Lloyds has been a favourite trade among retail investors since the end of the financial crisis, with bargain hunters buying in in the hope of a speedy return to its pre-2008 highs. However, problems for the bank continue to mount and it looks as if investors will have to wait a long time for that quick buck. As a result, the stock is the highest-profile name to be given a sell-recommendation in this week’s round-up of share-tips from the national newspapers.
Tuesday
Belvoir – Buy
Tempus recommended investors buy rental property franchise business Belvoir in the first tip of the week. Strong growth is expected in this sector of the housing market in the years ahead as house prices remain unaffordable for many. The stock pays a good dividend and the company’s model of acquisition and rebranding has plenty of room for growth. There has been some uncertainty in the wake of Brexit, which has served to mark shares back a little, but the longer term picture remains positive.
Lloyds Bank – Sell
Avoid Lloyds, was the message from Questor. The government had intended to sell down its stake in the bank but after the share price slumped, this move has been postponed. There are now bigger concerns building over the future outlook for the bank post-Brexit and two broker downgrades on Monday did nothing to build confidence. The latest interest rate cut isn’t helping either, with the Bank of England’s most recent move costing Lloyds almost £500m, according to calculations from Deutsche Bank. Cost-cutting continues in terms of branch closures and redundancies, but compensation claims for PPI mis-selling are mounting too and even the modest dividend that’s now on offer doesn’t look that appealing against sector peers.
Performance of stock over 10yrs
Source: FE Analytics
Wednesday
DS Smith – Hold
Tempus said investors should hang on to DS Smith. The packaging company updated the market on Tuesday and it was a case of steady as she goes. Yes, there was some fall-out in the immediate wake of the Brexit vote result, but shares have fought back, helped along by that slump in the pound – two-thirds of revenues are paid in euros. The stock may look punchy against its peers, trading on 14 times earnings, but it has a strong track record of growth – total shareholder returns over the last six years are some 400 per cent. With a 3 per cent dividend yield too, this isn’t a stock to run from.
GlaxoSmithKline – Buy
Buy GlaxoSmithKline, said Questor. Moves in currency markets are providing a welcome boost for the pharmaceutical giant and it looks set to deliver on a commitment to return to underlying profit growth after half a decade of decline. There’s also a promising pipeline of new drugs – yes, shares are expensive against Glaxo’s peers, but the consumer goods division provides a decent buffer and there’s a healthy dividend of almost 5 per cent on offer.
Thursday
Barratt – Buy
Tempus said investors should buy Barratt. Shares in the housebuilder collapsed on Wednesday despite some upbeat sales news in the wake of Brexit. The column cites investor concerns around the small size of the company’s land bank, combined with exposure to the London market – although it’s worth bearing in mind that the ongoing government Help to Buy scheme still supports some 30 per cent of sales. There’s still a shortage of housing in the UK and mortgage supply remains plentiful. Add to this the 6.7 per cent dividend yield that’s on offer and the stock still looks attractive.
Friday
Micro Focus International – Sell
Earlier this morning, Tempus recommended selling Micro Focus International. The UK’s second-largest technology company soared to the top of the FTSE 100 yesterday as the market applauded its bold acquisition of one of HP’s business units. Assuming the promised efficiencies can be delivered by the firm, then by 2020 the company is expected to run on a P/E ratio of just 12 – cheap for this sector. However, this is a high-stakes game and acquisition-led strategies can backfire, so taking profits off yesterday’s rally could be a good call.
Premier Oil – Buy
Questor finished this week’s roundup by saying investors should buy Premier Oil. The oil price crash may have caught the country’s largest independent producer somewhat off-guard, leaving it saddled with debt, but the column notes that an agreement with lenders seems imminent. Any restructuring of liabilities – along with the fact that costs have been trimmed dramatically – could give the stock a new lease of life.