Yesterday's resilient figures from Legal & General (L&G) revealed that first-half operating profits, up 6 per cent at £626m, were at the top end of forecasts. However, the housing market ensured that protection sales were flat. Given L&G's exposure to a weakening economy and yesterday's strong advance, there is little incentive to chase the shares at 108p. Avoid.

Yesterday's second-quarter numbers show that 888 Holding's poker unit suffered a 10% decline in net gaming revenue, compared with the previous quarter. The shares – off 1½p at 152¼p – are trading on a chunky multiple of 18 times earnings. However, the company's strong cashflow and growth potential makes shares in 888 a solid long-term hold.

Johnston Press, home to The Scotsman and the Yorkshire Post, has laboured this year, hit hard by the severity of the advertising downturn. Yet trading weakness can be a buying opportunity. The bad news is priced in. On the gloomy view, the shares trade at 4.6 times 2009 earnings, but interim results this month are likely to show what executives can do. Buy for recovery.

The Daily Telegraph

Intertek's robust first-half performance revealed profits jumped 21% to £58.5m on revenues 27% higher at £457m. With regulations and legislation being tightened to ensure similar health scares do not re-occur, Intertek is reaping the rewards and posted organic revenue growth of almost 30%. Hold.

Senior commands half of its revenues from the aerospace industry. The order books at Boeing and Airbus are chock full and this means good business for Senior. Most encouragingly, the company's margins improved significantly, given its focus on cost control, and helped Senior beat expectations. The shares currently trade on a forward earnings multiple of a little over 10 times, which is undemanding given the company's growth prospects. Buy.