LONDON (ShareCast) - Buy shares of Smith & Nephew, Danny Fortson advised in the Sunday Times. The Inside the City columnist said shares of the maker of artificial hips and knees had surged after US rival Stryker said it was considering a bid. Smith & Nephew releases annual results on February 5th and the numbers are likely to be good. The possible Stryker deal is the most important question. A deal would be logical because US hospitals and insurers want suppliers to cut prices. Scale would help and there will be no shortage of demand.
Sell Severn Trent shares, Danny Fortson recommended in the Sunday Times. They hit £22 on February 26th for the first time since the water company rejected a bid at that price 18 months earlier. They fell after the dividend was cut by 5% to pay for enforced cuts to household bills. The shares could fall further, the Inside the City columnist said. Rating agency Moody's changed its outlook to negative because the dividend cut may not be enough to maintain the group's credit quality.
Buy shares of Grainger, the residential property rental specialist, Midas advised in the Mail on Sunday. The shares should rise as renting becomes more widespread and some young people start to question the point of home ownership. A trading update on February 5th could give a short-term boost to the shares by allaying concerns about Grainger's prospects. The shares have fallen from 250p last spring to 194p because of concerns about the housing market and uncertainty before May's general election, but this seems overdone. Most of Grainger's homes are at the affordable end of the market.
Hold shares of Diageo, Questor recommended in the Sunday Telegraph. The drinks group's shares rose last week after it reported sales growing more strongly in the second quarter. Diageo is cutting prices to sell stock, which explains why first-half profits fell while sales were flat. The company is cutting costs and is on track to meet forecasts. The company is a good quality investment and a solid defensive stock but at 20 times forecast earnings the shares are too expensive in light of flat earnings growth.
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