Share tips of the week
SIX TO BUY
Dr. Martens
The Times
Consumer goods and retailing have come under pressure from inflation and supply-chain issues. But Dr. Martens still sold 14.1 million pairs of boots, shoes and sandals last year for the 12 months to the end of March, up by 1.4 million from the year before. This translated into a 43% increase in pre-tax profit and an 18% increase in sales. There’s scope for more growth, especially in Asia. Longer-term investors might want to be wary of the brand losing momentum, but right now it’s undervalued and worth buying. 271p
Games Workshop
The Sunday Times
Games Workshop’s 400 branches stand out “amid the carcasses of failed retailers” on the high street, not just because they’re packed with thousands of miniature figurines, but because they are “generally packed with customers”. The shares have almost halved since September, but this seems mostly due to “short-term issues” such as rising costs and the war in Ukraine. The firm’s fans are “diehards”, the business is “sensibly” run, and it’s diversifying into lucrative video games. 7,407p
Inspired Energy
Investors’ Chronicle
Inspired Energy acts as a middleman for companies negotiating power contracts and also provides advice on how to reduce power usage. The rise in energy prices has increased demand for its services as businesses look to cut their costs. The order book for January and February nearly doubled in value compared with the same time last year. Growth is “not spectacular” on a year-on-year basis, but things have looked “flashier” over the past five years: the compound annual growth rate for sales over that period was 26% and cash profits grew by 8%. The shares are trading near a 12-month low. Buy the dip. 14p
JD Sports
Shares
A recent sell-off in this clothing retailer “presents bargain hunters with an opportunity”. The firm is facing inflationary pressures as well as the cost of living crisis, but it has a “proven pedigree in navigating sector headwinds” and has strong relationships with popular brands. The company delivered another upgrade in its latest trading update, and it expects pre-tax profits for the year to January 2023 at least to equal the £940m it will report for the year to January 2022. 119.7p
Kingfisher
The Telegraph
Shares in the owner of B&Q have fallen 29% since September last year, mostly due to an “increasingly challenging operating outlook” as investors worry about the cost of living crisis, which has pushed consumer confidence to record lows. Many of its products are “discretionary purchases” that consumers might cut back on first. However, the downbeat outlook is “more than adequately priced in” to its valuation. The latest trading update said the firm is still on track to meet full-year guidance. Even if conditions deteriorate, it has the financial strength to overcome them. 259.9p
Loungers
The Mail on Sunday
Eatery chain Loungers provides value-for-money food and drink. The company’s focus on “attractive surroundings, attentive service, decent food and canny prices has worked consistently”. When it floated in 2019, the group had 146 sites and was generating sales of £153m a year, but remained loss-making on a pre-tax basis. Since then it has increased its number of venues by a third and is expecting to announce sales of over £235m for the year to April 2022, with profits of £18m. Low prices, adaptable menus and efforts towards staff training and retention means its well poised to weather a slowdown. 200p
…AND THE REST
The Telegraph
Credit-card processors such as Mastercard should be well protected against inflation: Mastercard earns a percentage of the amount cardholders spend and that amount will rise in line with inflation, meaning it doesn’t have to raise its prices for revenues to rise. Buy ($359.25). Economic turmoil has already been priced in for banking group Lloyds, so it “might not take a lot to deliver some positive surprises”. If things even go “vaguely right” at any point, “the shares could look like a steal”. Buy (45.14p).
The Times
Equipment-rental firm Speedy Hire announced “stellar results” last week. Pre-tax profit jumped from £8.3m to £29.1m for the year to the end of March. Shares are “unfairly neglected and underpriced” given its “robust pricing ability in the face of rising inflation”. Buy (48.15p). Agricultural group Camellia’s staple source of income is tea, but it has diversified into produce and nuts. Results for 2021 were positive and revenues and profits for 2022 should beat them, proving “there is solid demand for the company’s produce”. Buy (6,200p).
The Mail on Sunday
Food packer Hilton Food gets most of its sales from preparing red meat for big supermarket chains, but it has diversified into new markets and new food, including fish and vegan products. Whatever it’s selling, the group focuses on building strong relationships with large, established clients. The recent decline in shares is “overdone”; new investors could find value at current levels. (1,062p).
