Newspaper and magazine share tips

By THIS IS MONEY
Updated: 10:31 EDT, 4 September 2009

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.

Keeping up appearances: All the latest share tips from the newspapers and magazines.

FRIDAY

The Times

Hays' chief executive, Alistair Cox, described last year's recruitment market as the worst in living memory. And the group, the UK's biggest recruitment agency, has felt the pain – announcing a 43% fall in annual pre-tax profits yesterday. But Hays is doing all the right things and is broadening its exposure, moving into public sector employment which will prove a helpful buffer. Shares have gained more than a third this year and while the outlook remains fragile, it's a buy.

HMV may have gained a short-term boost from the failure of rivals Zavvi and Woolworths but analysts are critical of new ventures such as a move into live music, cinemas above stores and mobile concessions. Critics believe such ventures are years away from having an impact, if they ever do. How the initiatives play out is unknown but at a mere nine times this year's expected earnings, the market is assuming the worst. Hold. Daily Telegraph

BP's announcement this week was arguably its best in year with a deep-water discovery of oil in the Gulf of Mexico which could contain 3bn barrels of oil. When the oil price slumped earlier this year, fears grew of a dividend cut which wasn't realised. The company is rapidly cost-cutting. Shares are up 10% since their recommendation in February. With the yield looking more secure, the shares are a buy.

Melrose is a firm which buys underperforming industrial assets, shakes them up, turns them around and sells the business. A recent acquisition was engineering group FKI for just under £1bn. Recent group interim results were good, with pre-tax profits rising to almost £40m from £15.2m after acquisitions, prompting a 5% increase in the interim dividend. With net debt falling dramatically, the company should see significant margin and sales improvements once the market picks up. Buy. Investors should note the company is Melrose plc and is listed under the ticker MRO. It is not Melrose Resources, which is listed as MRS.

Investors Chronicle

Shares in outsourcing firm Serco have been somewhat ignored during the stock market's cyclically-focused rally. But a storming set of first-half result underlines its attractions. During the period it was awarded £2.1bn worth of new contracts and was appointed preferred bidder on business worth £1.4bn. With most of the group's contracts promising long-term growth (99% of this year's budgeted revenues are already in the bag), Serco is unlikely to disappoint. Buy.

It wasn't so long ago that PayPoint's management sounded confident their business was recession-proof. But the firm – which allows customers to pay bills, obtain cash or top-up mobile phones – issued a trading update earlier this month showing revenues have slumped 11%. PayPoint should expect its customers to continue to struggle with their bills or go easy when topping up mobile phones for some time to come. With signs of weakness emerging, it's time to sell.

THURSDAY

The Daily Telegraph

Sprits group Diageo turned in a good performance last year. Despite one of the most challenging periods in recent history, the company managed to increase its operating profits, although volumes fell by 3%. The current financial year is unlikely to be hit by significant destocking, although it may be too early to see its customers restocking. However, long-term prospects are good and investors should regard any falls as a buying opportunity. Buy.

Shares in Cape - the oil and mining services group – were tipped at 65½p in March and have now come off highs after hitting 230p a share. This degree of profit taking is hardly surprising after such a strong run. The firm has been making good progress on drawing down its debt and, despite current difficult trading, their hold on the Australia market should reap dividends in future. With plenty of opportunities for contracts in the next few years, it's a buy.

The Times

Hargreaves Lansdown, Britain's biggest private client fund management company, may have had a tough year but it's ridden the storm better than most with a 20% profit rise to £73.1m – comfortably ahead of analysts' forecasts. The firm is winning business from competitors and has loyal clients. Vantage, the company's main investment platform, is proving popular because of the ease with which clients, unhappy with the market's performance, can switch into cash. Buy.

Is DSG out of the woods? Yesterday it revealed a plunge in sales but the group will soon be comparing trade against last autumn, when the collapse of Lehman Brothers — and the fears over financial collapse, wholesale job losses and vanished savings — dominated headlines. The company raised £310m in April to accelerate a promising store refurbishment programme in Britain and Scandinavia. At 19 times next year's expected earnings, that looks an expensive bet. Avoid.

WEDNESDAY

The Daily Telegraph

Legal & General's new chief financial officer Nigel Wilson spent his first day in the job at the embattled insurer yesterday and his work is cut out in trying to balance the company's balance sheet.

L&G shares have underperformed over the last year on the FTSE 100 rising 7% against the 9% for the entire index and the company halved its interim dividend to 1.11p. But speculation that Clive Cowdery and his Resolution investment vehicle provides hope. Avoid.

Support services group Serco has signed a deal worth up to £500m to deliver the Government's Flexible New Deal - training jobseekers into employment. It adds to an impressive public services portfolio, but shares still only trade with a yield of 1.3% and a price/earnings ratio of 17 - less than in other sectors.

Like L&G, Serco has underperformed on the FTSE 100, but it is now a company on the up. Last week a 30.8% rise in revenue to £1.95bn had Serco forecast that revenues could hit £5bn by 2012. Public services outsourcing should continue, and with the company one of the few likely to benefit from the recession, it could be a valuable defensive. Buy.

The Times

Majestic Wine's decision to change its hugely successful business model by reducing its minimum purchase requirement from 12 bottles to 6 could have a significant impact. Majestic has run year-long trials at two of its warehouses and must feel that its a step worth taking nationwide.

It means that regular customers could be enticed into extra, smaller purchases that they might have previously made elsewhere. But it could be a while before the results can be assessed. Hold.

Regional newspapers remain in the midst of the worst crisis in their history, with advertising revenues languishing 33% in the first half of 2009. Yet Johnston Press had successful end to last week with shares soaring on the back of debt refinancing.

However, the Scotsman owner could still be forced into a cash-call to reduce its £485m debts, providing a significant risk at what is already a full valuation for a newspaper stock. Until there is broad economic recover: Avoid.