There were some high-profile FTSE 100 names among this week’s share-tip roundup from low-cost platform Trustnet Direct, including Royal Dutch Shell, Royal Mail and Unilever.
Tuesday
Jupiter Fund Management – Buy
On Tuesday, Tempus tipped Jupiter Fund Management as a long-term buy. Unlike its peer Aberdeen, Jupiter is not so exposed to emerging markets so the share price hasn’t been as turbulent of late. The company is expanding by entering new territories – it has highlighted Italy as the destination for the next launch at the end of the year – and this offers a relatively inexpensive growth strategy compared with buying up established players. The performance of its share price has been rather unexciting over the summer, but the company now offers a dividend yield approaching 6 per cent, although forward earnings can be difficult to predict. However, the column said this sector is set for growth.
Royal Dutch Shell “B” – Hold
Questor said investors should hang on to Royal Dutch Shell “B” shares. A recovery in crude oil prices and the fact the firm has managed to soothe fears over the merger with BG Group have contributed positively to the share price over the last few weeks. The question is whether the stock can continue to maintain its healthy dividend, which has typically provided a lure for income-hungry investors. Costs are being axed and the company remains cash generative, while the opportunities presented by the BG deal are certainly compelling, too. The column said an even better deal could be found by buying BG stock in the hope the merger completes, but there is confidence over the outlook here.
Wednesday
Royal Mail – Hold
Questor said investors should hang on to the Royal Mail. On Tuesday, the government announced it had completed its sale of the remaining stake it held in the company. This caused shares to fall, reflecting the discount offered with the latest placing, but the outlook appears a little more upbeat. The dominant market position, ability to trim costs and the fact it is sitting on a huge property portfolio all bode well. While there are constant regulatory worries that come with the market dominance, the stock has outperformed the FTSE, with its lack of exposure to the commodity slowdown helping. Trading on a projected 14 times earnings, the column said there is still value to be had here.
Performance of stock since floatation
Source: FE Analytics
Bellway – Buy
Tempus tipped Newcastle-based builder Bellway as a long-term buy, citing Tuesday’s update as proof of its focus on growth. Margins are set to remain above 20 per cent as all the expensive land it bought pre-recession has been built upon, cheap mortgage finance remains intact, Help to Buy is around until at least the end of the decade and there is a lack of property in circulation. This is a classic seller’s market and although the jump in the share price may have pushed yields below 4 per cent, if you believe the housing boom has further to run, this stock remains a “buy”.
Thursday
Connect Group – Hold
Questor said investors should hang on to Connect Group, formerly Smiths News. The newspaper distributor may be working in a market that is in terminal decline, but there are profits to be had. The firm is cutting costs to counter falling revenues and it is also expanding into other areas, including parcel distribution, having acquired Tuffnells at the end of last year. The shares are said to price in the tough outlook, trading on a multiple of just 8 times, and offer a 6 per cent yield.
N Brown – Sell
Tempus advised investors to avoid N Brown. The clothing retailer is still in the midst of transitioning to an online-only model and although transparency with the City has improved, profit warnings over the past 18 months are still casting something of a shadow. The strategy seems sound enough, but interim earnings highlighted the impact of rising costs, both in terms of capital spend on new systems and the closure of 18 physical stores. The restructuring may show signs of bearing fruit, but given the company now trades on a 14 times multiple, the scope for upside in the short term appears rather limited.
Friday
WH Smiths – Buy
Tempus tipped WH Smiths as a long-term “buy” this morning. The latest full-year results issued by the retailer have been strange at the headline level – like-for-like sales were flat, but that was the best it has produced in 13 years. The company has adopted a neat strategy of picking fights it can win – the CD and DVD market gives it no scope for profit – but it is the international travel operation that is raising the most interest. Hopes are high this is on course to see the same levels of profitability that the group’s airport shops in the UK achieve. Dividends may be a modest 2.7 per cent, but share buy-backs are part of the strategy and this will continue. Even on a 17 times multiple, this is worth a look.
Unilever – Buy
Questor said investors should buy Unilever. This is an established defensive play with the ability to consistently serve up sales growth. Emerging markets have helped the company – sales in Latin America were up by 15 per cent – but the situation isn’t quite as good in Europe. Food price deflation in the supermarkets is causing something of a headache, so in Europe, sales may have been up 4.7 per cent, but prices were down 2.5 per cent. The company trades on a 21 times multiple, but this is seen as warranted, with dividends on the rise. Questor said this is a good long term investment.
