The bank holiday means this week’s round-up of share tips from Trustnet Direct is shorter than usual.
The share tips are published before 9am as part of a daily round-up of financial news. You can find these round-ups, alongside opening and closing market reports, by clicking on Trustnet Direct’s equities home page.
Wednesday
Shawbrook – Buy
Tempus tipped Shawbrook on Wednesday. The business bank came to the market a couple of months ago with a valuation at the top of the target range, so gains from there have been limited, but the trajectory remains upwards. Shares reacted positively to news of a change in management and Tempus likes the fact the bank is extremely selective in the markets it is going after. While the column said exposure to buy-to-let could be problematic and that the real test will come when the economy slows down, it remains upbeat on the stock.
Performance of Shawbrook shares since launch
Source: FE Analytics
Questor said investors should hang on to Vodafone. Even ignoring the prospect of the takeover from Liberty, the outlook appears positive for the stock – Questor said its investment in improving mobile reception should stand it in good stead and pointed out it is consolidating its position in Europe, where sales are finally starting to tick higher. Even after all the bid talk, it does not look overly expensive, and its solid dividend means it isn’t one to ignore.
Thursday
Card Factory – Sell
Tempus told investors yesterday to avoid Card Factory. Wednesday’s market update revealed sales growth holding up well, new stores opening and the promise of a dividend before the end of the year, so on the surface, the stock looks as if it has plenty going for it. Of its 783 stores, only five are unprofitable and Card Factory thinks the UK can support 1,200 outlets. However, it trades on a 19-times multiple and while the cash payout could equate to a yield of 5 per cent, Tempus pointed out it is just three years since Clinton Cards went bankrupt.
Telford Homes – Hold
Questor said investors should hang on to Telford Homes. The AIM-listed, London-focused housebuilder has seen profits rise by 30 per cent in the past year and has passed the good news on to investors with a 26 per cent increase in the dividend payout. The chief executive is upbeat about the outlook, pointing out London property will remain in demand as long as supply constraints linger, while underlying prices are also continuing to move higher. Despite the fact Telford’s shares have risen 60 per cent in the past 12 months, the valuation remains a modest 12 times. However, Questor said that with the stock trading at more than twice book value, the real growth is already priced in.
Performance of Telford Homes shares over 1yr
Source: FE Analytics
Friday
Hansteen – Buy
Questor tipped Hansteen this morning. The company invests in commercial property across the UK and northern Europe, focusing on unfashionable industrial properties such as out-of-town warehouses rather than city-centre office blocks. Questor praised the simplicity of the business model – buy properties at a discount because they’re not fully let, fill them with tenants, increase the value and sell them. The shares are trading at a 19 times multiple, which seems high, but the 4.4 per cent dividend yield means it holds plenty of appeal.
IAG – Sell
Tempus said investors should sell IAG, pointing out the acquisition of Aer Lingus may not turn out to be the answer to all of its problems. The column pointed out the competition authorities may demand that the airline divests more slots at Heathrow and said that business traffic between the US and Ireland may not hold up if Washington adjusts tax policy. It also said that the current situation in which Ireland has US customs pre-clearance facilities may not be around for ever. Tempus finished by pointing out this is a competitive market and just how much extra value the purchase of Aer Lingus would guarantee is open to debate.
