Many stocks have made significant gains over the past week as the market has rebounded from the large falls seen since the start of 2016. Read this week’s share tip roundup from Trustnet Direct below to see which ones the experts are tipping for further gains.
Tuesday
Reckitt Benckiser – Buy/hold
There were mixed views on Reckitt Benckiser on Tuesday. Questor said investors should hang on to the stock after a boost in cold and flu medicine sales made for impressive full year results. The company continues to evolve away from lower margin cleaning products, expanding its health and hygiene lines instead, while lower commodity prices and a cost-cutting plan have also helped boost the bottom line. A growing middle class in emerging markets is also being picked off as a new wave of consumers come forward, helping to drive share price growth in recent years – the 2008 and 2015 market corrections barely register. There’s a good dividend on offer – around 4 per cent – but the stock now trades on a 24 times multiple. The column said this is good to hold, but getting in at this price makes no sense.
Tempus took a more bullish view, claiming that the high price is justified for such a reliable, defensive play. The company can grind out better margins and revenues year after year and despite these latest figures having been held back by a decline in M&A-inspired growth, the trajectory is being maintained. The high rating on the stock is flagged, but comes with the caveat that in today’s market, that reliability should command a healthy premium.
Wednesday
UK Oil & Gas – Sell
Avoid UK Oil & Gas, was the message from Questor on Wednesday. The company’s so-called “Gatwick Gusher” may have found some oil in Surrey, but the column pointed out the results of one well can’t underline the viability of the whole company. The test was a short one, raising questions over the pressure available to extract oil on a long-term basis, while the cost involved in drilling each hole also needs to be better understood. This remains highly speculative territory and Questor is not wading in.
Mondi – Buy
Tempus said investors should buy Mondi. The company’s share price has fallen back significantly over the last few months, with fears of over-investment in a slowing economy clearly weighing. Fears over the pricing of a basic packaging product called Kraftliner had also been troubling some investors, but as the shares start to rise again, it looks to the column as if the sell-off may have been too pronounced. On 12.5 times earnings, the company is starting to look cheap based on the fundamentals alone.
Thursday
Glencore – Sell
Questor recommended selling out of Glencore. A successful renewal of a borrowing facility saw shares in the miner soar by 17 per cent on Wednesday, meaning it is up by more than 50 per cent in the last four weeks, yet the stock still trades at a 70 per cent discount to net asset value. However, there are still plenty of pitfalls ahead – the cost of servicing debt is rising for the sector in the wake of credit downgrades, while the balance sheet has received a run of write-downs. The stock also remains in favour with short term traders looking to pick off gains – Wednesday’s rally certainly isn’t a reason to get on board.
Performance of stock over 1 month
Source: FE Analytics
Countrywide Properties – Sell
Avoid Countrywide Properties, was the message from Tempus. The housebuilder returned to the public market on Wednesday and shares jumped notably at the debut. Countrywide obtains about half of its revenues from local authority regeneration projects while the remainder comes from vanilla new-builds in and around London. The column is concerned this hybrid model makes valuations difficult to come by, so this and the absence of a clear track record make it a difficult share to get enthusiastic about.
Friday
Invidior – Sell
Questor said investor should sell Invidior, the drugs company spun out of Reckitt Benckiser at the end of 2014. The shares have been on a wild ride since and sales are struggling as a key patent for its heroin addiction medication expires. Even if shares look cheap, trading on a 10 times multiple, the outlook for sales remains questionable with a court ruling having the potential to throw competition open even wider.
BAE Systems – Buy
Tempus tipped BAE Systems, even though it is in something of a fallow period. Forays into cyber protection haven’t yet gained sufficient scale to mitigate the risks from cyclical slowdowns in traditional defence spending, but a 4.2 per cent dividend yield and the fact it trades on a 13 times multiple mean that with revenues set to flow through in the future, this is one worth considering.
