Newspaper and magazine share tips

By This Is Money
Updated: 13:23 EDT, 5 November 2010

Each day we round up share tips from national newspapers and investment magazines. For the Mail on Sunday's stock picks, read the Midas column.

Round up: We round up the latest share tips from national newspapers and investment magazines

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FRIDAY

The Independent

Insurer RSA Insurance Group produced a reasonable upbeat trading statement yesterday. RSA was in a poor state when Andy Haste took over and the job he has done is not to be underestimated. The company has been actively gobbling up small fry for some time (no less than 10 acquisitions made in 2010 already, which is quite an aggressive run to say the least). On valuation, however, RSA carries far less business risk. Looking at the earnings multiple and the progressive yield, there are points in the shares favour. It's a very tough call but having bought at 126p last year, we are inclined to hold for now.

The last time we looked at Tate & Lyle, the stock was trading at under 400p and valuation multiple stood at just over 11 times forward earnings. Since then, the sugar producer's shares have climbed well above 500p and the valuation had firmed up to about 11.8 times forecasts for 2011. Investors should also take note of self-help moves as the company undertakes initiatives to, as it puts it, 'focus, fix and grow' its business. All this plus a healthy forecast yield of about 4.7%. Buy.

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Investors Chronicle

Shares in Valiant Petroleum have fallen by 22.5% over the last month, following news that the company's Voila North exploration well in the North Sea failed to produce a hydrocarbon flow during a recent drilling programme. As a result, Valiant has undertaken to plug and abandon, which has incurred total costs in the region of $10m. Shareholders in Rugby estates have been the beneficiaries of a series of divestments over the course of this year. Rugby returned 175p a share to investors as part of an overall strategy to focus on its asset management activities, and it is anticipated that this process will continue through the second half of the company's financial year. Buy.

After several years of restructuring, chemicals group Elementis has found itself in a sweet spot. Its main business involves making additives for paints and other chemical–based product to improve their texture and flow. Margins are high because the cost of this input is low relative to the overall cost of what it is added to and Elementis has significant control over the supply of raw materials. Despite the share price momentum, the shares still look relatively cheap compared with those of its peers. Buy.

The Times

Charter International is one of the great names in British engineering history, maker of boilers and steam engines since 1857 and now producing industrial fans and compressors. Charter, which also owns Esab, struck a rare note of negativity in a buoyant engineering sector, seeing its shares down 6% as a consequence. They remain on a lowly nine times this years earnings, but unless you fancy a punt on a take over, there seems to be little reason to chase. Hold.

Steve Morgan, the founder of Redrow, is a worried man. The shortage of mortgage finance and the lack of the sort of 95% mortgages that previously allowed millions to get on the housing ladder is bad for young aspirant homeowners and for Britain PLC. Redrow put up 2,600 homes in the past financial year, not much above half the numbers at its peak in 2006. The Redrow chairman wants government action to free up the market. Precious little chance. Redrows shares are selling on about 70% of net assets, which suggest good value. But no real reason to buy at this stage. Hold.

The Daily Telegraph

Unilever was this Questor editor's very first tip back in November 2008, when the shares were in at £15.03. It has been a rocky ride over the last 2 years but the company has really started to deliver on its strategy and the market has been taking note. The shares trade on a 2010 multiple of 14.8 times, falling to 13.5 time in 2011. There are up 28% since the initial tip compared with the FTSE 100 up 41%. Buy.

Sweetener group Tate and Lyle posted an impressive set of interim results yesterday, propelling its shares to the highest since 2008. The results were an endorsement of the management's new strategy. Investors who brought shares in Tate and Lyle when Questor first recommended them as a buy on June 12 last year at 314.25p would have locked an impressive yield of about 7.5%, meaning they should consider themselves long term holders. The shares are trading on a March 2011 earnings multiple of 13.2 times, falling to 11.9% in 2012. The Share remains a hold for the yield.

THURSDAY

The Daily Telegraph

One of the most important tasks a company has to do is manage market expectations. The best way to do this is to under promise and over deliver. Petropavlovsk, appears to have done the opposite. Yet again the company has cut its production forecast for the current year – blaming the weather and a delay in the delivery of equipment. As a result, the 2010 full year gold production will now be in the region of 510,000 to 530,000 ounces. The shares are trading on a December 2010 earnings multiple of 16, falling to 9.5 next year. Hold.

Interim numbers for transport giant First Group were in line with expectations and revealed a welcome turnaround at its US Greyhound operation. Its UK rail operations, which include First Capital Connect and First Great Western, saw passenger numbers rise, with like for like passenger revenue up 4.4%. The interim dividend was raised by 7.1% to 7.12p, and the group reaffirmed its target to increase its dividend each year by 7%. The shares are trading on a March 2011 earning multiple of 9.7 times, falling to 8.7 next year. Buy.

The Independent

Serco, the FTSE 100 listed outsourcing group, was forced to back off from demanding a cash rebate from its suppliers. The fiscal squeeze is supposed to be positive for outsourcers, as they are well placed to deliver the kind of efficiencies the coalition is after. But Serco's reversal prompted questions about that view. There was still scope to grow volumes, analysts said, but the fact that the government wanted supply chains to be exempt from sharing pricing pressure was usual. Buy.

At first glance, the results of Capital Shopping Centres gave investors several reasons to be cheerful yesterday. Like the High Street as a whole, CSC's retail centres have had a better year than expected. Still there are reasons for investors to be fearful about putting CSC in its shopping bag. The shares continue to to trade at a premium to its net asset value, suggesting overvaluation. We think the retail sector in 2011 will be more resilient than doomsayers forecast, but at this price sell.

Share Magazine

After a 19% jump to £15.50 on the first day of trading after its flotation last month, the initial hype has died down on Betfair and the shares have come back to a more suitable entry point. Betfair is at lower risk than bookmakers but still has risk to consider. The company has been a massive success to date. A likely inclusion into the FTSE 250 at the index review (scheduled for December) is an added bonus, as it will prompt tracker funds to buy the shares. Buy.

Strong growth prospects and compelling technology make clean water expert HaloSource worth buying. At the Aim floatation just two weeks ago, the group raised £51.4m through share placing, of which £31.5m went to the company. 'Sales are forecast to grow extremely rapidly as a result' says Nick Walker at house broker Liberum. He expects HaloSource to move in to the black in the year of 2011, with a $4.5m net profit. HaloSource should see strong growth as its low-cost water purification technology is launched across a number of new markets. Additional business divisions offer blue sky potential. Buy.

The Times

Insurance accounting is hideously complex. Even the insurers will admit that, all too often the only person who really understands what is going on is that chief actuary. Which is why it was refreshing to see Standard Life helpfully clear yesterday. It chose to report the amount of long term savings policies sold as assets. The shares yesterday returned to 230p – the level at which they were floated in July 2006. They have been below this since 2008, having reached 343¾ in May 2007 before the crunch took hold. Standard Life is now finally beginning to motor. Buy.

With yet another company tied to UK public-sector spending producing a profit warning – this time energy specialist Eaga nerves over Logica's own exposure to spending cuts are understandable. The IT Company's third quarter trading statement does indeed give some reason for concern. What seems to have happened in the UK public sector deferred decisions on new contracts before the election and then again in the summer. Logica says there have been signs of increased activity since September and it is confident book to bill will be back about 100% for the full year. The shares, sell on a reasonable ten times this year's earnings, still further progress could be limited. Hold.

WEDNESDAY

The Times

Last week Go-Ahead insisted that public spending cuts would do no harm in the short term. This week Stagecoach insisted that the limited cuts announced in last months comprehensive spending review will not hit until 2012. As with any business reliant on the consumer, there is the possibility that they will balk at higher and higher prices, whilst unemployment will inevitably drag down the demand. Little of this seems to be factored into the price and shares, which are sharply higher after the CSR announcement. Hold.

Having turned down an offer from RSA group for the general insurance division that some of us still think of as Norwich Union, Andrew Moss now needs to demonstrate that he can put the business to better use. So the pressure was on Mr Moss to show that Aviva's brisk approach to cost savings, efficiencies and cash generation remains undiminished. A more forward thinking focused approach should mean the shares have further to go. Hold.

The Independent

Reckitt Benckiser, the consumer goods giant, unveiled a mixed set of third quarter numbers yesterday. The makers of the toilet cleaner Harpic showed uplift in margins, boosted by its continuing cost – cutting measures. It smashed city expectations for gross margin, which jumped by 80 basis points to 60.2%. However Reckitt suffered flat revenue in Europe, in part, thanks to increased competition. Its will also take time for Reckitt to integrate Durex and Scholl to its 17 other so called biggest brands. Therefore we are cautious on Reckitts shares for now - Hold.

Having spurned the unwanted attention of Royal and sum alliance, Aviva has produced a moderately positive set of numbers which suggest that Aviva was right to resist its rivals rather ill judged attempt to push it into selling its general insurance business. But will these numbers see off rumblings in some parts of the City that the life insurer just doesn't seem to be able to shrug off? On valuation grounds, Aviva which is increasing sales, still trades at a modest discount, so the shares are not overpriced. But nor are they a screaming bargain. Hold..

The Daily Telegraph

A return to profit in the third quarter for BP was very welcome, after a truly awful 6 months. Higher Oil and Gas prices helped the energy giant deliver a third quarter replacement cost profit, which strips out the unrealised gains or losses related to changes in the value of fuel inventories. The shares are trading on a December 2010 earnings multiple of 6.5 times, falling to 6.2 next year. They were first tipped at 487½ on April 4th last year, and they are down 11% compared with a market up 43%. Buy.

The most important news in the energy giant BG Group's third quarter results yesterday was its upgrade in reserves from three fields in Brazil. The company is planning to increase production by a compound annual of 6% to 8% all the way to 2020. The shares are trading on a December 2010 earnings multiple of 16.8 times, falling to 15.3 next year. The dividend yield is a relatively unexciting 1%, but this is not an income play. The shares were first recommended at £10 on January 5 last year, and they are up 25% compared with the FTSE up 26%. Buy.

TUESDAY

The Telegraph

Another company lifting full year earnings guidance yesterday was low cost airline Ryanair - headed up by the ever entertaining Michael O Leary. It's been a challenging year for the airline industry, beset by the Icelandic volcano's ash cloud as well as strikes by air traffic controllers. However Ryanair still managed to increase its pre tax profits in the six months to September 30th by 13%. Ryanair overtook Iberia in July to become the number one passenger carrier operating at Spanish Airports. Buy.

Market reaction to yesterday's results from Weir Group, the pump and seals specialist, were slightly surprising. The shares fell steeply after a positive trading update but later recovered. However, they have had a very good run recently, outperforming the wider market. Pre tax profit in the second half of the year will be roughly the same as the first half. Forecasts have been rising for some time and indeed, they are likely to rise again. Weir is up 39% since they were recommended on June 17 at £11.02, compared with a market up 9%. Buy.

The Independent

Intertek, the testing company for products from food to toys, has proved to be a safe pair of hands for investors this year. After touching a lowly 1150p in early February, Intertek's shares have soared by over 60%. Yesterday the company announced two small acquisitions which will bring Intertek new research and development services as well as cross selling opportunities. The shares now trade on a 2011 multiple of 21.2 time forecast earnings. Good company, but at that price we're not going to experiment further. Hold.

XChanging has been under a cloud since a worrying debate about its accounting policies emerged earlier this year. Boss David Andrews responded assertively, calling in accountants for a re-audit. Trouble is - any company involved in outsourcing starts to scare investors when accounting issues are raised. So since the rumours started, X Changing shares have fallen 40%, putting the company on a valuation of just 7.3 times 2010 earnings. XChanging's statement may have been cautious, but no alarm bells rang. The group continues to win contracts and is too cheap at the current price. Buy.

The Times

Once a useful slurry of pumps to the big miners, today about a third of Weir Group's revenue comes from non-mining customers, mainly in oil and gas. The company (which joined the FTSE 100 in September) has benefited from this diversification and so have its shareholders. Order book growth in quarter one was 16% year on year, in quarter two it was 34% and in quarter three it rose to 40%. The nine month statement pretty much guarantees that pre tax profits will come in at about £288m. Hold.

BG Group is going ahead and spending £9.3bn building a plant in Queensland, as its liquefied natural gas occupies about 1/600th as much space as the equivalent natural gas, which explains why it is economic to ship it round the world in huge container ships - and Asian nations cannot get enough of the stuff. Publishing its third quarter figures today which should show a ten per cent rise in operating profits, BG profit hold has risen to about $1,554m. Hold.