With bargain hunting investors who took heed of the advice “don’t try to catch a falling knife” likely to have missed much of the rebound in the FTSE this week, they will have to go back to looking at boring old fundamentals in the search for share price gains.
Fortunately low-cost platform Trustnet Direct rounds up all the share tips in the national newspapers every week – and here they are.
Tuesday
Amlin – Hold
On Tuesday, Questor said investors should hang on to specialist insurer Amlin. Interims have been bolstered by a lack of natural disasters, although with hurricane season on the horizon, this could soon change. Monday’s interims saw the payout ratio creep higher and profits dip by 3.5 per cent, but there was a rise in the dividend, which should provide some cheer. Falling reinsurance rates should lead to further upside, but the firm isn’t looking for a buyer – unlike many of its competitors – so anyone hoping to make a fast buck from a takeover should look elsewhere.
Bunzl – Buy
Tempus tipped Bunzl for income investors. Monday’s solid interim results – sales were up 7 per cent, profits were up 11 per cent and the interim dividend rose by 7 per cent – were eclipsed by a falling market that left shares 6 per cent lighter by the end of the day. The company remains in acquisition mode – 500 names are reported to be on its shopping list – which is proving to be a profitable strategy. Tempus likens Bunzl to WPP for its buy-up strategy and although it is trading on a 20 times multiple, the firm is without a global peer and offers the prospect of consistent delivery in the years ahead.
Wednesday
Regus – Buy/hold
There were mixed opinions on Regus on Wednesday. Tempus tipped the serviced office company after the publication of its interims on Tuesday showed a doubling of pre-tax profits. The company remains threatened by the fallout of a stock market downturn, although its massive geographical and industrial diversification should provide a degree of protection. Regus continues to buy up more premises and has targeted 600 new locations this year. Shares jumped 9 per cent on Tuesday, but Tempus said it still offers good value.
Questor was less optimistic, however, looking beyond the growth prospects and highlighting the fact the company now trades on a PE ratio of 25 and yields less than 2 per cent. The column said that while there is plenty to like about the business, now is not the time to buy in.
Thursday
Carillion – Hold
Investors should hold Carillion, according to Tempus. Wednesday’s interims offered some reassurance over the fortunes of the company, which is heavily involved in public sector contracts. There are some concerns regarding exposure to work in the Middle East and the implications of the slump in the oil price, but the company is hoping to harness the opportunities raised by the energy industry’s desire to cut costs. The dividend is more than twice covered by earnings and stands at a respectable 5.3 per cent, but the column said management has the potential to jeopardise the conservative growth, as illustrated by last year’s failed bid for Balfour Beatty.
Stagecoach – Hold
Questor said investors should hang on to Stagecoach. It has been a rough first quarter and the company’s reliance on local government contracts gives little scope for growth. It has shut down a couple of low margin contracts in the US but some opportunities do lie in wait, most notably in the UK rail industry. If it is awarded the franchises it has bid for, its outlook could improve significantly.
Friday
BAE Systems – Buy
Questor tipped BAE Systems this morning. The company’s share price dipped earlier in the week after it failed to secure a $6.8bn contract for the US military. However, it remains awash with work – there is an order backlog of £37.2bn – and that is with global defence budgets under a degree of pressure. It is not all plain sailing, with a question mark hanging over sales of the Eurofighter Typhoon jet, but the stock trades on a low multiple compared with its peers and has an attractive 4.7 per cent dividend. Questor said the current depressed price is the icing on the cake.
Performance of stock year-to-date
Source: FE Analytics
Hays – Buy
Tempus tipped Hays as a good long-term buy, calling it the most diversified of the players in the global recruitment business. Thursday’s results were suitably impressive even once a currency headwind of almost £10m is taken into account. Aggressive targets for doubling profits over three years are being adhered to and this is being factored into the share price – it trades on a 20 times multiple and offers a mere 2 per cent dividend yield, but the future looks bright.
