This week’s share-tip roundup from low-cost trading platform Trustnet Direct finds that things don’t appear to be getting any better for the miners – investors are being urged to sell Anglo American, while there is bad news for BHP Billiton too.
Tuesday
Genel – Buy
Tempus said investors should buy Genel, despite the fact its recent fortunes highlight the risks associated with investing in the petrochemicals sector. For example, when deals brokered between the Kurds and Baghdad fell flat, it left the firm unpaid for the oil it was producing. With this issue now resolved, the stock is starting to look cheap despite the fact the low price of the commodity is also acting as a headwind. Any firm that operates in such unstable areas will always have risks associated with it, but optimists with the stomach for volatility may want to get in now.
Dixons Carphone – Hold
Questor said investors should hang on to Dixons Carphone, a year after the two companies merged. Although the strategy laid out before the merger was met with derision, it appears to be working, with shares up by a third. The collapse of competitor Phones4U hasn’t done the company any harm either. The evolving UK mobile market may present risks to the business, but the company’s planned foray into the US has been well received. Questor said there is some more upside potential here, although much of the positive news has been priced in already.
Performance of stock since merger
Source: FE Analytics
Wednesday
Dairy Crest – Buy
Questor tipped Dairy Crest on Wednesday, with the firm hailing 2015 as a transformational year. Although the competition watchdog has yet to give its verdict on the £80m sale of dairies to Muller, the deal looks set to proceed unhindered. Sales are up, a structural change is underway relating to its future in the lucrative baby food market and the column is convinced this looks like a good investment.
Robert Walters – Buy
Tempus reiterated its “buy” rating on Robert Walters on Wednesday. The recruiter is not reliant on a single industry or area for its growth and continues to serve markets where a shortage of strong candidates is pushing wage inflation. Although the shares trade at record highs, the column noted entrenched earnings momentum and the fact that Panmure Gordon upgraded its full year expectations for the firm on Tuesday.
Thursday
Halfords – Buy
On Thursday, Tempus tipped Halfords as a long-term buy. The market is giving out mixed signals about the company, with the new management team yet to deliver clear plans for the future, but the share price has risen regardless. Q1 results were mixed and the current trajectory leaves margins exposed, but revenues are marching their way higher. At 15-times earnings, the shares are not cheap, but Tempus said there may be further room for growth.
Admiral – Sell
Questor said investors should avoid Admiral due to question marks hanging over both the future of the company and the insurance sector as a whole. The hike in insurance premium tax in last week’s Budget, news that large operators such as Uber have decided to self-underwrite, and the prediction that up to half of all cars will be at least partly autonomous within a decade, all add to a downbeat outlook. Although the firm is a generous dividend payer, returning 95 per cent of earnings to shareholders last year, this may not be sustainable.
Friday
Finsbury Food – Buy
Earlier this morning, Questor said investors should buy AIM-listed Finsbury Food. Finsbury is one of the UK’s largest bakers and licensing agreements with big names such as Disney mean that its cakes are often found in major supermarkets. A restructuring plan designed to cut the debt burden appears to be heading in the right direction, the company has diversified its customer base and the outlook for the full year is upbeat. Although shares are up 75 per cent so far in 2015, there is potential for further growth.
Anglo American – Sell
Tempus said investors should avoid Anglo American. Both Anglo and BHP Billiton have announced writedowns this week, which the column said is likely to be the start of an uncomfortable reporting season for the mining sector. The two firms published the bad news in their production updates – released ahead of earnings – and there is speculation this was to lessen some of the pain. There are also question marks over whether the dividend is sustainable. Anglo American’s share price is down by almost 50 per cent in just 12 months and there are worries it could fall further if next week’s figures disappoint.
